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.
@ bubblebustin
Well the threat of FATCA didn’t change my cross border shopping trips (never took any) or my investment habits (never made any) or my lottery ticket buying habits (never bought any) but it certainly made me realize that money can be as much a burden as a boon. It really isn’t about the money for me. It’s about privacy and my absolute abhorrence of a panopticon society.
Em and bubblebustin,
Haven’t been to the US for several years and likely will not go again. Even though I have renounced and could cross, a trip with my kids to visit relatives would be the only reason. Although my son’s passport says he was born in Canada (and he is not registered with the US and the only reason for doing that would be for the goal of renunciation, which is impossible), mine says I was born in the US. He would be travelling with me and subject to aggressive questioning from a border official if they wanted to ask if I was his mother, therefore surmising he would be a US citizen. I wouldn’t take that chance for his sake. No cross-border shopping, which I have never done; no visiting or touristing in the US – it will be elsewhere, likely within Canada; no US investments at all.
No financial support to the US from this household means little, except the way I feel better for doing my little bit.
@Petit Suisse
You wrote “I wonder why the IGA specifies that small accounts may be checked only if CRA’s implementation rules so permit.”
Are you referring to the section below from page 20? The phrase “Unless the Reporting Canadian Financial Institution elects otherwise…” appears in a few places. Most people are guessing that the banks will ignore the $50K threshold and report everything, but I suppose there could be an Easter Egg in the CRA Guidance publication prohibiting that election.
There are two angles to opening several new accounts before July 1. One is to put less than $50K in each one, if you believe the threshold will be honoured. The other is in the hopes that one of them will be deemed compliant by restricting customers to Canadian residents and not have any threshold at all.
Does the Canadian IGA penalise banks in the same way that the Swiss IGA does? If so, then your banks will be checking any account they suspect might have American connections regardless of the limit amount. The less they can reduce the penalty they have to pay the better for the bank will be their view.
Medea no it dos not. The Swiss voluntary disclosure for the banks ( other than the big 14) is entirely separate from the IGA. There isn’t yet anything similar in any other country. Canadian banks will only report bank balance and account no of ‘US persons’ and a host of accounts are exempt.
@Duke of Devon, let’s hope it stays that way then. Wouldn’t wish Switzerland’s bank problems on anyone else. Dealing with FATCA in it’s milder form is bad enough I say. Just glad I’ll be finished with it by June this year when the final filing is done.
@MedeaFleecestealer
This info from the Canadian Department of Finance FAQ on the IGA might also be of interest if it differs from the Swiss situation. Does the Swiss IGA contain a clause that Switzerland gets any better treatment contained in a IGA signed later by another country?
“The 30 percent FATCA withholding tax will not apply to clients of Canadian financial institutions, and can apply to a Canadian financial institution only if the financial institution is in significant and long-term non-compliance with its obligations under the IGA.
The FATCA requirement that Canadian financial institutions be required to close accounts or refuse to offer services to clients in certain circumstances will be eliminated.“
Israeli banks ordered to implement FATCA even without an IGA:
http://www.globes.co.il/en/article-boi-orders-banks-to-prepare-for-fatca-1000924691
” The Bank of Israel is not waiting for an Israeli-US agreement on the exchange of tax data. Supervisor of Banks David Zaken today announced that he is ordering banks to prepare to implement the Foreign Account Tax Compliance Act (FATCA). Under this law, passed in 2010, and which comes into effect in July, every financial institution in the world must notify the Internal Revenue Service (IRS) about its US customers, and, if necessary, to deduct tax payments from their accounts……….”
.”Most, if not all, of Israel banks are ready to implement FATCA and have signed their US customers on the forms. As a consequence, the banks have lost quite a few customers, who decided to withdraw their money and close their accounts. “Globes” has estimated that more than $4 billion have been withdrawn from accounts in Israeli banks.. .”…
@Petit Suisse, no, I don’t think so. That’s why many of the banks are asking/demanding that their clients prove they’re US compliant or strongly suggest they become so by entering an OVD program. That shows that they’re doing their bit to track down the tax evaders and they hope it’ll reduce their penalties.
As others have said, the Canadian situation is totally different to the Swiss one. Canadian banks haven’t been seen as tax havens or as wilfully encouraging US citizens to open accounts to hide their money. I think it would be different if they tried the same tactics with Canada and its million+ US/Canadian residents.
Is Carl Levin trying to kill FATCA?
blogs.angloinfo.com/us-tax/2014/03/17/how-to-avoid-fatca-tips-from-us-senate-subcommittee#.UyZ6RrrZRH8.twitter
The apparent renewed focus of the government on U.S. citizens and LPRs residing overseas is worth considering in the current environment.
