Concerns about the Foreign Account Tax Compliance Act (FATCA) have been deep-seated and widespread since Congress passed the law in 2010. On its face, FATCA is supposed to target tax evasion on offshore accounts.
In practice, however, the new law has posed major implementation challenges. For taxpayers in Texas and across the country — and for financial institutions around the world — the full story of getting ready for and complying with FATCA is only beginning to unfold.
A prominent U.S. Senator, Rand Paul of Kentucky, has proposed repealing parts of FATCA in order to ensure that there are proper privacy protections in the law for U.S. taxpayers. Sen. Paul has also sought to block tax treaties with several countries from Senate approval. He has expressed concern that these treaties would provide too much access to U.S. taxpayer data by foreign governments.
FATCA seeks to impose duties on foreign financial institutions to provide information to the IRS about American taxpayers who have foreign accounts worth $50,000 or more. Such would-be duties are at odds with historic traditions of bank account privacy in Switzerland and other places.
For now, Sen. Paul’s proposal does little to end the uncertainty surrounding the new FATCA requirements for foreign financial institutions. There are many questions to be resolved about what types of records these institutions need to keep, as well as how and where to report information to U.S. authorities.
It will take time and planning to sort these questions out and put proper systems in place for offshore account compliance. That is why the Treasury Department has pushed back the date for full implementation to 2014.
Please visit our page on offshore accounts.
Source: “Senator Paul offers bill to weaken U.S. anti-tax evasion law,” Reuters, Patrick Temple-West, 5-8-13