• France's news in English
 
expat_finances
US taxes and FATCA: 'The time for hiding is over'
Photo: Flickr/Pictures of Money

US taxes and FATCA: 'The time for hiding is over'

AFP · 26 Jan 2016, 09:12

Published: 26 Jan 2016 09:12 GMT+01:00

“The Foreign Account Tax Compliance Act (FATCA) requires banks to report information to the IRS regarding all financial accounts held by American clients,” Ines Zemelman, expat tax specialist and founder of Taxes for Expats, tells The Local. "The age of financial privacy is over.”

American citizens must report their worldwide earnings and assets to the IRS no matter where in the world they live.  With the implementation of FATCA, expats who have spent years avoiding this uncomfortable truth are being reminded of it -- as well as being punished if they don’t comply.

This development has led to many foreign banks trying to track down their American clients – and in some cases, lessen their own burden by simply refusing Americans service.

Many expats have begun to receive a ‘FATCA Letter’ from their bank requesting certain information about their US tax status (and asking them to complete either Form W-9 or W-8). The letter usually offers a brief explanation of the FATCA legislation that requires the bank to share your name, address, and other personal details with the American tax authorities - the Internal Revenue Service.

But what if you're not compliant? Some expats choose to ignore the request - but this high-risk approach is likely to quickly bring about a negative outcome.

Your bank might simply close your account, or even freeze your funds. Alternatively, your details may be forwarded to the IRS anyways and you may end up with a big red flag by your name.

“If you are not presently compliant with US tax laws, the time for hiding is over," Zemelman says. "Your goal should now be to make the appropriate IRS voluntary disclosure to come clean and resolve your undisclosed foreign accounts."

For expats who are not yet compliant with US tax filings, including submitted FBARs (Foreign Bank Account Report) and tax returns, Taxes for Expats recommends three steps.

"Respond to the bank immediately and tell them you are in the process of filing," advises Zemelman. "Ask to set up a timeline or get an extension."

Next, contact a professional US expat tax preparation company such as Taxes for Expats.

"If you were not working against the clock you could try to do it all on your own - but it's not something we'd advise if the bank is already on your case," Zemelman remarks.

Finally, make sure to take advantage of the Streamlined Filing Procedure, which can help you become fully compliant without the risk of penalties. The procedure requires completing three years of tax returns and six years of FBAR, and will put you in the clear once and for all.

Think your bank won’t know you’re American? You’re probably wrong, Zemelman warns.

Foreign banks have a list of various criteria to examine when determining if clients have a significant connection to the US. Every account is evaluated individually.

“Your birthplace is shown on your passport - even if it’s not a US one. Likewise, a client may have transferred funds to the US or may have an American address,” Zemelman says.

If banks fail to comply and report your information to the US, they get slapped with heavy fines - so instead they opt to play nice with Uncle Sam.

“If you are an American with an overseas bank account, it is likely that your bank has already asked or is going to ask about your US compliance status,” Zemelman says. She advises US citizens outside the US to plan for this - as foreign banks have essentially become enforcement agents of the IRS.

So what do you do when the bank in your country of residence starts sniffing around and asks about your US tax compliance status? It doesn’t have to be a nightmare, Zemelman says – if you handle it right.

“Don’t wait for the enforcement division to find you,” Zemelman concludes. “Come forward and fix your US tax situation first.”

This article was produced by The Local and sponsored by Taxes for Expats.

Today's headlines
Paris in August: Should you stay or should you go now?
Photo: AFP

When it comes to August in Paris, you're either a stayer or a goer. But which is the best choice?

French PM: 'France needs new relationship with Islam'
Photo: AFP

As France struggles to get to grips with an increasing number of terror attacks the French PM says the country needs a new relationship with Islam.

France's Muslims urged to attend mass in solidarity
Photo: AFP

A leading Muslim group in France has called on its community to attend a church mass this Sunday to show solidarity with Christians after the recent jihadist killing of a priest.

Hopes hit as France reports 'disappointing' zero growth
Photo: AFP

Hopes of small economic growth in France were hit on Friday when the latest GDP figures were announced.

Air France strike affects 30,000 passengers each day
Photo: AFP

The week-long Air France cabin crew strike continued on Friday with some 30,000 passengers hit by cancellations each day.

Mother of French priest killer left stunned and in denial
Photo: AFP

French police have formally identified the second attacker who killed a priest in northern France on Tuesday. And his mother has said he was her "gentle child".

Johnson hails France in Paris (while speaking French)
French Foreign Minister Jean Marc Ayrault (R) shakes hands with Britain's Foreign Minister Boris Johnson (L). Photo: AFP

VIDEO: A British Foreign Minister who speaks French. Fancy that.

Should you really go to the Bayonne Festival?
A bullfighter and a crowd at this year's festival. Photo: AFP

Should people boycott the Bayonne festival in France because it features bullfighting? Many think so.

Le Thought du Jour
Sorry Donald Trump, but 'France IS still France'
Photo: AFP

Donald Trump reckons 'France is no longer France', because his friend said so. We don't agree.

France to create new National Guard 'to protect its citizens'
Photo: AFP

France will soon have its own National Guard the president announced on Thursday as he aims to boost security to protect the French population facing repeated terror attacks.

Sponsored Article
5 reasons to try dating in Paris with The Inner Circle
France: A timeline of terror since the Charlie Hebdo attack
Sponsored Article
Why you should attend an international job fair
A timeline of terror in France since Charlie Hebdo
Culture
Thirteen free and easy ways to learn French
Culture
32 mistakes foreigners make when they arrive in France
National
Here are the worst scams to avoid whilst driving in France
Analysis & Opinion
Isis can simply be a conduit for the violent desires of psychopaths
Features
Six outdoor bars in Paris you simply must visit
Culture
The open-air Villette cinema has been cancelled over security fears
Sponsored Article
Why Swiss hospitality graduates are in demand
Culture
Henri Rousseau exhibition proves huge hit in Paris
National
Frenchman caught trying to sell Nice massacre souvenirs online
Society
OPEN NOW: Here's why you should head to the Paris Plages
Sponsored Article
Why expats choose international health insurance
Culture
What's on in France: Still plenty to see and do in July
Lifestyle
Treasures of Versailles to go on display in Australia
National
How to keep cool during France's heatwave
Sponsored Article
Why you should attend an international job fair
National
Nice attack: What we know so far
National
Nice attacker: Body-building, drug-taking, violent flirt
National
IN IMAGES: Drawings in tribute to Nice attack victims
Sponsored Article
Why Swiss hospitality graduates are in demand
Society
Promenade des Anglais: The iconic heart of the French Riviera
France faces more questions after latest deadly attack
Sponsored Article
Why expats choose international health insurance
National
Why is France the target of choice for jihadist attacks?
National
Nice truck attack: 'Bodies went flying like bowling pins'
Nice attack: Families of missing make pleas on Twitter
Politics
Boris Johnson cheered and booed at Bastille Day party
2,757
jobs available