New US FACTA law. A MUST READ for Americans overseas.

[eurobrat]

If you income is derived mainly from a more standard type offshore job with just 5 figure pay, you can deduct all or virtually all of that from your US taxes via foreign sourced earned income exclusion.

Correct, but the IRS does not consider investment income to be "earned" income. Our researching and taking the risk of investing is earning by most peoples' measure, but since it is considered "passively" earned income, the IRS makes it is still fully taxable.

This double taxation (by local country and the US government) is a huge penalty for the expat that has earned the right to have his money work for him.

Your warnings may fall on deaf ears for some, but at their own peril.

US citizens with close family ties abroad who are NOT US citizens likely put that to work to their
advantage. And further, there are quite a few cleaning ladies and gardeners who would be SHOCKED
to find out they are in fact worth millions. All they know is that they routinely sign some papers for
a good employer who tips them very generously every time they do so.

That's a dangerous game I would never play. Can you really trust your professional advisers, bank managers, etc. not to collude with your humble staff not to screw you out of your assets?

Yea and what happens if they die or something happens to them? Seems kinda risky.

[OutWest]

If you income is derived mainly from a more standard type offshore job with just 5 figure pay, you can deduct all or virtually all of that from your US taxes via foreign sourced earned income exclusion.

Correct, but the IRS does not consider investment income to be "earned" income. Our researching and taking the risk of investing is earning by most peoples' measure, but since it is considered "passively" earned income, the IRS makes it is still fully taxable.

This double taxation (by local country and the US government) is a huge penalty for the expat that has earned the right to have his money work for him.

Your warnings may fall on deaf ears for some, but at their own peril.

US citizens with close family ties abroad who are NOT US citizens likely put that to work to their
advantage. And further, there are quite a few cleaning ladies and gardeners who would be SHOCKED
to find out they are in fact worth millions. All they know is that they routinely sign some papers for
a good employer who tips them very generously every time they do so.

That's a dangerous game I would never play. Can you really trust your professional advisers, bank managers, etc. not to collude with your humble staff not to screw you out of your assets?

Yea and what happens if they die or something happens to them? Seems kinda risky.

Well I would not advise the housekeeper routine- though there are ways...

Now my wife and inlaws are not US citizens or residents. In those circumstances, their assets are not the same as my assets. Yes, I suppose if you are married to a gold digger or have crooked inlaws, then you are set for trouble. There are ways to create checks and balances...

[MatureDJ]

I wonder what would be the effect for this situation: Let's say I have a foreign wife who becomes a US resident but still owns an apartment in her home country, and then sells it, putting the cash into a bank account there. It seems that that account would be subject to FACTA.

[Rock]

I wonder what would be the effect for this situation: Let's say I have a foreign wife who becomes a US resident but still owns an apartment in her home country, and then sells it, putting the cash into a bank account there. It seems that that account would be subject to FACTA.

If she were to become a US permanent resident (green card) holder, that would make her a US Person. So yes, her non-US accounts would be subject to FATCA from that time forward.

[eurobrat]

I wonder what would be the effect for this situation: Let's say I have a foreign wife who becomes a US resident but still owns an apartment in her home country, and then sells it, putting the cash into a bank account there. It seems that that account would be subject to FACTA.

If she were to become a US permanent resident (green card) holder, that would make her a US Person. So yes, her non-US accounts would be subject to FATCA from that time forward.

Yep, having any ties to the US has pretty much become a trap for you to fill out that one or two little annoying form each year for the rest of your life.

A couple of rich guy's pretty much f***ed it up for everyone.

[eurobrat]

I wonder what would be the effect for this situation: Let's say I have a foreign wife who becomes a US resident but still owns an apartment in her home country, and then sells it, putting the cash into a bank account there. It seems that that account would be subject to FACTA.

If she were to become a US permanent resident (green card) holder, that would make her a US Person. So yes, her non-US accounts would be subject to FATCA from that time forward.

Yep, having any ties to the US has pretty much become a trap for you to fill out that one or two little annoying form each year for the rest of your life.

A couple of rich guy's pretty much f***ed it up for everyone.

[Jester]

I don't think that mere residency will exempt you from the restrictions on accounts owned by Americans. The bank will still report your account to the Feds.

I think that to avoid being reported, you will need to give them a foreign passport, which is usually (not always) based on citizenship. That way the bank "never knew" you were American.

(Haven't read the actual law though.)

