FATCA-No Tax Relief for Americans Living Abroad

With Tax Day a recent memory, many Americans still express their frustration with the whole tax process particularly if they find themselves settling tax debt with the IRS.  However, none have been more baffled by the American system of taxation than American citizens who live and work abroad. An International Herald Tribune article by David Jolly entitled Americans, the Tax Man Cometh gives a European glimpse into the plight of confused and disillusioned American ex-pats dealing with the tax filing requirements mandated by Congress as part of the Foreign Account and Tax Compliance Act (FATCA).

FATCA, as defined by the IRS, was enacted in 2010 as a way to combat tax evasion by U.S. citizens holding investments in offshore bank accounts. Unfortunately, what FATCA has also done with its broad brush is lump hard-working U.S. citizens in with the tax cheats and essentially treats them as such. The complaints many Americans abroad have are as follows:

  • Most U.S. citizens who live abroad already pay taxes to the country they reside in, often at a higher rate than the U.S. so aren’t evading U.S. taxes.
  • Their presence across the world promoting American commerce and values overseas should be more appreciated by the U.S. Government.
  • The U.S. is the only developed country who bases nationality, rather than residence to tax its citizens.
  • Preparing U.S. taxes in a foreign country is expensive, especially if the tax preparer makes mistakes.

Congress may have underestimated how difficult a large, overseas tax collection effort was going to be; just look at the many amnesty programs and repeated efforts to bring international banks into U.S. compliance. But the current government need for revenue only means continued efforts to go after Americans abroad and their billions in tax revenues from non-reported offshore accounts no matter how hard it is to acheive.

If you have unreported assets and did not file the paperwork necessary to qualify for tax amnesty, you need tax relief as soon as possible to avoid the following:

  • All offshore reporting is now being handled by the IRS Criminal IRS’s Criminal Investigation Division (CID)
  • The Foreign Bank Account Reporting (FBAR) penalties for not filing and meeting the amnesty guidelines are severe:
    • FBAR penalties can exceed 100% of the value of the asset, plus tax penalties and interest.
    • If CID makes a referral to the U.S. Department of Justice for felony indictment, the criminal sanctions can be as much as up to 5 years in prison.

Given the severity of financial and criminal penalties associated with unreported offshore accounts, don’t wait for the IRS to approach you. Being proactive about disclosing your foreign funds immediately will work in your favor. Hire tax experts such as a tax attorney or certified tax resolution specialist who know how to properly report offshore accounts and help negotiate an offshore tax settlement that brings you back into IRS tax compliance.

More Tax Help, IRS News and Tax Relief Tips:

  1. Offshore Banking-Swiss Tax Evasion Advisors Indicted
  2. IRS Help for Americans with Foreign Income
  3. To Avoid Tax Issues-Americans Give Up Passports
  4. Treasury Proposes Multilateral Agreement for Offshore Compliance
  5. Senator Rand Paul Challenges U.S. and Swiss Banking Treaty

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One Response to “FATCA-No Tax Relief for Americans Living Abroad”

  1. Rand Paul Challenges U.S. and Swiss Banking Treaty Says:

    [...] actions to block the protocol may be due to the administration’s desire to implement the Foreign Account Tax Compliance Act, or FATCA which accomplishes the [...]

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