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Wilmington NC CPA firm comments on TD F 90-22.1 and FATCA |Offshore Banking | FATCA

Demise of offshore banking; Wilmingon NC CPA comments on FATCA

Gary Bode, CPA: if you'd like a free initial consult with a Wilmington NC CPA tax accountant, please call us at 399-2705

Secret Swiss bank account?  Not any more.  Offshore banking faces a new challenge.  FATCA, the Foreign Account Tax Compliance Act, was passed in March. The law requires foreign banks to identify American customers and with hold 30% of interest and dividends on those who don’t provide enough information for proper IRS reporting.  Of course all good citizens filed TD F 90-22.1 :). Some foreign banks are involved in various schemes to hide American owned assets from the IRS.  Full information sharing will be required by our US Treasury, starting in 2013, backed by trade sanctions for countries who don’t comply. Actually, the IRS has been able to access offshore  bank accounts for a long time now, but on an individual, per request basis. 

UPDATE:  The Wilmington Star reported a related IRS news story about offshore banking on 2/10/2011.  The IRS had offered amnesty to American taxpayers with hidden offshore bank accounts if they “came clean”.  See below.  Apparently 15,000 folks did, with new tax revenue reported as 200 Million.  Encouraged by this sucess, and perhaps their expanded scope of information from FATCA, the IRS is offering a second amnesty program.  Here the main incentive seems to be a promise to forego criminal charges and thus jail time.  I expect most foreign countries will cave in to FATCA and report US customers to the IRS.  Which will close the offshore banking loophole for most taxpayers.  And rightfully so.  But I suspect it will also usher in a new era in offshore banksing, where the last foreign nation that stands up to the Treasury Department will bring in the largest US customers. 

Their point: file TD F 90-22.1 as required.

Offshore banking and subsequent tax cheating have been an IRS issue for years.  They offered amnesty to Americans to who came clean about undisclosed offshore accounts by September 23, 2009.  Now there are penalties and possible criminal charges.  A whole class of tax cheaters may be forced to pay taxes on income generated by deposits in foreign banks.

We’re a Wilmington NC CPA accounting firm.  If you’d like a free initial consult with a CPA tax accountant, please call us at 399-2705.

Foreign Banks Complain – Go Figure!

The IRS became efficient by shifting costs to employers, banks, brokerage houses, retirement fund institutions etc., through their revenue matching program.  An example is where your bank sends you, and the IRS, a 1099-INT tax form stating the interest you earned for the tax year.  Of course, the IRS then cross correlates this tax form to see if your Form 1040 actually claimed the interest as income on Schedule B. This reporting requirement costs the banks money.

Well, apparently foreign banks have even more expense.  They claim identifying US citizens is difficult, the IRS requirements are complex, and reporting is expensive. One estimate is 7 Billion world wide.  Of course, they’ll just charge each American account $10-20 as a reporting fee.  The real issue is probably resentment about a foreign power imposing rules. 

USB, a Swiss bank, brought legal action.  I suspect their mystique of secret banking lures in customers and they don’t want to lose this edge.  I suspect they will grudgingly comply but leave lots of room for plausible deniability.

See our other posts on TD F 90-22.1 and Form 2555.

We offer CPA financial accounting, tax preparation, tax positioning, QuickBooks training, supervised bookkeeping (including payroll administration).  All in a pleasant mix of expertise and customer service.  If you’d like a free initial consult with a Wilmington NC CPA tax accountant, please call us at 399-2705.

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