January 1, 2013
is the effective date of the Foreign Account Tax Compliance Act (FATCA) and
with its implementation the associated FATCA disclosures. FATCA ends historical bank secrecy as previously
relied on by many US depositors.
In anticipation
of FATCA implementation, the IRS, revised its Frequently Asked Questions
(FAQs), clarifying many uncertainties in the current OVDP, tightening some
areas and relaxing others. In addition, the IRS released, updated versions of
some of the documentation that taxpayers will be required to file as a part of
their acceptance into the OVDP.
The
clarifications establish that the OVDP is available to taxpayers who have both
offshore and domestic issues that require disclosure. Additionally, the IRS
clarified which years are to be included or covered in the required eight-year
voluntary disclosure period: for taxpayers who submit voluntary disclosures
prior to the due date or extended due date for 2011, the disclosure period
includes 2003–2010. For taxpayers who submit disclosures after the due date or
extended due date for 2011, the disclosure period is 2004–2011.
The IRS added two new categories of persons ineligible for
the OVDP. Under the OVDP, a taxpayer is required to notify the U.S. Attorney
General of any appeal or document submitted in connection with an appeal of a
foreign tax administrator's decision to provide account information to the IRS
and any such a person who fails to provide the required notice will no longer
be eligible to make a voluntary disclosure. Second, the IRS may announce that
certain taxpayer groups that have or had accounts at specific financial
institutions will be ineligible due to U.S. government actions in connection
with the specific financial institutions. Each announcement is to provide
notice of the prospective date upon which eligibility for the specific taxpayer
group ends.
The
IRS also revised certain documentation, the Offshore Voluntary Disclosure
letter used to make the formal application to the OVDP has significantly
changed and now has a required attachment/questionnaire which, to some extent,
replaces an earlier document known as the Foreign Financial Institution
Statement and further expands upon the details of the offshore account and the
persons involved in the creation of the account. The disclosure letter and the
attached questionnaire now call for information regarding deposits/withdrawals,
entities affiliated with the account, and a host of information relating to
communications with representatives of the foreign financial institution.
The
OVDP in response to situations involving U.S. citizens,including dual
citizens, residing abroad added two new provisions.The first, which previously posted as Tax amnesty offered to Americans in Canada, describes the IRS giving Canada persons
the opportunity to request an extension of time to make the election to Canada
to defer U.S. income tax on income earned in, but not yet distributed from,
Canadian registered retirement savings plans (RRSPs), pursuant to the U.S.-Canada Income Tax Treaty. If the
election is granted, the RRSP balance will not be included in the
offshore penalty base upon which the 27.5% penalty attaches.
The second which previously posted as Instructions - New Streamlined Filing for Non-Resident & Non-Filer U.S. Taxpayers! which describes the
IRS' new procedure (to take effect September 1, 2012) that will
allow U.S. citizens, including dual citizens, residing abroad to become
tax-compliant, without necessarily facing penalties, if they are low-compliance
risk taxpayers who owe little or no back taxes (generally, those persons who
have simple tax returns and owe $1,500 or less in tax for each of the covered
years).
If you have unreported income from Foreign Banks and you
want to Get Right with the IRS, 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).
Patrick Johnson
ReplyDeleteIn Canada I am pretty sure of at least 50 cases of renounciation or notification of relinquishment. My hunch is in reality their at least a couple of hundred are going on right now(and I believe this will continue to rise).
Of the 50 I am pretty sure all of them DIY with no US Tax or immigration counsel involved. Whether or not this is a "smart" decision by the 50 I will leave up to others to judge but I suspect all of them or close to all are not "covered" expatriates. Now half of these 50 or so are actually "relinquishments" which is not easy to understand. Basically these are people whom lost their US citizenship in the past under old nationality law(Basically when they became Canadians often way back in the 1960s and 1970s lost their US citizenship and never did anything to regain it or exercised any rights of US citizenship even after the law changed) but are only formally notifying the State Department now(which they did not believe was necessary at the time of loss of citizenship again way back in the 1960s and 1970s). Of these people a lot as a matter of "principle" are not filing out the exit tax paper work or certifying their compliance. What will happen to them? I am not the one to guess.
One of the more funny stories(and in many ways sad) story was of a 60 something widowed and retired secretary who became what she believed a sole Canadian citizen back in the 1970s. When she filled out of the form to give notification of relinquishment to the US State Department recently to receive a CLN she had to fill her last US address of residence where she hasn't lived in 50 years no one in her family has lived in for 38 years and was torn down 28 years ago. You want FATCA "Real Life" this is it.
A second point I will make is while a CLN is considered a proof of "Non US Personhood" I don't think there was really much consideration to putting it into the FATCA regs other than for strictly technical and legal reasons i.e. I don't think the IRS really thought that many people would actually have them. However, I suspect the number of CLN's as alluded earlier being issued is going up quite dramatically especially in Canada however if you have actually seen a CLN it is not a particularily "secure" document other than the Consulate seal.
There is also the problem that I personally don't think the State Deparment and IRS have good CLN records going back prior to the 1990s. You can bet someone will try to take advantage of this and we will have another UBS affair again.
Third I hear a lot about especially from financial institutions about "reputational risk" basically we don't want to get called in front of Carl Levin's Subcommittee on Investigations. Canadian FFI's and Canadian politicians though need to start thinking about another kind of risk and that is "Goodbye Charlie Brown" risk after the time in the 1980s a senior citizens famously accosted then Prime Minister Brian Mulroney in the street over his plan to de-index seniors benefits with the words "You lied to us" and "Goodbye Charlie Brown" and forced the then government almost single handedly to make down on a key part of its economic platforms. A senior citizen accosting the current Finance Minister or Prime Minister of Canada over giving into to FATCA(which all of the Canadian FFI's want them to do) will not be a "fun" experience notwithstanding the alternative experience of being hauled before Levin's committee on investigations.