http://www.compasscayman.com/caycompass/2013/10/08/FATCA-seminar-hears-of-stiff-penalties/
Acknowledging the welter of detail and difficulties in the law, part of 2010’s Hiring Incentives to Restore Employment Act, Mr. Cantor said the only people that like FATCA are lawyers and accountants.
“From the perspective of a U.S. international tax attorney, we love FATCA for four reasons: complexity; uncertainty, with all the changes since 2010; change, with all the amendments and reforms to the law; and fear-mongering,” Mr. Cantor said.
“One man told me it was the end of Western civilization as we know it,” Mr. Cantor said, explaining that “No, FATCA is aimed at foreign financial institutions and other financial intermediaries to prevent tax evasion by U.S. citizens and residents through use of offshore accounts.”
Audible despair gripped the hundreds of audience members when Mr. Cantor described eight IRS and Treasury Department forms required by the agency, followed by another five that might be needed.
Penalties are stiff for not filing, he said. For example, falsifying or failing to submit Treasury Department Form 90-22.1 could draw a $500,000 fine and up to 10 years for in prison. Tax evasion, he said, is liable to a $250,000 fine and up to five years. Failing to file a tax return attracted a $100,000 fine and up to one year imprisonment.
Following the presentation, Mr. Cantor, alongside Mr. McTaggart and KPMG partner and “head of tax” Doug Harrell, heard an hour of eager audience questions, most related to complex personal circumstances.
Mr. Cantor told one interlocutor that renouncing U.S. citizenship is unlikely to be effective: “First, you have to have another passport before you can do that. You cannot be stateless.”
An “exit tax” would also apply, he said, describing a law that “started when a certain resident here [Cayman] came from Belize.” Someone seeking to expatriate themselves, he said, could be forced to sell their assets, relinquish any trusts and pay state taxes.
“Until the State Department gives you a certificate [of expatriation], you cannot relinquish your passport, not until all your taxes are paid.”
A FATCA lawyer giving his clients false information on renunciations. That’s what FATCA lawyers do best!
+1. That’s full of basic errors.
Renouncing isn’t effective because you can’t be stateless. Everyone seems to forget there are millions of Americans eligible for second passports through parentage. This route enabled me to obtain a European passport many years ago. Never regretted my decision. The only decision for me is if the IRS decides to becomes ‘aggressive’ whether I remain a member of Club USA.
FATCA and this whole issue is work in progress and I’m waiting to see how it pans out.
These so-called ‘experts’ should get their facts right.
Where have I heard ‘I love FATCA’ before? It is a commonly used phrase by individuals who we all love to expose for their lack of intelligent arguments in many FATCA related articles. It makes sense that many of those we think of as trolls, and shit disturbers are actually members of the compliance industry who see FATCA and CBT as their life-long meal ticket, who justify their abuse of innocents by insisting they are ‘tax cheats’.
ooops…grammar mistake….hate when that happens.
@Don, ditto re: “FATCA and this whole issue is work in progress and I’m waiting to see how it pans out “.
I would add, that, we cannot just sit and wait, we have to also be pro-active. If we are all meek and quiet, and don’t protest much, FATCA will become a reality. That is why the SR’s, Otters, anons, and others hate the anti-FATCA movement and show it with their degrading comments. They want us to shut-up so they can make money.
@Mr. Cantor
“First, you have to have another passport before you can do that. You cannot be stateless.”
Wrong – of course you can be stateless!
“An “exit tax” would also apply, he said, describing a law that “started when a certain resident here [Cayman] came from Belize.” Someone seeking to expatriate themselves, he said, could be forced to sell their assets, relinquish any trusts and pay state taxes.”
Wrong – the exit tax doesn’t apply to everyone, and no one is forced to sell any assets!
“Until the State Department gives you a certificate [of expatriation], you cannot relinquish your passport, not until all your taxes are paid.”
Wrong – the State Department doesn’t even know if you owe any taxes; CLNs are issued completely independently of any tax issues!
Is this guy for real?
USA cannot enforce tax rules and law against Canada citizen Have they ever tried to extradie a Canadian for USA tax rules.
Re: statelessness issue and second passport;
There was no mention or recognition of all those born abroad – millions who were born with a non-US birthplace citizenship, and who already live outside the US – and who are only US persons due to a US parent. Or, those duals who were born in the US to non-US parents who then returned to their country of origin. Or those duals born in the US, but living and naturalized in another country.
They’re all obsessed with preventing people from ‘leaving’, but many of us have never even set foot in or lived in the US for any significant length of time – as adults, or at all.
It seems the USG isn’t the only one with an interest in misinforming people about renouncing and taxes. When the so-called professionals lie in order to profit off this, how can anyone do other than get out of Dodge?
@Don – The US, specifically, will let you renounce and become stateless. It’s a terrible idea and quite uncommon in practice, but not unknown (Google ‘mike gogulski’).
Anyway, notamused nails the three major errors, which in only 330 words is pretty impressive.
@notamused: … no one is forced to sell any assets!
Suppose you have $1 in the bank and own your home outright. You paid $1m for it and now it is worth $2m. You are over the ‘covered expatriate’ asset threshold for the exit tax, and so you ‘owe’ the US capital gains tax on around $337k. This is a phantom capital gain but you have to pay tax on it with real cash. You cannot pay it without selling the house.
