People do not like FATCA and they are not shy about it. If you bring up the Foreign Account Tax Compliance Act, don’t be surprised if the response is riddled with curse words.
U.S. expats hate it since some foreign banks just shut out Americans they see as more trouble than they’re worth.
Financial institutions hate it for the high standards and hassles it causes.
Foreign governments hate it for making the IRS more powerful than their own countries’ tax agencies.
At the end of the day, FATCA won’t even make the IRS much money. But the Obama administration has done a slick job of greasing the wheels of international commerce and quelling what could have been veritable repeal riots.
Now FATCA has a new fan base from an unlikely source: the Brits. Sure, there’s a post-Olympic glow and international goodwill. Yet it turns out British legislators want their own FATCA. Just like Brits embraced the hamburger, they want a U.S.-style automatic disclosure by foreign banks and tax authorities on U.K. citizens. Why? Cross-border tax evasion.
That means U.K. citizens and U.K. companies will get reported for foreign accounts just like Americans. The Brits even want to drum up support from other European nations to join the FATCA bandwagon. It’s too soon to say if British legislators will enact a right-hand drive version of FATCA. But who would have thought it?
FATCA isn’t even fully implemented yet. Many think the true test is coming in January 2013. In 2012, most taxpayers with foreign financial assets worth $50,000 or more must file a Form 8938. Unlike FBARs, this form is filed with your tax return. If you extended your tax return filing to October 15, 2012, it extends the date to file your Form 8938. That gives you a little time to figure this out.
Yet this filing is nothing compared to what’s facing foreign financial institutions. January 1, 2013 is D-Day for FATCA implementation. Foreign institutions have to comply or face serious U.S. actions. This has lead to many foreign banks not wanting to open new accounts or even keep existing accounts for Americans
FATCA seems pretty secure now despite resounding critiques. The Wall Street Journal’s William McGurn castigates FATCA here: Obama’s IRS Snoops Abroad. But as they say, imitation is the sincerest form of flattery.
JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.