The world is an ever-changing ever-evolving crucible of financial challenges for US expats. The implementation of the Foreign Account Tax Compliance Act or FATCA generated significant issues for US citizens and former citizens who live abroad. The serious challenges for expats and those considering expatriation as well as foreign nationals living and working in the US grow more difficult each day. Financially speaking, the world has become a much smaller place.
Most countries around the world have agreed to FATCA agreements with the United States. As a result, almost all foreign banks and institutions as well as sovereign tax authorities around the world are providing information to the IRS about all offshore accounts, balances (present and historical), transactions, account owners and their individual or personal tax identification numbers. This is the foundation for many of the serious challenges for expats and those considering the lifestyle of living and working abroad.
Leaving the country to live or work doesn’t eliminate your legal obligation to file tax returns with the IRS. Consider London’s former mayor Boris Johnson. Mr. Johnson was born in the United States and lived here until he was 5. He never went through the process of “expatriation” from the US and is still considered a US citizen by the IRS. He recently sold real estate in England that had substantially increased in value over the years resulting in a huge profit. The IRS sent him a bill for the taxes due on the gains in appreciation.
Expats are finding it extremely difficult to simply open a bank account anywhere in the world. The bank demands identification and detailed personal information. The application process is akin to applying for a mortgage here in the states due to FATCA regulations and reporting requirements.
Many US expats have not filed tax returns in years, but the IRS now knows where and how to find them, and has a direct source of funds it can attempt to attach – their offshore bank accounts.
These serious challenges for expats also impact foreign nationals living and working in the United States. Many have ancestral homes that have passed down through generations. These properties may generate a modest income. They may not. However, the foreign nationals who qualify as US residents and taxpayers must list these and every foreign bank account, investment account, asset and source of income or potential income on their tax returns and associated FBARs.
If they have failed to do so the penalties the foreign nationals face are 50% of the highest accumulated balance of these accounts and assets at each point, each year for the past 6 to 8 years or $100,000 per incidence, whichever is higher. They also face criminal prosecution and prison time for tax evasion.
The serious challenges for expats extend beyond the realities of banking and business. Increasing tax revenues is a priority for the IRS and the time has come to update back tax returns and ensure compliance with the IRS FBAR reporting requirements.
The IRS will separate you from the anonymity you believe protects you, and once they do you will be exposed to harsh draconian penalties. The reality may not be a rosy picture. The serious challenges for expats and foreign nationals living and working in the US are real. The experienced international tax and business attorneys at Allen Barron wish to protect your interests and minimize the risks you face. We invite you to a conversation. We can protect you with the attorney-client privilege. Contact us or call today for a free consultation at 866-631-3470.
