Renunciation and Relinquishment of United States Citizenship: Discussion thread (Ask your questions) Part Two
Ask your questions about Renunciation and Relinquishment of United States Citizenship and Certificates of Loss of Nationality.
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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 Renunciation and Relinquishment of United States Citizenship: Discussion thread (Ask your questions) Part One
@patrick
One Italian bank sends year-end balances to the IRS under FATCA, and he and/or a lawyer decide that he should enter streamlined and potentially cost himself millions? Dumb move.
Gone Soon. In your first post you laid out a plan and asked if there was anything else you needed to know. The answer is no there is nothing else you need to know. Your first plan is fine the way it is.
“@nononymous
With that kind of money he should have had much, much better advice than some clown sending him into the streamlined program.”
one of his italian banks gave him to the irs(although they said they never would) ,no attorney told him to enter the streamline program before that….
One Italian bank sends year-end balances to the IRS under FATCA, and he and/or a lawyer decide that he should enter streamlined and potentially cost himself millions? Dumb move.”
This harping on what a dumb move it was or that they shouldn’t have done it serves no purpose. Once to warn others not to, OK, but repeating the message, no purpose. It has been done and it can not be undone.
I suspect that there is more to the story that we do not know, and given the public nature of this forum, should not know. There may be very good reasons to do given the reality of their situation.
But what we do know needs to be pointed out. A bank has done something that it said it would not do, reported one of their clients to the IRS.
What else might this bank and others do fir the IRS? We do not KNOW but better consider the possibilities and the probabilities.
Nononymous, it may be that the Italian bank did more than that. They may have wanted proof that he’s US tax compliant otherwise they’d /freeze/close the account. PostFinance wanted to know I was when they checked their records and found I was a US citizen. And I’ve read some reports that even before FATCA came into force Credit Suiisse was wanting to see 5 years of tax filings before they’d be satisfied.
Medea Fleecestealer: “They may have wanted proof that he’s US tax compliant otherwise they’d /freeze/close the account. PostFinance wanted to know I was when they checked their records and found I was a US citizen. ”
Banks in Switzerland (IGA Model 2) are at risk of FATCA withholding; banks in Italy (IGA Model 1) are not.
Doesn’t mean they’re not playing it safe plaxy.
The Model 1 IGAs are quite benign, compared to the Model 2 IGAs. In IGA 1 countries, local customers born in the US are reported on and discriminated against and may have trouble opening accounts, but banks can’t require copies of FBARs, 1040s, etc, and banks don’t report directly to the IRS. So it’s a big difference.
I do feel for USCs in IGA 2 countries. It sounds pretty horrible, having to not just file, but actually share copies with a bank. 🙁
“Doesn’t mean they’re not playing it safe plaxy.”
Safe from what? The banks in Model 1 countries aren’t at risk of withholding.
Safe from what?”
From the ever changing regulatory landscape.
Banks certainly need to be aware of changing regulations, and as far as I’m concerned they thoroughly deserve everything they’ve got coming to them; but the IGAs can’t be changed unilaterally by either side, so USCs (in Model 1 jurisdictions like Italy) don’t have to worry that their bank might suddenly shop them to the IRS.
As FATCA is a unilateral event and Italy was either fooled or extorted into signing an IGA along with every other nation on earth, as long as the bank does businesx in the US or uses the SWIFT system to move money around, they are at risk.
The only question is how much risk at any point of time.
“as long as the bank does businesx in the US or uses the SWIFT system to move money around, they are at risk.”
The banks are at risk from sudden changes to US regulations, yes; but they’re not (in IGA 1 jurisdictions) at risk of FATCA withholding for failing to report accounts of local residents who have US citizenship. The banks report the accounts to the local tax agency so they’re safe. They just don’t like having to do the due diligence because it costs them money.
“but the IGAs can’t be changed unilaterally by either side,”
The US reneges on tax treaties by making unilateral legislation or court rulings and using the “last in time” rule. How do IGAs get to be more reliable than treaties?
For instance? What scenario are you hypothesising?
IGAs can be changed unilaterally by the US.
FATCA itself is a treaty over ride.
The US does what it likes. Iirc FACTA IGAs are supposed to work both ways, i.e. US banks are supposed to report on foreigners holding US accounts. I wonder how many US banks have done so? Duh – none? Why? Because it would be too expensive for US banks to implement so they were told not to bother.
“IGAs can be changed unilaterally by the US.”
How?
The US can disregard the IGA – failing to honour its commitments – but it already does that.
The US could withdraw altogether from the IGA, but so could the other side; unilateral withdrawal is one of the provisions. And if the US did choose to withdraw, that would be great news for USCs in Model 1 jurisdictions, would it not?
No IGA, hello 30% noncompliance fee.
Yep, that’ll be good for USCs abroad.
@Medea et al
US banks all report to the IRS any account that has made over $10 of interest on a 1042-S for non resident alien accounts. The IRS is meant to then send this to the relevant tax authority. Whether this happens or not I doubt but I was informed by a credit union account I still have in the US that they would be sending a 1042S) which shows an interest payment of around 40) to my home tax authority. Only interst is reported as is the interest of homelanders on a 1040s to the IRS. There is not much extra work for the US banks except to compute the address of the various foreign tax authorities.
Only interest is reported not balance ( FATCA reports both) . Accounts that generate no interest are not reported.
“No IGA, hello 30% noncompliance fee.”
Yes, compliance with FATCA rules would presumably once again be a problem for the banks, if the US withdrew from the IGAs.
“Yep, that’ll be good for USCs abroad.”
Yes. Banks in jurisdictions which have “Wider Approach” CRS legislation would presumably carry on with the due diligence and the reporting, but with no IGA obligations, the reports would not be sent to the IRS by the local tax agency.
Why would the US withdraw?
All they have to do is what they have always been doing, their banks generate their 1042 & 1042s, which goes to the IRS. All the IRS has to do is mail the 1042s on to foreign tax authorities. It seems that foreign govs have all rolled over and accepted this arrangement as it has enabled them to implement CRS.
“Why would the US withdraw?”
Exactly.
https://www.thetaxadviser.com/issues/2016/oct/irs-revises-forms-1042-s-and-w-8ben-e.html
To an earlier point, how did an Italian bank “do something it said it wouldn’t” if we are only talking about FATCA reporting? In that case having account balances reported (to the national tax authority, not directly to the IRS) is to be expected, once a customer is identified as a US person.
Otherwise yes, we know very little about this case and should probably stop speculating. Someone with $30 million in play and US citizenship would be well advised to pay a serious professional (i.e. Phil Hodgen) who won’t rush them into compliance without first considering the best options for expatriation.