The new rule, which goes into effect Jan. 1,
2013, requires banks to report information to the Internal Revenue Service on
non-taxable interest paid on accounts held by non-resident foreign nationals.
It applies to accounts that earn more than $10 in interest in a year.
Potentially such information could be shared
with the account holders’ home countries, raising privacy concerns among some
international account holders. Some fear their home governments might make
politically motivated requests for their bank information or that data
indicating their wealth will leak out, bankers said.
And those jitters have prompted some
depositors to move their money to jurisdictions such as Panama or the Cayman
Islands that have stronger privacy laws, said David Schwartz, executive director
of FIBA. Anecdotally, he said, FIBA has heard that several million dollars have
left Florida for other jurisdictions since the new regulation was passed in
April.
“The U.S. banking system is still the safest
and soundest place in the world to put your money,’’ said Schwartz. “There is
no reason to panic. There is a process by which the information is collected
but not automatically exchanged with home countries.’’
It is the IRS that will make the determination
on whether to release the information — and only as a part of a tax evasion
investigation or something of that nature, said Vega.
Rev. Proc. 2012-24,
2012-20 I.R.B. 913, published
contemporaneously with the final regulations, provides a list of the countries
whose residents will be subject to reporting under the final regulations. The
revenue procedure specifically states that the listed countries are those with
which the United States has in effect an income tax or other convention or
bilateral agreement relating to the exchange of information pursuant to which
the United States agrees to provide, as well as to receive, information, and
under which the Competent Authority is the Secretary of Treasury or his
delegate.
Accordingly, bank
deposit information reported pursuant to the final regulations will be
exchanged only with foreign governments with which the United States has an
agreement providing for the exchange of information and only when certain
additional requirements are satisfied.
The IRS noted that, even when such an
agreement exists, the IRS is not compelled to exchange information, including
information collected pursuant to these regulations, if there is concern
regarding the use of the information or other factors exist that would make
exchange inappropriate.
The revenue procedure
also includes a second list identifying the countries with which the IRS has
determined it is appropriate to have an automatic exchange relationship
regarding interest subject to reporting under the final regulations. The IRS
currently exchanges deposit interest information on an automatic basis with
Canada.
Residents of countries
not on the information sharing agreement list published in the revenue
procedure are not subject to reporting under the final regulations. However,
the IRS notes that banks can elect to report interest payments to all of their
nonresident alien depositors as a way to address any potential burden
associated with determining which depositors are subject to reporting. Thus,
residents of non-sharing countries can become subject to reporting even though
their country of residence is not listed in the revenue procedure.
According to Treasury
and the IRS, the extension of the reporting requirement is considered
appropriate because of the importance of cooperative information exchange for
tax purposes. The information gathered, as a result of information exchange
relationships with other jurisdictions, can be utilized by the United States to
identify potential U.S. taxpayers that evade tax by hiding income and assets
offshore.
If you have questions regarding this New Reporting Requirement, contact the Tax Lawyers at Marini & Associates, P.A. for a FREE Tax Consultation at www.TaxAid.us or www.TaxLaw.ms or Toll Free at 888-8TaxAid (888 882-9243).
Sources:
Miami Herald
It is important to point out that the new rule applies only to individuals. Therefore, legal entities (e.g., partnerships, foundations, corporations) would be exempt from the new reporting obligations.
ReplyDeletePosted by Carlos Soto Raynal, TEP
Other Reasons for Florida Bank's diminishing deposits?
ReplyDeleteWe read a newsletter from Foodman CPAs & Advisors (www.foodmanpa.com) where they indicate that there are high value accounts where clients have presented their banks with documentation that currently identifies them as U.S. Citizens and/or residents and yet, their banks, have erroneously classified and reported them as Foreign Resident accounts leading to inaccurate IRS reporting.
Where these banks came clean and reported their non compliance in past reporting and account opening procedures, they would open themselves up to possible reviews and sanctions. Alternatively, they could quietly close these accounts and hope that a Regulatory Examination does not discover these non compliant accounts.
The clients whose accounts have been closed, are possibly in tax non-compliance. They are U.S. taxpayers whose deposits have been inaccurately reported by their US Bank for a number of years. As U.S. citizens or residents they should quickly get back into compliance through amended returns or Voluntary Disclosure.
They should not have FBAR issues since their unreport income is NOT from a Foreign Bank Account.
If you are a US Taxpayer who is non compliant, contact the Tax Lawyers at Marini & Associates, P.A. for a FREE Tax Consultation at www.TaxAid.us or www.TaxLaw.ms or Toll Free at 888-8TaxAid (888 882-9243).