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American Citizens Abroad fight Fatca, FBAR

World’s banks are starting to wake up to the administrative nightmare it could pose

GENEVA, SWITZERLAND – American Citizens Abroad (ACA), with InterNations, a global expats social network, will be holding a fourth Town Hall meeting in Geneva Wednesday evening (16 November, 18:30-21:30, Webster University, Bellevue/GE) to address tax issues for US citizens, in particular to bring them up to date on Fatca and FBar obligations and the reported heavy penalties for non-filers. Democrats Abroad and Republicans Abroad are supporting the town hall meeting.

Ed. note: see GenevaLunch feature articles on previous town hall meetings and US overseas citizens’ tax obligations.

Fatca is the Foreign Account Tax Compliance Act. Financial institutions around the world will be obliged starting in 2014 to comply with Fatca or refuse to accept US citizens as clients. US citizens will be required to file a new, additional form that is part of the Fatca legislation starting with their 2011 fiscal returns.

Financial industry fears heavy impact of US legislation comes at a bad time

Banks around the world are starting to wake up to what Ernst & Young calls the “completely new and extended information and reporting systems” that will be required by Fatca. RiskNet recently wrote that “If the US’s proposed wide-ranging tax law comes into force, financial institutions across the globe could experience operational upheaval and enormous compliance costs, alongside potential reputational and systemic issues.”

Wednesday, the Swiss Private Bankers Association referred to “a Kafkaesque tax reform being drawn up by the USA, known as Fatca”, reflecting opinions voiced by other, non-Swiss bank groups.

CPIFinancial warned 16 November that “ll banks and life insurance companies which have US source income or handle US source income will be affected since all US source income might be subject to 30 per cent US withholding tax if they are not Fatca compliant.”

ACA goes public with campaign to repeal Fatca

ACA has launched a public campaign to have Fatca appealed. “Starting in 2014 (moved from 2013), foreign financial institutions will be required by the US government under the Foreign Account Tax Compliance Act (Fatca) to report information regarding accounts of US citizens to the IRS. This law requires foreign financial institutions (FFI) such as your local bank, stock brokers, hedge funds, pension funds, insurance companies, trusts, etc. – to report directly to the IRS all their clients who are “US persons” (citizens and green card holders living in the USA or abroad). The penalties for the institutions that do not cooperate are steep.”

Rami Schandall says in the text with a public online petition to scrap Fatca:

“IRS efforts to chase tax cheats are netting another group entirely. Americans, green card holders, and dual citizens living abroad, face the threat of prohibitive fines for simply failing to file with the IRS, when many are unaware they were required to do so. This aggressive cash grab can devastate the lives of law-abiding citizens who already pay high taxes in their country of residence.

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Posted 16 Nov 2011 at 15:19

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US taxpayers abroad struggle to make sense of laws, lingo

Editor’s note: the meeting in Geneva invoked the Chatham House Rule to encourage open discussion, so no names or identities of participants and presenters can be revealed

Geneva, Switzerland (GenevaLunch) - Confusion replaced 2009′s anger and a black mood when a group of mainly Americans gathered in Geneva for the second time in nine months to learn more about their obligations to Uncle Sam’s tax arm, the IRS. US citizens, green card holders and others who potentially owe the American government tax money, or even just forms, met at Webster University Tuesday 4 May to hear from a group of experts what their obligations might be.

The result was an evening that focused primarily on how to invest your money if you live outside the US, in order to avoid problems with the Justice Department or the IRS. An earlier meeting at Webster in September 2009, organized by American Citizens Abroad with support from Democrats Abroad and Republicans Abroad, was held just days before a US amnesty deadline for people to declare foreign assets held abroad. That meeting drew twice as many people and a younger crowd.

The September evening was notable for the shock it gave many who attended, about “non-compliance” issues and the obligation to file an Fbar (foreign assets) form.

This week’s meeting brought together four specialists in tax consulting, estate planning and legal issues. The longer-term focus meant there was less of a sense of panic in the crowd. Speakers offered several surprises about the increasingly complex tax payment system, and 10 of 13 people randomly questioned individually by GenevaLunch in the 24 hours after the meeting characterized it as “depressing”, if helpful.

Taxpayers face confusing changes in rules, application of them

The speakers outlined several problems:

there are a number of recent and upcoming changes to taxation regulations, most of which appear to be poorly understood by US citizens living overseas
changes have been implemented in an irregular pattern over time, creating uncertainty for taxpayers
US citizens abroad are caught in the gap between US banks that don’t want them and Swiss banks that refuse them, adding to mortage, pension plan and others investment dilemmas.

Among the changes

2008: the Heart Act, amended expatriation procedures and includes succession tax – “much discussed but seldom implemented” says one Geneva meeting expert

2009: voluntary disclosure programme, under which 14,500 people took advantage of the amnesty

2010: the Hire Act – gifts, annuities, insurance pulled in for Fbar reporting of foreign assets, but no guidelines have been issued yet about how this will be implemented

Fbar: The Treasury has now gone back to its 2000 definition of who is a US Person for filing purposes, after “going overboard on that” one speaker says, and it exempts some people for some assets in earlier years (IRS notes on the change)

Grats, which cover the transfer of assets of family owned business is being reviewed

The exclusion for gifts to “alien spouses” is $134,000 in 2010 but is dropping to $60,000

Estate tax credit and exemption levels: 2009 applicable estate tax credit was $1.46 million, no estate tax in 2010 and credit in 2011 will be down to $345,8000. Available exemption in 2009 was $3.5 million and in 2011 it drops to $1 million.

“Land of the free – I used to really believe that”

Those attending who said the meeting had depressed them gave several reasons: the difficulty of understanding what one person called the “foreign language of tax jargon” (see “US tax mini jargon buster”), a sense of abandonment by a US government indifferent to the reality of the lives of its citizens abroad, frustration that too many Americans who live in the US wrongly see those abroad as a spoiled group of tax dodgers, and ultimately, a costly and unjust inability to plan.

“The right to plan – isn’t that what someone said the last time?” asked one woman. She was recalling a speaker who argued that under a fair system all taxpayers should have the right to plan for the future, but that current US tax rules make this impossible for many people abroad.

She and others chafed that even tax and estate planning experts fail to understand the needs of US citizens married to people from other countries, who often want little to do with the complex US tax structure.

Change, hope, dialogue and a dream

Updated 20:50 Visit the GenevaLunch US 2008 election photo gallery: images from the American International Club, Democrats Abroad and Webster University parties.

Click on images here to view larger.

Geneva, Switzerland (GenevaLunch) – Euphoria for many, quietness for a few: the election of Barack Obama as the next US president was marked Wednesday morning in Geneva by four words, repeated at all the events where election-watchers gathered: change, hope, dialogue and a dream.