New Rules Targeting Overseas Accounts

Last updated on December 24, 2021

The new rules by the Treasury Department looking to target offshore assets of U.S. taxpayers may come into effect from January, next year. Foreign Account Tax Compliance Act (FATCA) will introduce new regulations for improving compliance with respect to foreign financial assets and offshore accounts.

The Act was enacted in 2010, just two years back, when a Swiss banking scandal was unearthed and it was found that American taxpayers had hidden millions of dollars in various tax havens.

Under FATCA, American taxpayers must report assets to the IRS when filing taxes if they exceed a certain threshold. Along with that, FATCA requires foreign financial institutions to share information about financial accounts owned by American citizens. Even if foreign entities own an account in which a U.S. taxpayer has a substantial ownership interest, the financial institution must inform the IRS.

The Treasury Department of the U.S. has already missed the deadline of September, 2012, to publish the new rules. Businesses are waiting to see what the new rules will be. http://www.reuters.com/article/2012/12/20/us-usa-taxes-fatca-idUSBRE8BJ0T320121220 adds:

“International businesses ranging from Western Union Co to BlackRock Inc are waiting anxiously to see the rules so they can figure out how to comply with the law.

Delays mean businesses will have less time to prepare for compliance. Multinational firms have said they need at least 12 months to prepare for FATCA’s 2014 start date.

“It is critically important that final FATCA regulations are issued as soon as possible,” said Barbara Angus, a principal at Big Four accounting firm Ernst & Young LLP.

Treasury efforts on the rules may have been slowed by a number of government-to-government FATCA information-sharing deals it started pursuing earlier this year, tax experts said.

The United States has completed FATCA deals with the UK, Denmark and Mexico. Switzerland and Spain also have “initialed” agreements with Treasury.

Meanwhile, negotiations are continuing for deals with at least 50 other countries, according to the Treasury Department.

These deals represent a shift in FATCA implementation. While not envisioned as part of the 2010 law, the agreements are seen as a more practical way to implement the law.”

American taxpayers are demanding that corporations pay their share of taxes. More than a 100 Americans protested against tax shelters, demanding that the tax money be brought back to the country.

There has been opposition to FATCA because many believe that it is discriminatory to be forced to report on pension plans, foreign bank accounts, annuities and property only because the assets are held overseas.

It is after the new rules are introduced that American taxpayers will know how much and in what ways the new tax rules concerning offshore assets affects them.