An impressive new article by Jason van Steenwyk for NerdWallet Investing. Jason, a freelance writer living in Fort Lauderdale, provides a well-informed and sympathetic portrayal of FATCA’s looming threat to US Persons worldwide. No comments yet, so I might suggest that we offer our feedback and encouragement. Nice to see another homelander get it right.
American threats against innocent expats are increasing
The following claims were made by Tick-Tock-Tick-Tock – US Swiss Tax Deal Imminent:
- Time is running out.
- A willful failure to file is considered a felony punishable by five years in prison.
- Holders of unreported foreign accounts have more than jail to fear.
- the IRS has proven itself very adept at finding taxpayers that have not filed an FBAR.
- Those that are caught can expect both a tax bill and a penalty assessment of the greater of $100,000 or half the highest balance in the account.
- Making things worse for taxpayers is next year’s looming FATCA law.
- If the IRS thinks you moved or renamed your account to avoid detection, chances of criminal prosecution increase dramatically.
- The Quiet Disclosure strategy not only doesn’t work, it sets up taxpayers for a huge interest and penalty bill.
- The IRS publicly states on their amnesty website that those who try to quietly send any missing FBAR forms to the Service Center may find themselves in hot water.
Eritreans can feel themselves lucky. Their government is far less criminal against its diaspora.
FATCA IGA and Application Law Approved by Swiss Parliament
L’accord fiscal avec les Etats-Unis passe le cap du National
The taxation agreement on FATCA between Switzerland and the US that would prevent American taxpayers from avoiding the [IRS] was accepted Monday by the National Council [lower house of Parliament] by 112 to 51.
Accounts held in Switzerland by American taxpayers should no longer escape the IRS. By 112 votes to 51 and 21 abstentions, the National Council passed the FATCA agreement Monday. The bill returns to the Council of States [Senate] for a minor divergence regarding the [date?] of entry into force.
The American law called FATCA was to be in effect from next January. The agreement [IGA] and its [Swiss] enforcement law… was prepared in view of this [date]. In the meantime, Washington made it known that the new rules would be applicable only from July 2014.
Past not yet dealt with.
With this treaty, Switzerland should be able to put an end to the taxation conflict with the United States. But only for future taxation of American accounts.
In order to draw a line through the past, certain banks must await the verdict of the American court system, and others must resort to a program concocted by [Washington] which would essentially put them at risk for significant fines and [require] transmission of data to [the IRS].
My assumption here is that the Swiss enforcement law is being returned to the Senate in order to change the effective date to July 2014, but I am not certain. Please see text of the enforcement law and previous discussions here at IBS: Discussions on Swiss Senate Approval of FATCA and SIF page
Here are some direct links cited on aforesaid IBS post, dating back to the June approval of FATCA and Swiss enforcement law by the Senate:
Proposed Federal Law (French): Proposed Enforcement Law
Text of the IGA (English): IGA
Text of the IGA (French): IGA-French
Report (French): Report
What really upsets me is that we had heard in the news that the debate on FATCA would go to the lower house in November. Also, I am wondering if anyone in either house of the Swiss Parliament knows that a drive for repeal is under way. The RTS article does not mention bone fide residents of Switzerland or neighboring countries. Again, our plight is ignored by the press.
Please everyone, write to RTS and other Swiss news agencies to remind them of who this will affect.
——
Here is another article from Le Matin that goes into more detail, sorry no time to translate this morning: http://www.lematin.ch/suisse/L-accord-FATCA-passe-le-cap-du-Conseil-national/story/29090313
What can you buy from the IRS for $50,000?
Well, that depends very much on who you are. For the same amount of protection money, you will get very different results.
Say you are a multinational corporation managed & controlled entirely in the U.S., with huge amounts of intellectual property developed by U.S. employees. You can buy an Advance Pricing Agreement: in exchange for the “user fee” specified in Rev. Proc. 2006-9 § 4.12.3, the IRS will promise not to fight back when you pretend that a tiny man in a Bermuda mailbox owns that intellectual property & makes a certain percentage of your U.S. profit. If your gross income is under $200 million, you can even get a 55% discount on the fee! And the Obama administration is adding IRS staff to ensure the rapid processing of your application to pay less U.S. tax.
Now say you are a Canadian who was born in the U.S. and you’ve managed to save up six figures for your retirement after a long & successful career spent entirely in Canada, paying Canadian taxes. In that case, you can buy a ticket into the Offshore Voluntary Disclosure Program: in exchange for about a fifth of your life’s savings (even if you don’t owe any U.S. tax) and two years of your time spent writing letters back and forth, the IRS will promise not to have the Department of Justice file charges against you for the “crime” of not filing Foreign Bank Account Reports with the Financial Crimes Enforcement Network. (Unless the IRS had their fingers crossed behind their back.)
