Tax Notes from Abroad: FATCA Update
posted Jul 6, 2017 by Kenneth A. Freshman, CPA, JD in the Global Tax Blog
At a recent conference at which I spoke in Geneva, Switzerland, the home of many Americans who work or have retired abroad, I was able to take home a lot of insight on concerns of the expat community. Check out part one of my Tax Notes from Abroad series, “How are Expats Coping with Tax Burdens?” Expats have had a lot of difficulty in recent years regarding their tax responsibilities, which they feel are more burdensome than necessary (i.e. financial account reporting, the foreign tax credit.) The icing on the cake for the expat community was the 2010 enactment of FATCA, the Foreign Account Tax Compliance Act. Read on....
This law had two main components.
- First it expanded foreign financial account reporting to other non-U.S. assets on a new Form 8938.
- Additionally, it required foreign financial institutions to identify and in certain instances withhold U.S. taxes on the accounts.
Negative implications for expats?
The FATCA enactment has had some negative implications for U.S. account holders. In order for the financial institutions to avoid being prosecuted by U.S. authorities they are turning over account related information to the IRS. Additionally, opening an account for a U.S. person is an administrative headache, causing many institutions to avoid doing it.
Difficulty opening bank accounts
Americans residing abroad are having an increasingly difficult time opening bank accounts. While there have been several bills introduced to repeal FATCA nothing seems imminent at present. On a more positive note, Congresswoman Carolyn Maloney of New York recently introduced a bill to establish a commission to study and address the effects of federal policies on Americans living overseas.
Tax “reform” means many different things to different people. For some it is tax rates, while for others it is the complexity of the tax rules. For American citizens abroad it would seem to be the latter, given their frustrations with FATCA and other tax rules. We’ll keep you updated as more develops regarding FATCA.
For more information, consult a member of our International Tax Practice.