FATCA Discussion Thread (Ask your questions) Part Two
Please ask your questions here about FATCA.
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NB: This discussion is a continuation of an older discussion that became too large for our software to handle well. See FATCA Discussion Thread (Ask your questions) for earlier discussion.
Does anyone know how it is that FACTA can be imposed on a non-US citizen spouse of an Expat? Yes, the couple may have a joint account (for convenience), but the assets over a 44 years, were not accumulated strictly by the Expat. Furthermore, on what basis does the US have jurisdiction over the non-US spouse. So far, the options explored have us divorcing, or possibly separating, as the least costly way to live out our days in peace.
Article in the WSJ: http://blogs.wsj.com/riskandcompliance/2014/01/24/republican-party-backs-fatca-repeal-resolution/tab/comments/
Noted one of the comments:
US Citizen considering renouncing wrote:
After working hard overseas for decades, filing and paying taxes every single year, I was rewarded by the US government with a big slap on the face.
I was recently promoted to General Manager, and was offered a 10% partnership with rights to buy another 10% (mid size company). When the partners (company is mostly owned by a financial institution as an investor only) found about that:
– me having signatory powers on the company’s bank accounts; and
– owning 10% or more of the company
will expose the company to certain IRS requirements…. they pulled the plug on me.
My wife & I are considering renouncing our US citizenship. This is easily said than done; the pain that comes from simply having to consider this option is intolerable.
What else can we do? We have kids to provide for, and a lifestyle that we love and will defend. We have come to realize that being successful, honest and law abiding american citizens living abroad are grounds for us to be punished by our own government.
@always something says, no need to go quite that far. Just get your name taken off the accounts, i.e. no longer have joint accounts. Accounts only in the non-US spouse’s name and you have absolutely nothing to do with them.
As far as the jusidiction, US law says that all US citizens must file US tax returns no matter where they live in the world. Note that this is separate from FATCA and is a law that’s been around for about 100 years – but the US has only recently started clamping down on non-filers. As part of that law US citizens who have foreign bank accounts, i.e. accounts based outside the US, must file FBAR forms (Foreign Bank Account Report) detailing those accounts if the aggregate figure for those accounts exceeds $10,000 at any time during a year. It doesn’t matter whether the US citizen contributed anything to those accounts; so long as you have any financial interest or signatory rights over an account it’s considered yours and must be reported. There is also possibly a need to file an 8938 form too.
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Report-of-Foreign-Bank-and-Financial-Accounts-FBAR
I renounced last year and didn’t need to file a US tax return because I have no income. But I did have to file FBAR’s on the joint accounts I share with my husband.
It has become a nightmare for many people and has indeed led to divorce in some cases. It has also affected some Americans getting jobs/promotions because companies don’t want them to have signatory rights over company accounts because they’d also have to be reported to the IRS as you can see from osgood’s recent post.
@MedeaFleecestealer
“Just get your name taken off the accounts, i.e. no longer have joint accounts. Accounts only in the non-US spouse’s name and you have absolutely nothing to do with them. ”
That’s really just trading one big set of problems for another, though, isn’t it? There are many legitimate and important reasons for having joint accounts…
@notamused, yes there are. But if you don’t want to have to report accounts then doing this and finding ways around any other problems is both easier and cheaper than separating or divorcing. So long as you have absolute trust in your partner you should be able to make it work. Alternatively, the US spouse and non-US spouse have totally separate accounts that earnings, etc, are paid into and you get rid of the joint accounts that way. The main thing is to have no financial interest or signing authority on the non-US accounts. That way they don’t have to be reported. It’s not going to be easy if they have a mortgage, investments, etc, with both names on them, but it’s worth exploring other avenues before going to a divorce court. As always research, research, research before making ANY major decisions.
@MedeaFleecestealer
I agree that going to divorce court in order to become compliant is an extreme solution.