The article explains the contradictory statements of David Jacobson, then U.S. Ambassador to Canada and then IRS Commissioner Shulman. See page 33 of the article, which provides as follows:
More troubling and problematic is the mixed
message sent to U.S. citizens residing overseas,
including by David Jacobson, the U.S. Ambassador
to Canada who stated in a recent interview:
“What the IRS is saying here is that if … you don’t
owe taxes to the U.S., and you file your return and
they show you don’t owe taxes, there aren’t going
to be any penalties for having filed late.” Is that
what the IRS is really saying? The short answer is
a resounding “NO”! The IRS spoke a few days
after the Ambassador’s comments when it issued a
statement entitled, Information for U.S. Citizens or
Dual Citizens Residing Outside the U.S. In the IRS
statement, they indicate that taxpayers who do not
owe any U.S. taxes “ … due to the application of
the foreign earned income exclusion or foreign tax
credits) will owe no failure to file or failure to pay
penalties. In addition, no FBAR penalty applies in
the case of a violation that the IRS determines was
due to reasonable cause.” [Emphasis added.]
Now as we all know there are a number of problems USCs and LPRs living overseas face regarding the application of U.S. law and whether they have filed U.S. income tax returns, FBARs or information returns, such as IRS Form 5471, 3520, 8858, etc. These problems include:
1. The IRS makes the determination of whether there is “reasonable cause” when no FBARs were previously filed. The IRS has not attempted to articulate in any real detail, what they view as “reasonable cause.” This is not a determination by the taxpayer. Will one know it when they see it?
2. USCs and LPRs living outside the U.S. can be subject to the FBAR penalties even if no U.S. income tax is owing (e.g., due to the foreign earned income exclusion and/or foreign tax credits). Each of these individuals have to track the exchange rate applicable in their home country of residence to know if and when the U.S. dollar thresholds in the U.S. law are met.
3. The FAQs 17 and 18 provide solace to USCs and LPRs residing outside the U.S. only if they ” . . . reported, and paid tax on, all their taxable income for the prior years but did not file FBARS . . . “ Of course, the school teacher in the IRS’s own example in IRS Example 1 and 2 did not have an account that ever reached the equivalent of US$10,000. If the school teacher in the IRS example did have such an account, even for a day, she would not fall within the “free on base” rule that the IRS will not assess an FBAR penalty. That “free on base rule” is only applicable when ” . . . The IRS will not impose a penalty for the failure to file the delinquent FBARs if there are no underreported tax liabilities and you have not previously been contacted regarding an income tax examination or a request for delinquent returns. . . “ In example 2, there is an unreported tax liability of $2,100. Hence, according to the IRS analysis the school teacher can be subject to a $10,000 FBAR failure to file penalty, even if the income tax is paid of $2,100, if the IRS determines the late FBAR filing was not due to “reasonable cause.”
4. A published 2012 District Court opinion, McBride, held the taxpayer was liable for FBAR penalties even if the taxpayer had no actual knowledge. The facts of that taxpayer were very bad in the case of McBride, yet the conclusions of the Court and statements below, give little comfort to USCs and LPRs residing overseas who have not filed FBARs, that the government might assess large FBAR penalties (the 50% willfulness penalty of the highest account balance in the case of McBride)
@Theta
The Non compliant USC overseas…. What to do, what to do?
http://blogs.angloinfo.com/us-tax/2014/03/10/the-tax-non-compliant-american-abroad-what-are-your-choices/
@bubblebustin
and for a campaign contribution, Carl will provide a private members bill with new tips and legislated loopholes on how to avoid the monster of his creation.
@Theta,
thanks for the timely reminder of the educational remarks of the previous US Ambassador Jacobson.
One has to ask;
If the US Ambassador to Canada (who stated that he spoke to the head of the IRS on the matter and must receive some kind of briefing) does not understand the labyrinthine complexities of the extraterritorial tax and reporting the US demands of those living outside the US – in the country he was sent to, how then should all of us who live and may have been born outside the US have mastered it?
Even now, the IRS, instead of providing ‘education’ and assistance to us – just across the border where the second largest population of duals and US persons abroad reside – in Canada, but chooses to leave those here to our own devices to figure out how to comply with the convoluted and costly demands, or to figure out how to formally check out of the system. The IRS has a budget for ‘education’ as well as for ‘enforcement’ functions. They’ve chosen to invest in ‘enforcement’ over information and education – as the Taxpayer Advocate noted several times and warned them was an unwise balance. One of their latest reports mentioned that they’ve chosen to invest in their website vs. assistance by phone, in person, etc.
