Online FATCA Registration Begins

The Foreign Account Tax Compliance Act (FATCA) was enacted in the wake of the UBS scandal to crack down on tax evasion overseas.  “FATCA requires foreign financial firms to report to the IRS offshore accounts held by Americans that are worth more than $50,000.

Foreign financial institutions that fail to comply with FATCA face a 30-percent withholding tax on their U.S. source income, a penalty that could effectively freeze them out of U.S. financial markets.

FATCA does not take effect until July 2014, but there have been many steps leading up to it, including this latest step: the registration process.  Remember though, the registration process is not an individual tax requirement but, rather, is meant to secure the cooperation of financial institutions.  If you are a in charge of a foreign bank, investment firm, or insurance company and you need to know, the schedule of events appears to be as follows:

Registration may be done on paper, but the IRS highly encourages that it be done through their secure online web application.  Once a firm has registered, the IRS issues them a Global Intermediary Identification Number (GIIN).  Registration ensures that the IRS knows who to call when they have questions about suspected tax cheats.

 

Foreign Accounts & Quiet Disclosures

There is a general, overriding principle in the world of Federal Tax that goes something like this: if you voluntarily come forward to admit your prior tax shenanigans and get yourself back in the good graces of the IRS, there will be less negative consequences than if the IRS catches you trying to get away with it.

This principle holds true with respect to the reporting of foreign bank accounts.  Taxpayers who are caught hiding assets in foreign accounts are subject to criminal prosecution, and could very well face jail time.  But under the IRS voluntary amnesty programs, those who come forward and disclose their offshore assets are promised they won’t go to jail in exchange for payment of penalties that are based on a percentage of their account balances.

There are some who want to get back on the grid without having to pay hefty penalties.  They do this by making a so-called “quiet disclosure” of foreign assets; they report their foreign accounts without giving the government information about accounts held in previous years.  This type of disclosure sometimes tricks the IRS into believing the accounts are brand new.

According to a recent report by the Government Accountability Office (GAO), there may be more quiet disclosures happening around the nation than the IRS has the ability to identify.  The IRS is taking tips from GAO on how to detect more of these quiet disclosures.

F.C. Manager on Trial for Tax Evasion

Harry Redknapp, former manager of the Tottenham Hotspur F.C., was recently accused of tax evasion related to a bung he received for player transfers. What!?  I know, English news articles are fun, but sometimes difficult to decipher.

Translation for American readers:

  • Harry Redknapp is the current manager of the Tottenham Hotspur Football Club. The spherical kind of football, not the prolate spheroid with pointed ends so popular around this time of year in the United States.
  • Tottenham Hotspur has been around since 1882, often referred to as the “Spurs.”
  • A “bung” is an English word used to mean a BRIBE.

Redknapp allegedly hid his bonuses in an offshore account in Monaco which he named “Rosie 47″ after his dog and his own birth year. Once again we see that people will do whatever it takes to find tax relief these days, even if it means resorting to nefarious tricks and schemes. Full story here.

The IRS Counts to Three: Opens up Another OVDI

If you have kids, do you count to three when you want to get a certain behavior out of them?  You know what I’m talking about: “Mikey, take your sister’s phone out of your mouth right now!  Don’t make me come over there!  One . . . Two . . .”  I’m not a big fan of counting to three.  The problem is I don’t know what happens after “three.”  And what if you don’t get the desired conduct?  Do you keep counting?  How high do you count before you dole out the consequence?

Today the IRS announced that it will be offering another Offshore Voluntary Disclosure Initiative (OVDI), this just months after we thought it was over for good.

“It’s unlikely the IRS will offer another program because that would undermine the agency’s credibility. When they say, ‘Now we really mean it,’ it’ll be like the boy who cried ‘wolf.’

~ Scott Michel, Caplin & Drysdale

The first OVDI was back in 2009, then the IRS reopened the program (with slight modifications) in 2011, giving a deadline of September 9th.  This time around there is no filing deadline, at least not one that we’re aware of yet.  The IRS says this time they reserve the right to change the terms at any time, such as when the program ends and what kinds of penalties apply.

I guess the IRS is trying to show it’s still in charge.