If you mean that countries often require you to be a resident to even open an account, that is true. But that is not exactly based on FATCA I think. It started some time ago here in Mexico for example. Yes, it was probably for the same (apparent) purpose as FATCA, to discourage foreign bank accounts for the masses, and only allow them for those who live abroad and really need them.

I believe Eurobrat now has Italian passport (in addition to USA one). That document will show him as having been born in USA most likely. So banks may even perform some due diligence for cases where prospective new client was merely born in USA to find out whether or not he is in any way a US person for tax purposes.

If he really wants to escape the USA tax and reporting requirements as well as the barriers to opening so many types of bank and financial accounts for US persons (so many institutions refuse our business now, I know this from repeated first hand experience over last few years and have even been kicked-out of some old accounts due to rule changes), his best bet might be to:

- renounce his US citizenship at one of our embassies in Italy (I doubt hes rich enough to have to pay any exit tax lol)

- once he gets his certificate of renunciation from US Department of State, he can use it as proof to banks and financial institutions that he is indeed no longer a US person.

Yes I believe persons BORN in US are considered US persons under FATCA regardless of actual passport nationality.

Good catch.

+1

[Jester]

While I had heard that this rule was coming up, can you enlighten me a little more on it's impact. If the Average Joe has money in a US financial institution and opens a bank account in his country of residence abroad for convenience sake, how does this hurt him? Or if said Average Joe is working abroad and putting his paycheck in his bank abroad, again how does the reporting requirement hurt him?

Of course in principle no one wants the IRS to know too much, but in reality what are the impacts - that is unless Average Joe is doing something illegal and hiding income or assets. Just curious...

Well it goes like this,

Joe in the Philippines owns a house, has a retirement ira, a checking and a savings. Joe now has to report everything. Joe was required to before but uncle same told joe that it was the honor system. Uncle sam has changed his mind and he no longer likes the honor system so he has gone all around the world establishing agreements with over 50k banks agreements to exchange information between each countries citizens connecting everything. So now the US knows about Joes life in Manila and the Philippines knows about Marco life in the US.

Time goes by and Joe is just living his life in the Philippines, uncle sam did not tell Joe about this new law. Joe, as a good ol'boy US citizen is supposed to know by himself. Joe forgets to disclose his checking, savings and IRA. Time goes by and Bank ABC in the Philippines lets Uncle Sams IRS know about Joe's.

The IRS now penalizes Joe $10,000 for each form and each year he forgot even if it was unintentional.

Even if Joe were to remember, it would cost Joe about $300-500 a form with an accountant to file them in the US. Joe has to file a form for each account and asset he if worth over $10,000 in a given year.

For me, it's a big deal because now I have to spend an extra $500 on filing taxes for no f***ing reason. I have no money over here and I'm working for a measly €22-25k a year. So basically I'm check to check but now theres the possibility I have to waste more money on IRS paperwork.

It's another headache that I will have to deal with for the rest of my life that I'm abroad. Fatca is another spying tool, a big headache and a waste of money and sadly it's probably here to stay.

OK, this makes sense. Since I already self-file I am hoping I can continue to do this when abroad. I definitely don't want to give it to an accountant.

Figure out what you need to do, get the right version of Turbo Tax, and self file. Involving an accountant, especially an international CPA firm, only increases your risk. Cus when audit time hits, those pros you paid to do your taxes will cover their asses and incriminate you if need be. Don't share your info with anyone. That way, the IRS can only come to you and you remain in control of all your info.

Thanks for the headsup. Jewish CPA in West Los Angeles did me right back in the day. But he was.. connected... somehow. So I thought paying the $$ to these guys was worth it. But you're right, the international CPA's are typically not going to share beers (or synagogue) with the local IRS chief. (Or whomever or whatever).

I will continue self-filing from now on.

[Jester]

I just file the form. It's a simple form and you have to do it online. I'm well under the exemption anyway. The real problem would be if banks start dumping Americans because they don't want the hassle.

Some are already doing that, but the only reports I heard where in Switzerland. Which form do you file Mr. Peabody just the FUBAR? You do it by yourself and never had problems with the IRS harassing you?

I filed here. I never here from them.

http://bsaefiling.fincen.treas.gov/NoRegFBARFiler.html

Here are the reporting requirements. There are potentially two forms depending on your situation.

http://www.irs.gov/Businesses/Compariso ... quirements

+1 and thanks

This stuff is hard to sleuth out online

[Jester]

I've written on FATCA in previous posts and it is not new. It is 4 years old and this month marks the final phase of the delayed full implementation for foreign financial institutions. The reporting requirements for individual US persons has been in effect for years.

