The Fate of FATCAApril 27, 2017
With the GOP controlling Congress and the White House, many expect Republicans to fulfill their pledge and get rid of FATCA...but who knows what will transpire.
The most recent report the IRS taxpayer advocate submitted to Congress in January includes a section about FATCA, the Foreign Account Tax Compliance Act, and addresses a widespread conception that Americans overseas are ‘tax cheats.’ The IRS, according to a ‘taxpayer advocate’ report, “has adopted an enforcement-oriented regime with respect to international taxpayers controlled by the viewpoint that, unless proven otherwise, all such taxpayers should be suspected of fraudulent activity.”
New regs under FATCA
U.S. citizens and tax residents must now report overseas holdings of as little as $50,000 even if they owe no taxes. If you neglect to do this, you will face onerous penalties.
For Foreign Financial Institutions (FFIs), the penalty for not giving the IRS this information is a 30% withholding penalty on any U.S.-sourced payment to these institutions.
What is the ‘taxpayer advocate’?
What’s known as the ‘taxpayer advocate service’ is an independent organization within the IRS that reports to the National Taxpayer Advocate. The TAS, as it is called, is designed to help businesses and individuals with their tax-related issues.
The taxpayer advocate isn’t in the business of calling for laws to be abolished, but rather “recommending fixes around the edges.”
Some think this approach is wrong
To paraphrase the “taxpayer advocate,” some feel that the IRS has taken this approach without factoring in comprehensive, statistical data which analyzes whether or not noncompliance or fraud is widespread and despite Taxpayer Advocate Service analysis pointing out that the vast majority of these taxpayers actually appear to be markedly more compliant than a good amount of the U.S. taxpayer population.
Campaign to Repeal FATCA
Contrasted to the taxpayer advocate aim, an initiative set forth by Nigel Green of the deVere Group (an international financial consulting firm), centers on completely repealing the law because of its tendency to view all Americans as tax cheats.
At this point, we don’t know what the future of FATCA holds, but it’s clear that there is strong opposition to it.
Questions about the fate of FATCA? Our Global Tax Team can help.