On 1/17/13, the U.S. Treasury Department published new U.S. information- reporting rules on overseas accounts to catch Americans who dodge U.S. taxes by secreting their assets offshore.
Targeting foreign banks, the Foreign Account Tax Compliance Act (“FATCA”) rules, published 1/17/13 by the U.S. Treasury, require foreign financial institutions with $50,000 of any American taxpayer’s assets to report the holdings to the IRS, which completes the rule-writing process for FATCA (enacted as law March 2010).
The banks must report to the IRS in English, account holders’ names, addresses, account balances, plus dividends and interest. The first reports are due in 2015. The U.S. Treasury Department rejected requests to delay a January 2014 start date for big penalties imposed on individuals and financial firms that do not comply with the law. Financial institutions that refuse to comply with the law will be shut out of U.S. securities markets.
As of 1/17/13, seven countries have signed government to government agreements with the U.S.: (1) the United Kingdom, (2) Mexico, (3) Denmark, (4) Ireland, (5) Switzerland, (6) Spain, and (7) Norway.
Some of the inter-governmental agreements include a reciprocal information-sharing provision under which the IRS will deliver taxpayer information to a foreign government about its citizens living in the U.S.
Certain retirement funds, life insurance and other “low risk” financial products held abroad are exempted from reporting their U.S. account holders’ information to the IRS.
The U.S. Treasury is hoping to sign up more than 50 countries with FATCA agreements and “kick-start” a dragnet of tax enforcement. Manal Corwin, Deputy Assistant Treasury Secretary for International Tax Affairs, told Reuters: “The real story here is that it looks like it is going to become a global model.”
See: 1/17/13 Reuters article: “U.S. Issues Final Tax Anti-Evasion Rules, Enforcement Ahead.”