New Federal Law Affects Bank Accounts Held in Foreign Countries
The United States Department of the Treasury is seeking to reduce the incidence of tax evasion by American citizens with foreign bank accounts and foreign assets which goes into effect 2013. The Foreign Account Tax Compliance Act (FATCA) is a law designed to help discover and reduce tax evasion tactics utilized by American citizens and businesses.
Americans hold foreign accounts for many reasons, and holding a foreign account is not itself a crime. However, authorities believe some citizens may be using them in an attempt to avoid paying taxes on all eligible income. FATCA allows for cooperation with several foreign countries like France, Germany, Italy, Spain and the United Kingdom to report information on American's foreign accounts. In return, the United States will provide similar information back to these countries for their citizens.
When the law goes into effect, these countries will report holdings of American citizens in excess of $50,000 dollars to the Internal Revenue Service in accounts held in their country. Previously, there was no requirement to aid the IRS in doing so. The IRS estimates that the acquisition of information about foreign accounts will result in the addition of approximately $792 million of tax revenue.
If an American is found to have incorrectly or inappropriately reported their taxes to the government, a fine may be utilized to punish the taxpayer. Unfortunately, this fine may be in excess of $50,000 for continued failure to report. In addition, for non-disclosed foreign assets, an additional penalty of 40 percent of taxable funds may be levied against someone who underpays.
Foreign bank accounts are held for a variety of reasons, most of which are proper and only a few of which are improper. Many Americans hold foreign bank accounts, including Floridians. Taxpayers who have been accused of improperly holding funds in foreign bank accounts should contact a criminal defense attorney to ensure that their legal rights are protected.