Life in a post-FATCA world
Americans and green card holders residing abroad continue to be frustrated and confused with the many rules and regulations they must follow in order to be compliant with their US tax filing and reporting requirements. Citizenship based taxation plus thousands of IRS code changes in the past decade have contributed to the confusion and caused many to struggle to understand what is expected of them.
To add to the perplexity, since July 1st FATCA (Foreign Account Tax Compliance Act) is now in place which requires all financial institutions around the world to identify their US person account holders, report them and sometimes do withholding from their accounts. This level of intrusion and transparency is unprecedented and is driving significant change and restrictions on how and what Americans can do with their non-US banks and insurance companies. Limitations to products such as mortgage insurance, mutual funds and US stocks and bonds will cause more Americans to look back to the United States in order to make these sorts of investments. Although US dollar based, taking this approach does eliminate foreign account reporting requirements and provides efficient tax reporting forms.
FATCA is indeed a game changer. In the past, when some overseas Americans were confronted with their non-compliance, they would question, “how will the US Internal Revenue Service (IRS) know”? FATCA now provides a clear answer. In January 2015 reporting of accounts in Belgium will begin when local financial organizations start turning over details to the Belgian authorities who in turn will send that information to the IRS. These details are spelled out in the model 1A reciprocal agreement signed between Belgium and the United States on April 23, 2014.
Now is the time for those faced with non-compliance to address their situation no matter if that involves non-reporting of bank accounts or other financial assets or not filing past tax returns. Especially now that on June 18, 2014, the IRS has modified the Offshore Voluntary Disclosure Program (OVDP) and the streamlined filing compliance procedures. These changes are intended to ease the burdens and help taxpayers come into compliance.
One thing remains constant in the face of so much change; it is always better to come forward and into compliance than to be found out and receive demands from the IRS.