However, depending on the country’s tax laws, having separate accounts may also be a big problem if one spouse dies, i.e. the remaining spouse may have to pay inheritance tax on that which actually belongs to him/her. Just one example of why that’s not always a desirable solution. In any case, USPs should be divorcing the USA, not their spouses!
@notamused, very true! But not always so easy and quick as many would like. And for some, not possible at all. So other means have to be found.
FATCA And The Law of Unintended Consequences
@Just Me
Here’s another option to Brain’s suggestion: Bypass the quagmire altogether by skipping the tax part, renouncing and never going to the US again.
@JustMe
HE IS NO LONGER POSTING COMMENTS!!!
One of the benefits of writing a popular tax blog is the mail that one receives. Because of confidentiality concerns, we no longer post comments on our website, but we do appreciate emails from readers and comments from those blogs that still allow them (e.g. TaxConnections). For example, last week we wrote two pieces about the impact of FATCA in Canada. That prompted 72 responses and several tragic or ridiculous stories that I categorize as FATCA’s “unintended consequences.”
@nothernstar…
I think that is on his personal blog, but NOT on TaxConnections blog where comments are accepted, or at least that is how I read it.
I guess we’re bad for business, northernstar. You can respond to this article on TaxConnections.
@Bubblebustin
that is a good option for some, including me.
The IRS has recently confirmed the Treasury Department’s message from December “No more FATCA delays”:
IRS deputy commissioner Michael Danilack’s comments, made on 28 January followed his address to the New York State Bar Association’s tax section, contradict a report published by Taiwan’s Central News Agency nine days before, which suggested that FATCA might be about to be delayed again‚ for another six months.
http://www.portfolio-adviser.com/news/regulation/irs-brass-says-no-more-fatca-delays
Well we know what the FATCA poodles in the Bahamas might be willing to pay to get FATCA rolling – between $500K and $63M.
The comment is particularly good:
http://www.tribune242.com/news/2014/jan/30/govt-fatca-system-bids-peak-at-63m/?news
Interesting to see a hint of what ALL of a FATCA IGA country’s taxpayers – (in this case Bahamas) will spend on creating a FATCA reporting system (that is start-up costs only – not the even greater ongoing forever and ever costs):
http://www.tribune242.com/news/2014/jan/30/govt-fatca-system-bids-peak-at-63m/?news
‘Gov’t: Fatca System Bids Peak At $63m’
Thursday, January 30, 2014
By NEIL HARTNELL
Tribune Business Editor
hartnell@tribunemedia.net
” The Government yesterday said it has received bids costing up to $63 million for its Foreign Account Tax Compliance (FATCA) reporting system, which will process US client records from 2,000 financial services providers………
……We have to look at how we staff this, and we have to get this right.
…….“One thing the IRS has said to us ius that they will issue no comfort rulings. We’ve got to get it right.”…
……She added that between 600 to 2,000 Bahamas-based financial services providers would, “for the first time”, be required to supply the Government with records and information on US clients, hence the initiative’s importance.
The Bahamas is negotiating a Model 1 Intergovernmental Agreement (IGA) to ensure it complies with the FATCA demands of the US Treasury and Internal Revenue Service (IRS).
Under the terms of the agreement presently being negotiated between Nassau and Washington, all Bahamas-based financial institutions will have to supply the Government with the required information, with the latter then passing this on to the IRS/US Treasury.
Dr Virgill-Rolle said that while the Model 1 IGA would likely reduce the FATCA administrative and compliance burden for Bahamas-based financial institutions, it put the onus on the Government – via the Ministry of Finance – to implement a completely new information gathering/reporting infrastructure to interface with the IRS.”
So, where is any evidence of the costs of a FATCA IGA implementation to ALL Canadian taxpayers?
Is it possible that the Harper government is planning to sign up without ANY cost (and ‘benefit’) analysis? If not, then where is that information? Shouldn’t it be provided to our representatives in Parliament and the Canadian taxpaying public?
No information was provided in answer to the questions asked by MP Hsu and MP Brison.
