The Internal Revenue Service has announced new rules that some Texas residents may want to pay attention to. The first rule that the IRS has begun implementing requires the banks of customers who have offshore accounts to provide more details about their customers’ income.
The federal government says the new rule has been imposed in order to prevent tax evasion by citizens who keep money in accounts overseas. This new rule, however, has not come without backlash.
In response to the new regulations, some customers are being dropped by their banks. According to reports, somewhere between 1,000 and 2,000 clients of a Munich-based bank recently were informed that their securities services would end at the end of the year. Banks have said the new regulations would require too much additional work on their end.
The Munich bank is not the only one that has let customers go. Deutsche Bank AG stopped providing services to U.S. customers who had securities accounts this summer.
The new tax regulations, however, do not end with offshore accounts. Banks within our country are hoping to stifle a possible rule that would force them to begin reporting interest they pay to noncitizens who live in the U.S. Texas banks say the institutions that have a large number of foreign deposits could suffer immensely. Banks in other states are likely worried as well. The Treasury Department reported that foreign deposits in U.S. banks total to about $2 trillion.
For taxpayers, it’s important to know that the IRS is cracking down on offshore tax evasion. Texas residents who have offshore accounts should take extra care when filing tax returns this year.
Source: The Wall Street Journal, “Banks Sweat as Tax Net Tightens,” Robin Sidel and Laura Stevens, Dec. 29, 2011