For anyone who deigns to use dual citizenship as cover, you would be committing a felony and you would be toast. FINCEN and the US Treasury's Banking Secrecy Act tracking databases will flag you as a likely dual national and you will have your funds seized and be subject to prosecution. The only escape is renouncing US citizenship or voluntarily ending US Residency (Green Card) Status.

All that is necessary is complying with the yearly FBAR and Tax Form 8938 filings and you are fully in compliance.

FATCA enforcement of these filings is nothing short of draconian. Rand Paul has a FATCA repeal bill submitted but it has no chance of passing until Obama and the Democratic Senate are out of power. It will sit in committee until after the mid-terms at the earliest.

FATCA is nothing to screw around with. Public and political sympathies are nil to low for offshore holdings so comply if you plan on staying off of the chopping block. They will know if you are not in compliance. There are even Canadians who did not know they were "US persons" via birth or marriage that have been snagged by this law.

You've been warned.........

+1

[Jester]

I doubt they're going after people that have €2000-3000 in an account and only had €20,000 touch their account in a calendar year.

If they are than that's just pathetic and it probably cost them more in tax payer money and resources to catch those people than it was worth.

"Don't tug on superman's cape,
Don't piss in the wind"

http://www.youtube.com/watch?v=YQrTGE4wwwA

[Jester]

You see, when your earnings are predominately investment gains and incomes you get no earned income exclusion. So your US taxes kick-in from a very low level (just a few thousand US$).

Only if you report them

Well, if I don't report them, then my tax bill will be very low. Great solution. Thanks. Why didn't I think of that one?

Given the new FATCA reporting requirements, it's likely the IRS receive conflicting information from my financial institutions and would quickly put 2 and 2 together, say within 1-3 years. That would be great. Interesting new expats who happen to work for the IRS field offices would be getting in touch with me and showing a very keen interest in certain aspects of 'my life'. Wow, it's really nice to be cared for. I've been meaning to meet more Americans anyway. Since we'd all become fast friends, I'm sure they would waive the penalties, interest, and original taxes due and never refer me to their criminal investigation side. Hmm, it's nice to dream sometimes. I think I'll just stick with the tedious and unexciting straight and narrow path of being a 100% honest US taxpayer just as I always have.

+5

Best laugh of the day



OMG don't tell me the NWO is hiring expats... ohSHIT... noone would turn you in FASTER than a self-righteous Kano

And yeah now that I think about it... doesnt the IRS have a tipster program? Some beer-swilling no-count could buy a lot of beers with the intel he gathers from a big-mouthed friendly guy...

[Jester]

US citizens with close family ties abroad who are NOT US citizens likely put that to work to their
advantage. And further, there are quite a few cleaning ladies and gardeners who would be SHOCKED
to find out they are in fact worth millions. All they know is that they routinely sign some papers for
a good employer who tips them very generously every time they do so.

Gold.

[Contrarian Expatriate]

Just had my first negative FATCA encounter yesterday while cashing in my matured foreign CD. The bank asked me to complete and sign a FATCA form which asks for my IRS Taxpayer ID (which is the Social Security Number for most).

I told the clerk that I never give that number out, especially to a foreign institution. She stated that after I withdrew the money from her bank, my account would have to be blocked so I could no longer bank there unless I provide the number.

I, declined and put the money in a new CD in one of my other banks that do no have that policy (yet).

This FATCA is going to expose Americans to identity theft and fraud since it is requiring foreign banks to collect Social Security Numbers to be reported the IRS. The US Congress and the President should be ashamed.

I will henceforth transfer 90% of my wealth abroad!

[eurobrat]

Just had my first negative FATCA encounter yesterday while cashing in my matured foreign CD. The bank asked me to complete and sign a FATCA form which asks for my IRS Taxpayer ID (which is the Social Security Number for most).

I told the clerk that I never give that number out, especially to a foreign institution. She stated that after I withdrew the money from her bank, my account would have to be blocked so I could no longer bank there unless I provide the number.

I, declined and put the money in a new CD in one of my other banks that do no have that policy (yet).

This FATCA is going to expose Americans to identity theft and fraud since it is requiring foreign banks to collect Social Security Numbers to be reported the IRS. The US Congress and the President should be ashamed.

I will henceforth transfer 90% of my wealth abroad!

I told you, they're like all a bunch of puppets for the US. I can't believe the USA got all of these banks to participate in this thing.

Only the US has the time and resources to do something like this. I think in the future when I retire, I will give one of my citizenships up so that they don't bleed me dry.