FATCA places requirements on more than just foreign offshore banks, U.S. Banks required to comply as well.
Jeffrey S. Freeman, J.D., LL.M
Banks worldwide are talking about FATCA (Foreign Account Tax Compliance Act), which requires the disclosure of bank account holder information to the Internal Revenue Service and foreign offshore countries. Despite the massive costs of complying with FATCA, banks are working to get systems in place to meet the reporting requirements under the law. FATCA is set to take effect July 1, 2014. Both American and offshore foreign banks are hurrying to make sure they do not run into compliance problems and are reporting appropriately.
Under FATCA, U.S. banks are required to disclose information to the IRS about accounts held by non-resident aliens for all countries with which the U.S. has a tax treaty or other inter-governmental agreement. Hence, FATCA will work to help both the U.S. and many foreign offshore countries find tax evaders.
Currently the U.S. has an income tax or other convention or bilateral agreement relating to the exchange of tax information with seventy-two countries. In the law suit Bankers Association v. IRS – Complaint, Bankers Association also raised concern over the potential leakage and abuse of personal asset information with many countries that have “unstable governments and porous law enforcement systems”. They claimed these rules will discourage future foreign investment and has triggered a withdrawal of foreign funds from U.S. banks. They claimed this outflow of deposits and investments will reduce the ability of U.S. banks to make income-producing loans and to create jobs and spur economic growth in their communities. Ultimately a judge dismissed the lawsuit.
Judge James Boasberg of the U.S. District Court for the District of Columbia said that the new rules will cause minimal burdens to the banks and to its customers. The Justice Department and IRS insist that U.S. Bank compliancy is critical to implementing FATCA and providing reciprocity. The court also found that regulations would improve U.S. tax compliance and deter tax evasion.
Regardless of their likes or dislikes with the new regulations, U.S. Banks are currently working hard to meet the regulation deadline. And it is all hands on deck as 2014 keeps speeding along towards the FATCA effect date.
About Freeman Tax Law
Freeman Tax Law is a boutique tax law firm with national exposure equipped to handle all domestic and international tax law matters. At Freeman Tax Law, the attorneys and professional staff have vast experience with foreign tax compliance, international tax planning, and resolving tax controversies involving offshore banking matters. Freeman Tax Law helps taxpayers and foreign entities become in compliance with laws such as Foreign Account Tax Compliance Act (FATCA) and Offshore Voluntary Disclosure Program (OVDP). In addition to handling complex tax controversies, the Freeman Tax Law team has extensive expertise in assisting clients with wealth management and estate planning.
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