201601.13
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Expat Tax Lawyer | FATCA Hurts U.S. Foreign Business – International Tax Services

Golding & Golding - International Business Tax Lawyers

Golding & Golding – U.S. and International Tax Lawyers

FATCA (Foreign Account Tax Compliance Act) has become more and more widespread, with nearly 100 countries entering into IGA (Intergovernmental Agreements) with the U.S. and thousands of Foreign Financial Institutions (FFI) reporting account holder information to the United States – whether or not the FFI is in a country that signed and IGA or not.

Unfortunately, several good US taxpayers and US businesses who conduct business overseas are getting stuck in the FATCA matrix – and it is having a severe impact on its business. Namely, many foreign banks and foreign financial institutions are either closing foreign accounts that are owned by US taxpayers or their business, refusing to open the accounts to US taxpayer and/or downgrading accounts and limiting the account statuses.

FATCA

FATCA is the Foreign Account Tax Compliance Act. It is an IRS International Tax Law that is designed to reduce offshore tax evasion and tax fraud. FATCA requires U.S. Taxpayers to disclose unreported foreign bank accounts, foreign financial accounts, and foreign income to the IRS; otherwise the Taxpayer can be subject to extremely high fines, penalties, and outstanding tax liabilities.

Unfortunately, most people only learn of FATCA when they receive a letter (“FATCA Letter”) from their foreign bank or foreign financial institution requiring the U.S. Taxpayer to show proof that they are in FATCA compliance.

Accounts subject to FATCA compliance include:

  • Foreign Bank Accounts
  • Foreign Savings Accounts
  • Foreign Investment Accounts
  • Foreign Securities Accounts
  • Foreign Mutual Funds
  • Foreign Trusts
  • Foreign Retirement Plans
  • Foreign Business and/or Corporate Accounts
  • Insurance Policies
  • Foreign Accounts held in a CFC (Controlled Foreign Corporation); or
  • Foreign Accounts held in a PFIC (Passive Foreign Investment Company)

If the Taxpayer cannot show proof that they have complied with FATCA, the bank or foreign financial institution will freeze or even forfeit the foreign accounts. 

U.S. Business Operating Overseas

For US businesses that operate overseas it is crucial that the foreign country allows the taxpayer to open up and maintain foreign accounts. There are many reasons why the foreign account is necessary, including:

  • To have foreign currency
  • To make payment for contractors
  • To have immediate access to money
  • To make payment for bills and other expenses

One of the main reasons why the foreign banks are making it so difficult is due to the FBAR (Report of Foreign Bank and Financial Account) requirements.

FBAR Reporting

If you, your family, your business, your foreign trust, and/or PFIC (Passive Foreign Investment Company) have more than $10,000 (in annual aggregate total at any time) overseas in foreign accounts and either have ownership or signatory authority over the account, it is important that you have an understanding of what you must do to maintain FBAR (Report of Foreign Bank and Financial Accounts) compliance. There are very strict FBAR filing guidelines and requirements in accordance with general IRS tax law, Department of Treasury (DOT) filing initiatives, and FATCA (Foreign Account Tax Compliance Act).

Filing FBARs and ensuring compliance with IRS International Tax Laws, Rules, and Regulations is extremely important for anyone, or any business that maintains:

  • Foreign Bank Accounts
  • Foreign Savings Accounts
  • Foreign Investment Accounts
  • Foreign Securities Accounts
  • Foreign Mutual Funds
  • Foreign Trusts
  • Foreign Retirement Plans
  • Foreign Business and/or Corporate Accounts
  • Insurance Policies (including some Life Insurance)
  • Foreign Accounts held in a CFC (Controlled Foreign Corporation); or
  • Foreign Accounts held in a PFIC (Passive Foreign Investment Company)

Golding & Golding provides Foreign Account Reporting strategies for clients around the globe in order to report Foreign Bank Accounts and become FBAR compliant. We also defense clients who are under FBAR Audit by the IRS and DOT.

                                                      

What is an FBAR?

In accordance with international tax law compliance, taxpayers who meet the threshold requirements are required to file an FBAR.

An FBAR is a “Report of Foreign Bank and Financial Accounts” form. It is a form that is filed online directly with the Department of Treasury.  Unlike the tax return, the FBAR form must be filed by June 30th of the tax year and there are no extensions available for filing it late. If you attempt to file it late, there can be serious repercussions, including fines and penalties – since it is considered Quiet Disclosure or Silent Disclosure in an attempt to circumvent the OVDP or Streamlined Program rules and regulations.

**UPDATE: Starting in 2016 for Tax Year 2015 – filing of your 2015 FBAR will be in accordance with the same time periods to file your tax returns, which is by April, 2016 unless you receive an extension of time to file.

FBAR filings can be overwhelming, especially if you have never filed one before. If this is the case, our experienced international FBAR Lawyers can assist you in ensuring you are compliant with IRS FBAR Law and FATCA requirements.

                                         

Who is Required to File an FBAR?

Not everyone who has foreign accounts is required to file an FBAR.  Rather, it is required to be filed by all U.S. Taxpayers (whether they reside in the U.S. or overseas) with foreign accounts that have an “annual aggregate total” exceeding $10,000 at any time during the year. Thus, if a U.S. Taxpayer (including Legal Permanent Residents “aka Green Card Holders”) maintains foreign accounts, including banks accounts, financial accounts, or insurance policies that have a combined value of more than $10,000 (or has indirect ownership of the account or signature authority), then that person is required to file an FBAR statement.

                                         

What if None of My Accounts Exceed $10,000?