It will obviously cost a bundle to create, implement, operate and maintain a FATCA reporting system, and to staff such an automatic reporting structure forever and ever – and amend it every time the US makes a new demand. How is it possible for a government to sign on to such an agreement (which to Canada is a binding treaty, but to the US is a fluid US-controlled law subject to US domestic whims, and no limits) without any projections as to the effects on the Canadian public purse funded by ALL Canadian taxpayers?
IF implementing FATCA comes out of existing budgets for the CRA, Ministry of Finance, etc. then obviously something more important to Canadian interests and Canadian taxpayers loses out. So, what will that be? Services? Staffing?
Staffing cuts at the CRA are already in motion http://o.canada.com/business/federal-government-plans-to-slash-millions-hundreds-of-staff-from-canada-revenue-agency-compliance-programs/ http://www.rcinet.ca/en/2014/01/03/canada-revenue-agency-to-cut-auditors-as-domestic-international-tax-evasion-rises/
And for ALL Canadian accountholders at financial as well as non-financial institutions, what will they pay extra in hidden or overt service charges for FATCA, and what will be cut in terms of services, etc. ?
Banks will certainly not allow for FATCA to cut into their own profits. They will pass the costs of FATCA compliance on to Canadian taxpayers (via the FATCA IGA), and to their accountholders.
One big area that is sure to be impacted is staffing at CBA and other FATCA affected institutions.
Banks routinely cut staff to boost profits http://globalnews.ca/news/1006978/bank-of-montreal-cuts-1000-jobs/ Why would this time be any different?
The one comment was interesting (though again lumping all US taxpayers as dishonest) …
IRS Failure To Pay Division: Are You an Obama Cabinet Nominee or Just an Average Joe Off the Street?
Examples of two Federal laws that don’t work. We can expect the same of FATCA
Law Doesn’t End Revolving Door on Capitol Hill
Companies Fleeing Taxes Pay CEOs Extra as Law Backfires
No, Congressman NEVER learn!
@JustMe
Congressmen DON’T want to learn. It is sickening. My high school history teacher taught us that Empires implode from within from corruption. The USA is just about there.
@Mark Twain, thanks for that great cartoon. It illustrates what I call the “I’ll have a Geithner” option – one that the IRS doesn’t make available to the rest of us but should. We can owe zero or far far less that Geithner did, but be tormented and penalized. Where is the “I’ll have a Geithner” option for those living ‘abroad’?
@All
I wish there was a list that showed all the elites who got away with tax evasion or fines. Both parties.
I saw these FATCA posters http://www.keepcalm-o-matic.co.uk/search/?q=fatca
I like this one best:
http://www.keepcalm-o-matic.co.uk/p/fatca-fund-america-taxing-canadian-assets/
@badger
I like that FATCA slogan…. Very, very good.
‘America’s Own Onshore Tax Havens’
Feb 2nd, 2014 By Vicky Dixon
http://www.moneyinternational.com/tax/americas-onshore-tax-havens/
“US President Barak Obama needs to look in his back yard to find out where some of those missing millions of cash and investments are sheltered behind a veil of secrecy.
…… a small family house in Thomas Avenue, Cheyenne, Wyoming, is a doorway to a hidden financial world.
……home of more than 2,000 corporations.
….. head office of Wyoming Corporate Services. The firm incorporates shell companies with shadow directors for anyone who prefers their financial affairs remain confidential.
“…….Obama and the US Treasury have placed a huge amount of pressure on nations considered tax shelters to reform the way they work.
Banking secrecy in Switzerland was crushed when the Treasury discovered the nation’s financial institutions had actively conspired with US taxpayers to help them evade tax.
FATCA is holding the world’s financial system to a straightforward choice – join up and comply or forget trading in the US dollar system.
Yet the US states of Delaware, Wyoming and Nevada are home to nearly 700,000 shell corporations owned by individuals and companies from around the world which the US Treasury admits are unregulated and easy to manipulate as financial shelters.
FATCA only deals with offshore bank accounts and as these states are mainland America, the law does not apply to them.”