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Americans Are Unwanted Worldwide (At Least By Banks)
Photo Credit: Forbes Business

Americans Are Unwanted Worldwide (At Least By Banks)

Jan 1 2014, 12:06pm CST | by

As 2014 dawns, it’s a different world for Americans. Although America is still admired, for banks around the globe, Americans bring a new taint. In Switzerland and many other countries, banks are...

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29 weeks ago

Americans Are Unwanted Worldwide (At Least By Banks)

Jan 1 2014, 12:06pm CST | by

As 2014 dawns, it’s a different world for Americans. Although America is still admired, for banks around the globe, Americans bring a new taint. In Switzerland and many other countries, banks are scrambling to hand over U.S. account data to the IRS. Banks are first “asking” account holders, but not giving them much time to answer.

Tell us we can disclose, banks say, or we’ll close your account–in which case we’ll still tell. Should Americans respond, ignore the letters, or close their accounts? FATCA —the Foreign Account Tax Compliance Act—takes effect in 2014 and the IRS penalizes foreign banks if they don’t hand over Americans. Most foreign countries and their banks are lining up, so forget bank secrecy.

Plus, the U.S. has data from 40,000 voluntary disclosures, whistleblowers, banks under investigation and cooperative witnesses. The smart money suggests resolving your issues, but that can cost. Americans must report worldwide income  on their taxes. For many, FATCA also requires an IRS Form 8938  to report foreign accounts and assets.

Americans with a foreign bank account over $10,000 at any time during the year must check “yes” on Form 1040 Schedule B, plus file an annual FBAR. Tax return and FBAR violations are dealt with harshly. Tax evasion can mean five years in prison and a $250,000 fine. Filing a false return brings three years and a $250,000 fine.

Failing to file FBARs can bring fines up to $500,000 and prison up to ten years. Even civil FBAR penalties are high. Non-wilful FBAR violations draw a $10,000 fine, and that’s per year, per account. The penalty for willful FBAR violations is the greater of $100,000 or 50% of the account balance.

Each year you didn’t file is a separate violation. Those numbers can exceed the total account so are much worse than the 27.5% Offshore Voluntary Disclosure Program penalty. The choices seem few:

  • Tell the bank you’re compliant even if you’re not? The bank and the IRS are likely to find out eventually.
  • Don’t respond and do nothing? The bank will close your account, and banks routinely turn over the names of closed accounts.
  • Close your account and move elsewhere? You’ll likely end up with two banks disclosing your name.
  • File amended tax returns and FBARs, tell the bank you’ve complied with IRS laws, and wait? This is considered a “quiet” disclosure–a correction of past tax returns and FBARs. The IRS warns against it.
  • Just start filing complete tax returns and FBARs prospectively, without trying to fix the past? You could tell your bank you are complying with IRS rules, but there is a risk your past non-compliance will be noticed.

Some people facing these choices are racing to prove they aren’t American after all, but that’s tough without official documentation. Providing another passport at account opening may help some slip under the radar, but that too isn’t safe. In many cases, the chances of catastrophic fines or prison seem fairly small, but for most people the risk isn’t worth it.

That’s one reason there’s another decided uptick in the IRS Offshore Voluntary Disclosure Program. Whatever you do, vet your facts carefully and get some objective professional advice. Try to get your situation resolved in a way that makes sense for your facts, risk profile, and pocketbook. It’s a new and open world.

You can reach me at Wood@WoodLLP.com . This discussion is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional.

Source: Forbes Business

 
Update
10

6 weeks ago

RM47mil KWSG contributions still unclaimed

Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

Cambodia's Famous Battambang Circus
KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dewan Rakyat was t ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
9

6 weeks ago

Gold shop lost almost RM1mil

Jun 9 2014 3:50am CDT | Source: Business Times Malaysia

Sydney FC v West Ham United - Football United New Zealand Tour 2014
KANGAR: A gold shop owner lost almost RM1 million after after the safe on in his shop was broken into by r ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
8

6 weeks ago

Motion to debate MAS losses in Dewan Rakyat rejected

Jun 9 2014 3:39am CDT | Source: Business Times Malaysia

Federal Aviation Administration Bans All US Flights To Israel
KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rejected by the Dewan R ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
7

6 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minister, D ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

6 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

INDIA-CHINA-DIPLOMACY-TRADE
PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Selatan’ in the ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

7 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

Government Weekly Cabinet Meeting
KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM2.78 million in ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

7 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Mi ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

7 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

Iskandar Johor Open - Previews
JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year involving an allocation of RM20 mill ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

7 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

EurAsia Cup presented by DRB-HICOM - Day One
PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan Baza ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
1

7 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion Kinrara Damans ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

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