They’ve even cut the in-person walk-in assistance to the elderly and low income in the US:
“…… cuts are also affecting crucial services available to society’s most vulnerable, since the IRS has announced that its walk-in clinics will no longer be able to provide free return preparation (limited since 2002 to elderly, disabled, and low-income taxpayers) as of January 1, 2014, Olson said. “I think that preparing tax returns for our citizens is a core tax administration duty, and I don’t know of any country that’s a member of the OECD that is not doing that except” the United States, she said, adding, “I think that’s a shameful thing, but that’s the new paradigm of tax administration.”…… ”
http://www.tax.org/www/features.nsf/Articles/B4C7B2AF7165796F85257C230051003C?OpenDocument So you know those abroad are even further down the line for any ‘service’, but still high on the list for ‘enforcement’ and punishment. Despite any robust evidence of what those abroad might possibly actually owe them after having paid one full set of taxes at home where we live outside the US. It would be charitable to even entertain the numbers US politicians like to toss about for the ‘tax gap’ as attributed to those abroad http://profwilliambyrnes.com/2014/03/15/so-where-does-the-oft-cited-150-billion-figure-of-offshore-evasion-come-from/ http://www.gpo.gov/fdsys/pkg/CHRG-111shrg49492/html/CHRG-111shrg49492.htm http://federaltaxcrimes.blogspot.ca/2014/02/live-feed-for-senate-permanent.html#comment-1285780652
And even then, as we together try to figure out the renunciation/relinquishment laws and policies and forms for those who see no alternative in terms of remaining under this punitive system any longer, the US is providing no assistance to make that simpler, easier, clearer, etc. Instead, the IRS CI announces that they’re interested in the reasons why the numbers are rising so sharply. Whereas previously Treasury opined that FATCA (as part and parcel of US CBT) had nothing to do with it. And why did the State Department decide to up the renunciation fee to 450.?
I call BS when they continue to cancel even sporadic US tax information sessions at the Canadian consulates and embassy *”due to budget cuts”, but continue the aggression, threats and confiscatory penalty regime: *”Note: Owing to budget cutbacks, the Internal Revenue Service will not/not be providing any in-person assistance or tax seminars at the U.S. Embassy and certain of the Consulates General in Canada.” http://canada.usembassy.gov/consular_services/taxpayer-assistance.html
That notice has been there since at least 2011 if not earlier.
Compliance isn’t what they are seeking. Penalty revenue and vengeance is.
@just me
This is the first I’ve seen of Carl Levin targeting USP’s abroad specific to FATCA. Even if the report relates only to Switzerland, the reporting thresholds he’s complaining about are consistent within all the IGA’s so far. Reporting thresholds would have to be reduced to zero in order to overcome what he identifies as problems within the Swiss IGA and any others. Is it back to the drawing board for FATCA?
Not sure if this quote was mangled by the author or verbatim from a spokesperson from the World Council of Credit Unions, but it mentions Canadian Charter conflicts (so I also posted it in the Canada and FATCA thread):
“…….some issues with the IGAs and the OECD standard are more serious. Michael Edwards, chief counsel at the World Council of Credit Unions in Madison, Wisconsin, believes that privacy concerns may be a major stumbling block. “Information sharing through a central hub is logical but it raises questions under various countries’ privacy laws. One of the reasons it took Canada so long to sign a Fatca IGA was because of concerns about the Canadian Charter of Rights. Hopefully the IGA addresses the Canadian issues but with all the data breaches we have been having, any centralised hub will raise privacy concerns even if it is totally lawful.”……..
from ‘Universal Fatca runs into political obstacles’
Author: Alexander Campbell
Source: Operational Risk & Regulation | 17 Mar 2014 http://www.risk.net/operational-risk-and-regulation/feature/2333567/universal-fatca-runs-into-political-obstacles
Also note this article speaks of information reporting on ‘foreign citizens’, ex. “…The OECD draft agreement envisions countries reporting to each other not only on assets held by foreign citizens directly, but also on assets held by local financial entities controlled by foreign citizens…” whereas didn’t the OECD actually specifically note that it would be based on ‘residency’ in contrast to the US citizenship/status basis? I wonder if the authors themselves are confusing the US basis for FATCA with the OECD Common Reporting basis of residency in the article?
There are lots of other interesting nuggets re ‘reciprocity’ – lack of, and the US machinery req’d for, OECD GATCA, etc.
