FATCA is the Foreign Accounts Tax Compliance Act. It is a law created to combat tax evasion by American taxpayers with taxable assets overseas who keep them in offshore bank accounts. FATCA creates new tax information and reporting and withholding requirements, designed to gain information about US persons rather than to raise revenue. Not only does FATCA affect US citizens but it also involves the offshore financial institutions in which they keep their assets. Overseas banks and other financial institutions have to report accounts held by US taxpayers. The law’s implementation is now set to start in 2014 having already been extended once.
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If you are a US citizen with income or assets overseas, you have to comply with FATCA. Is there a way to avoid FATCA? No, not so long as you are an American citizen. The only way to avoid FATCA is to cease being an American. Are there people who would go to that extent just to avoid the requirements of FATCA? You bet there are.
In the first quarter of this year, the government reported that 670 Americans have given up their citizenship, mostly to avoid FATCA reporting. But while the law has proven to be a nuisance to many Americans, giving up your citizenship does not make the problem of paying taxes go away. The IRS says that you are still liable for any taxes you may owe.
For people who have intentionally violated the foreign reporting laws, the IRS has an amnesty program you can participate in. Under this program, you will face no audit, no criminal prosecution, and a one-time penalty. For others, however, there may be better alternatives. Special programs exist for expatriates living offshore with no US income, for “accidental” Americans (those born overseas but are technically US citizens) and for those with a combined balance of less than $75,000 in offshore accounts.
So if you have not been paying your taxes from offshore accounts, you should participate in the IRS’ amnesty program voluntarily. Although there are no guarantees, for those who can demonstrate that their actions were not willful may receive a single $10,000 penalty or no fine at all. Because the risks are so high, however, waiting is never a good move. This is because the new FATCA law dramatically increases the risk of getting caught. But if you want to participate in the IRS voluntary amnesty program, you should consult a tax attorney to help you in the process.
Call the Law Offices of Darrin T. Mish, P.A. at (813) 295-7648 for a free consultation on these matters.