While the IRS is adding headcount to rubber-stamp APAs more quickly, apparently they can’t find anyone to make a statutorily-required response to the National Taxpayer Advocate’s criticisms of draconian fines levied against Americans abroad. On the other hand, this is nothing more than rational behaviour by the IRS. As badger mentioned in a recent comment:
why the US is hammering individuals in Canada and elsewhere – because they can, rather than pursuing US corporations with more means to pushback or find loopholes.
Companies with expensive international law firms on retainer have an irritating tendency to take their fights to Tax Court. Much better to go after soft & clawless prey who will roll over and beg for mercy because they’ve been psychologically conditioned with a visceral reflex against doing anything as “drastic” as renouncing citizenship to protect themselves & their families.
National Post Offers Some Good Sense Advice to Snowbirds
It’s not too often that an article on snowbirding in the United States takes a sentence to remind Canadians of a certain age to be mindful of their assets in terms of taxes and estates, but an article in today’s National Post does just that very thing.
Too often Canadian retirees are enticed south of the border with misinformation that can land them, or their heirs, in US tax hell, and I wouldn’t say that the following advice is the most strongly worded I’ve seen, but it’s good practical advice anyway.
A snowbird making a habit of spending several months a year in Florida or another U.S. state needs to take legal advice on consequences of the U.S. residence and may trigger the U.S. significant presence test for tax liability and questions of permanent domicile.
While there is no mention of banking or investing issues to be aware and wary of, reminding folks that the US government has different ideas about residence for tax purposes that can have an impact on their wills and their estates is as good a place to start as any.
And just for comparison purposes. I stumbled on the reverse situation via a WSJ article that was linked on the Americans in Canada Facebook page.
Quote of the Day
“Patriotism is often an arbitrary veneration of real estate above principles.”- George Jean Nathan
Lynne Swanson, Nothing against the United States, until now : This Worth sending to representatives in Parliament
AFL-CIO backed Citizens for Tax Justice defends FATCA
http://www.ctj.org/taxjusticedigest/archive/2013/08/surge_in_tax-wary_us_expats_re.php
In its latest attack on the Foreign Account Tax Compliance Act (FATCA), the Wall Street Journal describes in ominous tones the “record” number of individuals who renounced their U.S. citizenship in the last quarter, supposedly driven by FATCA’s reporting requirements, which are designed to prevent tax evasion.
What scary headlines about a “surge” in expatriations leave out, however, is what a miniscule number it really is. Even the six-fold increase this quarter compared to the second quarter of last year meant that only 1,130 people renounced their citizenship in the second quarter of this year. To give some context, this number represents less than 0.02 percent of the estimated six million Americans that live abroad.
“Surge in Expatriations to Avoid Taxes!” “US expatriates renounce citizenships at record rate!” Pretty alarming headlines. News coverage of what complying with FATCA actually entails has been misleading and would make you think that the rise in renunciations is driven by the “overly burdensome” rules that are financially crippling US citizens living abroad. The fact is, the primary component of FATCA affecting individuals is the requirement that U.S. citizens with $50,000 or more in foreign financial assets (which does not include housing or other basic non-financial assets) simply have to attach a disclosure statement about their accounts in their yearly tax return.
Whatever inconvenience is caused by these requirements is far outweighed by the benefits to the U.S. and its law abiding taxpayers. According to the Congressional Joint Committee on Taxation (JCT), FATCA’s anti-tax evasion measures are estimated to raise $8.7 billion (PDF) over their first decade of implementation (and JCT has a history of underestimating such tax enforcement measures, too.) Considering that the U.S. loses an estimated $100 billion (PDF) annually due to offshore tax abuses, rather than seeking to curtail FATCA, Congress should expand on these efforts through legislation like the Stop Tax Haven Abuse Act in the House or the CUT Unjustified Loopholes Act (PDF) in the Senate.
While the emigration of every single wealthy person abroad is makes big news (see, for example, coverage of Facebook billionaire Eduardo Saverin or singer Tina Turner), the reality is that the number of renunciations is negligible – especially compared to the number of new citizen naturalizations each year. In fact, 503,104 people have been naturalized in the US since the start of Fiscal Year 2013, which means well over 250 people embracing US citizenship for every one person renouncing it over the past several months.Asking the few and largely wealthy Americans with substantial offshore financial assets to do a little extra paperwork is not unreasonable when we know that cracking down on offshore tax evaders will bring in revenues to invest in things like roads, schools, healthcare and a quality of life that make the US so attractive to aspiring U.S. citizens.
Look at what ExpatForum.com says these days. Remember them censoring what we had to say?
What we had to say being censored at ExpatForum.com led us to form the Isaac Brock Society!
They have now posted information from American Citizens Abroad. Are they waking up?
American tax officials accused of targeting expats
The complete ACA letter referred to is ACA Final Letter to Treasury-IRS, July 19, 2013.
G20 Nations Agree to Share Tax Info By 2015
The Globe and Mail reports that the players at the current G20, when not posturing about the coming US war on Syria, have agreed to share tax information.
Why?
Well, we know why. Tax cheats! They are everywhere.
One positive in the article is that it mentioned FATCA and the privacy concerns Canada has about it.