It does not matter.  It is important to remember that the threshold is the Annual Aggregate Total value at any given time during the year. This means if you have 11 bank accounts with $1000 each at any given time during the year, you are STILL required to file the FBAR and list all the accounts on it, even if none of the accounts exceed $10,000. In other words, you are required to report the total value of all your foreign accounts located in any foreign country once you exceed the $10,000 annual aggregate total threshold on any given day during the year.

There are various accounts and other assets (insurance policies) which may or may not be included in your FBAR analysis. Please contact one of our experienced FBAR Lawyers for further assistance regarding specific account disclosures.

                                         

What if I did Not File an FBAR Statement?

If a person fails to file the FBAR, there is still hope. Depending on whether the person also had unreported foreign income (income that was earned overseas and not reported on the U.S. tax return – even if it was reported in a foreign country and foreign tax was paid), the IRS and DOT will determine if a penalty will be issued; usually the taxpayer will be penalized but the amount of the penalty will vary. 

                                         

Expat Tax Services

With the globalization of the United States economy, many companies are starting to suffer “growing pains” in the form of determining how to setup payroll and provide tax planning to foreign employees who are working in the United States, as well as to U.S. workers who are working overseas.

The United States’ tax system is entirely different than many other countries. Most notably, United States taxes individuals on their worldwide income no matter where they reside.

U.S. Employees Working Overseas: If a US worker is working overseas, living overseas and only earning foreign income, they are still required to file a US tax return and pay U.S. Tax unless certain exemptions/credits apply. When this is coupled by the fact that international tax is further complicated by issues such as the  Foreign Earned Income Exclusion and Foreign Tax Credit, it is crucial that the employer and employee understand the tax ramifications of international employment.

Foreign Employees Working in the U.S: Alternatively, when a foreign employer transfers foreign employees overseas to the United States to work, the foreign employee will also be introduced to a much more complicated tax situation. It can get very confusing and frustrating for the foreign employer who wants to provide certain benefits to the worker they are sending to the United States, such as health insurance premiums, housing, per diem, meals, and are unsure of the tax ramifications.

                        

Global Expat Tax Consulting

As one of the few boutique tax law firms and enrolled agent firms that focuses on international tax law and international tax planning, we are in a unique position to consult with employers, employees and expat communities  both in the United States and worldwide involving ex-pat tax related issues.

In addition, we are also enrolled agents license by the IRS (The highest credential the IRS awards). As a result, not only can we provide our clients with the fundamental day-to-day tax preparation, analysis, and reporting issue assistance, but as experienced international tax lawyers we also provide additional assistance with tax Treaty analysis, US and foreign Tax Summaries, and presentations involving the interplay between, FATCA, GATCA/CRS, FBAR Reporting, FTC (Foreign Tax Credit) and FEIE (Foreign Earned Income Exclusion).

                        

Expat Consulting – How Our Service Works

Depending on where our client resides and if our client is and Employer, Employee, or Expat Community – we will meet with the client in person or by Skype or (other electronic transmission) to determine what type of tax services are required and what the overall spectrum of services will be.

We have a network of translators around the world who we work with to provide translation services to ensure that nothing is lost in translation. Tax issues are difficult enough, without there being any miscommunication regarding translation.

Thereafter, we will develop a cost-effective program to provide the employer with a broad range of different services we can provide, including:

  • General Tax Summary Presentation
  • Tax Return Preparation
  • Tax Planning Presentations
  • Tax Return Analysis
  • Tax Treaty Analysis
  • FBAR and FATCA Presentation
  • OVDP and IRS Streamlined Presentations for U.S. Expat Employees
  • Presentations on Specific Areas of Tax Law
  • Preparation of Tax Related HR Materials
  • Individualized Summaries For Each Employee’s Particular Situation Several Other “Need-Based” Tax Consulting
  • Legal Tax Opinion Letters

                        

Format

The format of our services depends primarily on the needs of our client. We receive requests to travel around the world providing expat consultation services. For some of our clients overseas or in the United States, they prefer that we provide a classroom/instructional type of presentation, which is no problem at all.

Sometimes, we find it better and more effective to have both the employer and employees in the room together when we are making a presentation so that everyone can ask their questions, as well as listen to the responses of other questions people ask and get on the same page regarding tax issues.

                        

Expat Communities

In addition to meeting with employers, we have also presented materials to ask back communities around the world as well, especially in light of the new FATCA and FBAR reporting rules. For many individuals who reside overseas and have been working out of the United States for several years, they may be out of tax compliance and subject to certain penalties – although we have worked with several ex-pats to get those penalties abated.




FATCA

is the Foreign Account Tax Compliance Act. It is an IRS International Tax Law that is designed to reduce offshore tax evasion and tax fraud. FATCA requires U.S. Taxpayers to disclose unreported foreign bank accounts, foreign financial accounts, and foreign income to the IRS; otherwise the Taxpayer can be subject to extremely high fines, penalties, and outstanding tax liabilities.

Unfortunately, most people only learn of FATCA when they receive a letter (“FATCA Letter”) from their foreign bank or foreign financial institution requiring the U.S. Taxpayer to show proof that they are in FATCA compliance.

Accounts subject to FATCA compliance include:

  • Foreign Bank Accounts
  • Foreign Savings Accounts
  • Foreign Investment Accounts
  • Foreign Securities Accounts
  • Foreign Mutual Funds
  • Foreign Trusts
  • Foreign Retirement Plans
  • Foreign Business and/or Corporate Accounts
  • Insurance Policies
  • Foreign Accounts held in a CFC (Controlled Foreign Corporation); or
  • Foreign Accounts held in a PFIC (Passive Foreign Investment Company)

If the Taxpayer cannot show proof that they have complied with FATCA, the bank or foreign financial institution will freeze or even forfeit the foreign accounts.