Bay Area Estate And Tax Planning Law Firm

If FATCA and FBAR regs combined, would the new regs be FATBAR? p2

On Behalf of | Apr 30, 2015 | Uncategorized |

We are talking about the Taxpayer Advocate Service’s recommendations to simplify reporting under the Foreign Account Tax Compliance Act. The TAS is an independent agency — helmed by the National Taxpayer Advocate — that monitors the activities of the IRS. The recommendations in this case came about with the help of American Citizens Abroad and other organizations that look after the interests of U.S. citizens living in foreign countries.

As we have explained in past posts, American citizens must file a tax return every year even if they live thousands of miles away. The law applies to all citizens abroad earning more than $9,000 annually, whether they took up residence five days ago or five decades ago. In addition, citizens that have more than $10,000 in an account in a foreign bank must report that information to the Treasury Department.

When the reporting rules for those banks and other foreign financial institutions came online, though, the banks began to balk. The requirements made doing business with American citizens a burden, and Americans soon found that their banks no longer wanted their deposit accounts or would not open new accounts for them.

Taking a close look at the big picture, the TAS reasoned that long-time expats, the people who are legal residents of foreign countries, are likely not hiding their assets; they are merely depositing their assets in accounts in their home country. In fact, their FBAR filings already reflected that. Why, then, ask financial institutions to report on these accounts?

Specifically, the Same Country Exemption would revise the definition of “financial account” to exclude accounts held by U.S. citizens that are bona fide residents of the country if the reporting financial institution is organized under the laws of that country. So, a French bank would not have to report on accounts held by U.S. citizens that legally reside in France.

As we said in our last post, the rule change would not require the approval of Congress. It could take effect immediately and demonstrate to foreign banks that their concerns have not fallen on deaf ears. There may not be any downside at all.

We’ll see what happens.

Source: Accounting Today, “Taxpayer Advocate Recommends Merging FATCA and FBAR Reporting Rules,” Michael Cohn, April 21, 2015