Last week, the IRS and the Department of the Treasury, released a set of amendments to the final regulations to implement the Foreign Account Tax Compliance Act (FATCA). The final regulations had been released the beginning of last year and the law is slated to go into effect beginning in July. These recent amendments address concerns raised since the release of the final regs.
Passed in 2010 as part of the HIRE Act, FATCA aims to combat tax evasion by allowing the IRS to create agreements to work with foreign governments or financial institutions to obtain information on US depositors. To date 22 countries have signed FATCA agreements with the US, with many others at various stages of completing agreements. There are two models for these agreements, one in which the IRS deals with foreign governments who in turn communicate with the financial institutions in their countries, and a second where the IRS talks directly to the foreign financial institutions. In either model the end goal is the same, gathering information on US depositors to identify tax evasion.
FATCA has received criticism and resistance since it was first passed. Some have blamed it for the spike in US citizens renouncing their citizenship since 2010. Some foreign financial institutions have also pushed back against the law, while others have decided no longer to accept US depositors.
Treasury officials have said they expect FATCA to be a model for future laws in other countries, for there eventually to be an established framework of information sharing among countries and financial institutions to combat tax evasion. Earlier this month, the Organization for Economic Cooperation and Development announced new standards for the automatic, FATCA-like exchange of financial information across borders.
Augmented in their efforts by FATCA, the IRS continues an aggressive stance toward US citizens who keep money offshore to evade paying tax or who fail to report those assets. The penalties for failing to declare foreign financial assets or evading taxes through offshore accounts are severe and can include time in prison. Since 2009, the IRS has continued its Offshore Voluntary Disclosure Program, which allows taxpayers to “come clean” regarding previously undisclosed offshore bank accounts and other assets and to receive a reduction in penalties and to avoid criminal prosecution.
Horowitz Law Offices represents taxpayers before the IRS in connection with offshore disclosure, reporting requires (including FBARs), and for other tax concerns. You are welcome to contact us as (312) 787-5533 or email@example.com