IRS modifies FATCA Implentation - Again
Monday, October 29 2012 @ 06:36 AM EDT
Contributed by: Anonymous
This is a direct response to the many issues raised by tax professionals and foreign bankers who have challenged the various provisions of the law.
I recently published an article titled “FATCA: Reality vs Rumor’ for the inaugural issue of the University of Louisville Panamá “Latitude” magazine which is available online through the Quality Leadership University webpage. What follows is a summary of some of the main points of that article.
The HIRE Act passed by the US Congress and signed into law Jan 2010 included an entire new chapter of the Internal Revenue Code, Chapter 4 – Taxes to Enforce Reporting on Certain Foreign Accounts.
Those IRC sections 1471 through 1474 have created much uncertainty and angst among not only US citizens who live and work outside the USA and dual nationals who hold US Green Cards or US passports, but the foreign financial institutions with which they interact and conduct business or have personal bank accounts. (more)
The full details of the reporting requirements are beyond the scope of this brief article, but the area of most concern to US individuals – including all dual nationals -- relates to transferring their own money from a US bank to a foreign bank for perfectly legitimate purposes and seeing 30% of it scooped up by the IRS and held until the US person files a tax return and claims the refund, which could be more than a year later. This could cripple real estate purchases and even endanger the health of expats who transfer funds to cover medical expenses.
In Panamá the local financial institutions have been making decisions to either divest themselves of any US person account holders and thereby avoid the problem, or to spend substantial amounts to reprogram their internal reports to generate the information which US based banks have been providing to the US Treasury Department for decades.
Now the immediate pressure has been relieved, but not eliminated. Those provisions were to become effective 1 Jan 2012, but have been deferred now twice, yet the local banks and other government agencies are moving ahead with implementing some of the requirements. Evidence of this are the recent demands of several local banks for signed agreements by US citizens to permit the bank to disclose the account holders’ information to the US Treasury Department – disclosures which are counter to the sovereign laws of the Republic of Panama.