A new banking law known as the Foreign Account Tax Compliance act, or FACTA, is set to bring closer scrutiny on people in Massachusetts and elsewhere around the country who have significant assets with financial institutions outside the U.S. The law could serve to ensnare more people with tax evasion charges.
The IRS recently announced new tax laws that would provide relief to dual citizens. However, the new laws have both positive and negative aspects. The new tax laws are for non-residents, including dual citizens who lived outside the United States beginning in 2009. Furthermore, the non-resident must not have filed a United States tax return for at least three years and be considered low risk by the Internal Revenue Service. If you are currently under an IRS investigation or haven't disclosed all your income in the country where you live, you are generally considered high risk. The benefit of using the new tax laws is a reduction in the possible penalties that you could wind up paying.
Boston accountants waiting for the passthru payment regulations of the U.S. Foreign Account Tax Compliance Act will have to keep waiting. Some industry experts think the Internal Revenue Service will have to postpone releasing elements of the Fatca passthru payments beyond June of this year or make them easier for institutions to understand and implement.
The Internal Revenue Service is not alone in its effort to crack down on offshore tax evasion by American taxpayers. Last week, the federal government announced that it has enlisted the help of five European nations to enforce the Foreign Account Tax Compliance Act.
All American citizens who have offshore bank accounts totaling more than $10,000 are required to disclose those accounts to the Internal Revenue Service and pay any applicable taxes.
The standard tax season has ended for Boston tax payers, but FBAR season has just begun. FBAR stands for Foreign Bank Account Report, and filings are required to be completed by June 30, 2011. FBAR requirements are critical for taxpayers in the U.S. who hold one or more foreign financial account.