As we have discussed before on this blog, the U.S. Treasury Department has been working directly with foreign governments to implement the Foreign Account Tax Compliance Act, a U.S. law intended to crack down on tax evasion through offshore accounts. Ideally, Treasury wants cooperation agreements with all foreign governments that will require them or their banking sectors to provide the U.S. with data on all American taxpayers with assets worth $50,000 or more held in foreign accounts -- and to withhold 30 percent of all dividends, interest or other payments due on those accounts for possible seizure by the IRS.
These agreements were initially expected to go into effect last January. Last week, however, Treasury unexpectedly agreed to delay the implementation of those agreements by six months, or until July of next year. One banking lobbyist described the delay as underscoring "what has been obvious," he said, "that this is an enormously complex and burdensome regime to deal with. People just aren't ready."
Treasury's deputy assistant secretary for international tax affairs, however, indicated perhaps that the U.S. hasn't yet obtained all of the agreements it needs. "We are providing an additional six months to complete intergovernmental agreements with countries and jurisdictions across the globe," he said in a statement.
While it is unclear exactly how many governments have agreed to help the U.S. enforce the FATCA tax evasion scheme, but the countries that have signed the agreements include Great Britain, Ireland, Mexico, Spain, Singapore, and the Cayman Islands. Once such agreements are signed, any foreign financial institution that doesn't comply could be liable for back taxes and, potentially, a 40 percent penalty on any past-due amounts on the covered accounts.
What this underscores for individual taxpayers who may still have undisclosed foreign accounts and assets is that enforcement efforts may be spotty and unpredictable. If you have $10,000 or more in foreign accounts and/or $50,000 in offshore assets, now is the time to get sound legal advice on whether to apply for the IRS's Offshore Voluntary Disclosure Program, file amended tax returns and FBARs to become compliant with U.S. laws.
Source: The New York Times' DealBook, "Foreign Banks Win New Delay in Tax Evasion Rule," Lynnley Browning, July 12, 2013