In practice I suspect a variation of this is likely to apply to quite a few ‘covered expatriates’. Not that congress gives two hoots for the practical problems of all the crap that they force on the rest of us.
It’s not good to have a blood pressure spike first thing in the morning! All I can say is “consider the source”.
None of those getting out of Dodge had too much concern for where they were going – just get your ass out of town before it’s shot. Being stateless may just become preferable to remaining a US citizen, in some circumstances.
@bubblebustin:
Well, maybe. My concern for people like Gogulski is that they may lose the right to stay wherever it is they are, get deported to the US for lack of any better idea, and end up in immigration detention for the rest of their lives with no way out. Dark, but weirder things happen.
Many nations might find their citizenships to be very marketable to Americans. Think of all the spinoff industries, but they too will die off when global migration comes to an end for America. But for keeping it a secret, CBT should’ve done this long ago.
I have to repeat the old joke this post reminds me of:
Q: What’s black and tan and looks great on a lawyer?
A: A Doberman Pinscher (or, in more modern parlance, a Pit Bull)
Maybe some of those making comments here, could post them on the Cay’s Compass article to counter the errant information… We know it. They don’t! So educate the journalist that is just regurgitating what a “Lawyer” said. Tell them where they are wrong. I just stopped by a computer to look at this, and I see only one comment. I will try to do one later today, if no one else does…
BTW, give credit where credit is due. Bluntly honest…
“From the perspective of a U.S. international tax attorney, we love FATCA for four reasons: complexity; uncertainty, with all the changes since 2010; change, with all the amendments and reforms to the law; and fear-mongering,” Mr. Cantor said.
@schubert1975 – or a Rottweiler. Either of the three works.
@Jerry,
re: “USA cannot enforce tax rules and law against Canada citizen Have they ever tried to extradtie a Canadian for USA tax rules. ”
I don’t know about extradition, and I have not heard too many people post about that worry here at IBS.
However, with FATCA, USA is definitely trying to enforce tax law against Canadian citizens. Whether the banks sign up individually or Canada signs an IGA, FATCA still amounts to the same thing – American law being enforced on Canadians and residents of Canada. Would you disagree?
@Jerry,
Also, people are worried about things like: identity theft due to private information being sent to IRS, penalties being imposed by IRS for non-reporting of FBARS (which FATCA will reveal), getting nasty IRS letters in the mail once they have been smoked out by FATCA, being hassled at the US border, being refused entry at the border due to non-compliancy, uncertainties over how/if IRS will attempt to collect on penalties it will assess from account details Canadian banks have released (extradition being one possibility), etc.
On extradition it’s debatable whether it could be done. Not paying taxes or filing forms under CBT is not a crime in other countries as they are RBT. Most extradition treaties mandate it has to be a crime in the country being requested to extradite.
So if you’re in France and paying all your taxes and the US wants to extradite you it could be argued you are not committing a crime under French law. France would not prosecute a French citizen living in the US long term and paying ONLY US taxes (as long as he pays all taxes from his French sources of course).
This would be a sticky legal argument for the US. The US would have to re-write extradition treaties as well.
Have you seen the authors name? It could only be better if his last name ended in a “d” instead of an “r”. You can email Tad Stoner at:
tad.stoner@cfp.ky
@Watcher
I interpret Mr. Cantor’s assertion that people are “forced” to sell there assets in a more literal sense, for example if the USG stated that expats were no longer allowed to hold any US assets. That would truly be forcing people to sell their assets. His statement implies something along those lines, as if there were no alternative. That’s a misrepresentation of the facts and is simply fear mongering. The scenario you’ve described is a bitter pill to be sure, however it is not completely bereft of alternatives.
@Notamused, I wouldn’t even put it past the USG to change the rules for U.S.persons by trying to force Expats to repatriate all their assets (apart from property and employer-sponsored pensions) to U.S.-based banks and brokerages. This would make U.S.tax compliance easier plus place assets in far easier reach of the IRS.
@notamused: … however it is not completely bereft of alternatives.
I assume you mean deferral. As ever with the IRS, the cure is worse than the disease.
http://blogs.angloinfo.com/us-tax/2013/07/15/expatriation-deferring-payment-of-the-exit-tax/
“While the immediate financial consequences of the Exit Tax may be very harsh, making the tax deferral election brings on its own set of unique problems. There is no guarantee that the covered expatriate will be permitted to enter into a tax-deferral agreement with the IRS, since this is completely discretionary with the IRS. It is very important to note that the IRS’ acceptance or rejection of an individual’s application to defer the tax would not be known until after the individual has already expatriated. So, an individual could be stuck having to pay all the Exit Tax if the IRS rejected his application and it would already be too late, since the individual will have expatriated and therefore already be liable for Exit Tax. Further, when tax-deferred property is finally disposed of, the capital gains tax rate may be higher than under current law. All this, in combination with the continuous accrual of interest on the Exit Tax that is owed and the requirement to maintain adequate security, may result in an extremely difficult financial burden.”
@monalisa1776
By placing the hurdles as high as they have with FATCA, they are effectively already doing what you describe, i.e. putting pressure on people to repatriate (themselves and/or their assets).
In my view, that’s one of the 3 options (“3 Rs”) for US expatriates:
1) Renounce/Relinquish
2) Repatriate
3) Run for your life!