When struggling consumers hear about offshore banking, they naturally think such assets only apply to the rich. Secret bank accounts issued in the name of a confidential number, often portrayed in mystery movies, are less prevalent than a stake in an oversea property estate. Cash in a financial institution is an easy reporting task for foreign banks. Although, most Americans do not possess such wealth, many do have an interest in real property or chattel ownership in portable entities that are outside the physical soil of the country. Even if you are not one of these fortunate beneficiaries, the principle behind the (FATCA) statue can certainly apply a broad interpretation domestically.
The provisions commonly known as the Foreign Account Tax Compliance Act became law in March 2010.
•FATCA targets tax non-compliance by U.S. taxpayers with foreign accounts
•FATCA focuses on reporting:
•By foreign financial institutions about financial accounts held by U.S. taxpayers or foreign entities in which U.S. taxpayers hold a substantial ownership interest
•The objective of FATCA is the reporting of foreign financial assets; withholding is the cost of not reporting. Notice 2013-43 revises the implementation timeline and provides additional guidance
Clarification for individual’s states:
Taxpayers with a total value of specified foreign financial assets below a certain threshold do not have to file Form 8938
If the total value is at or below $50,000 at the end of the tax year, there is no reporting requirement for the year, unless the total value was more than $75,000 at any time during the tax year
“The IRS anticipates issuing regulations that will require a domestic entity (corporations, partnerships, trusts, or estates) to file Form 8938 if the entity is formed or used to hold specified foreign financial assets and the total asset value exceeds the appropriate reporting threshold.”
If you have insomnia, try some bedtime reading – Basic Questions and Answers on Form 8938. Especially, note Question 5.
Q5. I am a beneficiary of a foreign estate. Do I need to report my interest in a foreign estate on Form 8938?
Generally, an interest in a foreign estate is a specified foreign financial asset that is reportable on Form 8938 if the total value of all of your specified foreign financial assets is greater than the reporting threshold that applies to you.
The IRS clarification in Q3 states, “Foreign real estate is not a specified foreign financial asset required to be reported on Form 8938”, seems to provide relief for real property ownership. Notwithstanding, the purpose and intent of the FATCA is to cast a broad net around the eventual reporting of any negotiable instrument that citizens hold worldwide.
Imagine the next incremental step might well be a yearly financial statement under penalty of perjury. The exemption caveat being, if you do not have sufficient income that requires the filing of a Federal tax return, you can forgo the torment of the 8938 torture.
Make no mistake about the implications of tracking down the last penny of treasure. The Caribbean buccaneers stole pieces of eight from the colonial empires who promoted the slave trade. Today the practice of trading on the flesh of labor is substituted with the taxation on the “financial assets” of the incarnated serfs that need to pay tribute to their feudal lord.
Through the Intergovernmental Agreement Model 1 & 2, the IGA provides for a partnership agreement between the U.S. and a FATCA Partnership jurisdiction, namely France, Germany, Italy and Spain with the United Kingdom first to sign the IGA agreement and model 2 IGA reflects the framework that was described in the joint statements by U.S. and Switzerland and U.S. and Japan.
Now this multilateral global financial compliance is spreading back to the islands of the erstwhile pirates. This go around is practiced by computer keystrokes instead of wheeling a saber. The significance of the Cayman, US agree on reporting of Americans’ assets, is to eliminate one of the last refuges of financial privacy.
“The Cayman Islands says it has reached agreement with the United States to provide information on accounts held by American citizens to comply with a sweeping U.S. law designed to combat tax evasion.
The British Caribbean territory, considered the world’s sixth largest financial center and a major haven for mutual funds and private equity, said the texts of the new pacts will be made public once an official signing ceremony is held.
The Cayman government said the pacts are tied to a U.S. law called the Foreign Account Tax Compliance Act, which was enacted in 2010 and expected to take effect next year. The law targets non-tax compliance by U.S. citizens with foreign accounts around the globe, and Washington is pressing nations to provide client data.”
Oddly reminiscent of “We have to pass the bill so that you can find out what is in it.” Seems like the Pelosi logic extends to the Grand Cayman financiers . . . the moneychangers seldom service the discretion of their customers.
When the NSA scoops up every wire transfer, fax instruction or email message, who can maintain the privacy of their personal papers? Just because the technocratic dragnet stretches globally, the inalienable right of private property still maintains the moral high ground.
If FATCA is merely a legitimate cooperative coordination, many people would eagerly support closing the door on the wealth sheltering hidden assets in foreign depositories. However, the encompassing scope of defining financial assets to be whatever serves the interests of the taxman, should disturb every citizen.
Recollect how different our lives are today from a century ago before the Revenue Act of 1913. The past century has assaulted privacy rights to the point that the average person simply accepts that the government is acting properly. When filling out Form 8938 becomes routine, the surrender of what is left of your meager fortune is sealed. The greed of the real pirates never ends.
James Hall – August 28, 2013
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