The Internal Revenue Service (IRS) is now looking at bank accounts and investments U.S. citizens hold abroad, through a law that is making it harder to hide assets. Effective July 1, 2014, the U.S. government will start imposing 30 percent taxes on many overseas payments to financial institutions that don’t share information with the IRS.
These new reporting requirements apply to foreign banks and American citizens. Unpaid back taxes on assets not previously disclosed could total as much as $40 billion so it’s easy to understand why the IRS is so motivated.
The new burden has frustrated overseas banks and U.S. expatriates. It’s also created a new standard of global bank-to-government information sharing designed to throw light on often difficult-to-trace accounts.
No one knows yet how successful the law will be in combating tax evasion. Still, it allows the U.S. to scoop up data from more than 77,000 financial institutions and 80 governments about its citizens’ overseas financial activities.
Under Fatca, U.S. banks and other companies making certain cross-border payments — such as interest and dividends — to foreign financial institutions must withhold a 30 percent tax if the recipient isn’t providing information about its U.S. account holders.
Fatca prompted more than 77,000 financial institutions to register for the program to avoid the withholding tax. However, providing this information directly to the IRS opens the floodgates for U.S. citizens and Expats who need to comply.
The list includes jurisdictions that often are labeled as tax havens, such as the British Virgin Islands, the Cayman Islands and Guernsey. It also includes most of the world’s major economies, such as Germany, Japan, Canada and the U.K.
If this situation concerns you, simply contact Andrew Brody at 305-231-2150 to discuss your situation. We are Florida Certified CPA’s serving South Florida for over 65 years. At Canner Brody and Yan, we have a team dedicated to International Taxation Compliance and fluent in English, Spanish and Chinese helping Expatriates and Multi-National Businesses.