Worth reading.
http://www.thenewamerican.com/economy/item/17868-obama-tax-scheme-could-destabilize-banks-spark-economic-crisis
Tuesday, 18 March 2014 10:47
‘Obama Tax Scheme Could Destabilize Banks, Spark Economic Crisis’
Written by Alex Newman
“The Obama administration has refused to perform (or at least release) any sort of cost-benefit analysis of its new tax reporting scheme, labeled “DATCA lite” by some analysts, as it paves the way for even greater FATCA-linked domestic data collection and sharing. Independent experts, though, are warning that the plan could result in potentially tens or even hundreds of billions worth of foreign deposits fleeing from U.S. institutions….”……
…”“We see no principled basis on which to require that financial institutions based in other countries collect and provide us with information on U.S. taxpayers, if we take the position that our own institutions should be exempt from similar requirements,” explained Treasury Acting Assistant Secretary for Tax Policy Emily McMahon in a 2012 speech. “To the contrary, we believe that it will be critical to the success of our efforts to implement FATCA that we are able to reciprocate.”
Of course, spying on people and sharing their deeply private information without a warrant or even probable cause is unlawful in many countries around the world — in the United States, the Fourth Amendment to the U.S. Constitution was supposed to protect Americans from such machinations. To get around those obstacles in the supposed hunt for an extra billion or so dollars of tax revenue every year, the Obama administration is signing up foreign governments for what are known as “inter-governmental agreements,” or IGAs.
Once the unconstitutional pseudo-treaties are signed — the U.S. Senate gets no opportunity to offer its consent on the deals, despite what the Constitution requires — foreign governments are expected to violate the privacy of account holders in their jurisdictions and become de facto agents of the IRS. Information on so-called “U.S. persons” is to be collected and sent to the Treasury. In return, the Obama administration plans to force U.S. banks to “reciprocate” — or put another way, violate the financial privacy of foreigners with accounts in the United States on behalf of foreign IGA signatory governments….”…..
New Website to Assist Millions of Taxpayers with Undisclosed, Offshore Accounts
http://www.prnewswire.com/news-releases/new-website-to-assist-millions-of-taxpayers-with-undisclosed-offshore-accounts-251152991.html
@noone
I haven’t seen a more appropriate name for what they do, have you?
@bubblebustin
You got that right. They have their nicey nice sheep costume but underneath they are ready to eat you alive.
is an ovdi application not accepted if the accountholder’s bank is one of 14 under CI.
cornering from both sides…senate and irs
Sweden will discuss FATCA next week, in the tax committees of the parliament.
http://www.riksdagen.se/sv/Dokument-Lagar/Utskottens-dokument/Ovriga/Skatteutskottets-sammantrade-_H1A3SkU22/
I have often hit the leaders (ledarmote) and also A. Borg the finance minister with emails, but it may have been a month since I last sent them stuff.
The leaders are listed here
http://www.riksdagen.se/sv/Utskott-EU-namnd/Skatteutskottet/Ledamoter/
The minority leader (Leif) answers the telephone and indeed acts to your telephone call. Unfortunately, he acted by falling in love with FATCA.
For me, now being employed and overpaid, it is difficult to call them. THere are emails and phone numbers. To call, drop the zero, and substitute 0046 from Europe or (011) 46 from North America.
The latest nonsense piece about FATCA (Bangkok Post – March 23):
http://www.bangkokpost.com/news/investigation/401244/is-fatca-just-for-fat-cats-us-expats-beware
The writer works for a firm specializing in financial services for expats. Gosh surprise.
I’m sure he would appreciate your comments. 🙂
HAS THE IRS LET THE KING OF THAILAND OFF THE HOOK?
and now also those with corporate signature authority?
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Report-of-Foreign-Bank-and-Financial-Accounts-FBAR
Exceptions to the Reporting Requirement
Exceptions to the FBAR reporting requirements can be found in the FBAR instructions. There are filing exceptions for the following United States persons or foreign financial accounts:
•Certain foreign financial accounts jointly owned by spouses;
•United States persons included in a consolidated FBAR;
•Correspondent/nostro accounts;
•Foreign financial accounts owned by a governmental entity;
•Foreign financial accounts owned by an international financial institution;
•IRA owners and beneficiaries;
•Participants in and beneficiaries of tax-qualified retirement plans;
•Certain individuals with signature authority over, but no financial interest in, a foreign financial account;
•Trust beneficiaries (but only if a U.S. person reports the account on an FBAR filed on behalf of the trust); and
•Foreign financial accounts maintained on a United States military banking facility.