• Sweden's news in English
 
expat_finances
US taxes and FATCA: 'The time for hiding is over'
Photo: Flickr/Pictures of Money

US taxes and FATCA: 'The time for hiding is over'

AFP · 26 Jan 2016, 09:12

Published: 26 Jan 2016 09:12 GMT+01:00

“The Foreign Account Tax Compliance Act (FATCA) requires banks to report information to the IRS regarding all financial accounts held by American clients,” Ines Zemelman, expat tax specialist and founder of Taxes for Expats, tells The Local. "The age of financial privacy is over.”

American citizens must report their worldwide earnings and assets to the IRS no matter where in the world they live.  With the implementation of FATCA, expats who have spent years avoiding this uncomfortable truth are being reminded of it -- as well as being punished if they don’t comply.

This development has led to many foreign banks trying to track down their American clients – and in some cases, lessen their own burden by simply refusing Americans service.

Many expats have begun to receive a ‘FATCA Letter’ from their bank requesting certain information about their US tax status (and asking them to complete either Form W-9 or W-8). The letter usually offers a brief explanation of the FATCA legislation that requires the bank to share your name, address, and other personal details with the American tax authorities - the Internal Revenue Service.

But what if you're not compliant? Some expats choose to ignore the request - but this high-risk approach is likely to quickly bring about a negative outcome.

Your bank might simply close your account, or even freeze your funds. Alternatively, your details may be forwarded to the IRS anyways and you may end up with a big red flag by your name.

“If you are not presently compliant with US tax laws, the time for hiding is over," Zemelman says. "Your goal should now be to make the appropriate IRS voluntary disclosure to come clean and resolve your undisclosed foreign accounts."

For expats who are not yet compliant with US tax filings, including submitted FBARs (Foreign Bank Account Report) and tax returns, Taxes for Expats recommends three steps.

"Respond to the bank immediately and tell them you are in the process of filing," advises Zemelman. "Ask to set up a timeline or get an extension."

Next, contact a professional US expat tax preparation company such as Taxes for Expats.

"If you were not working against the clock you could try to do it all on your own - but it's not something we'd advise if the bank is already on your case," Zemelman remarks.

Finally, make sure to take advantage of the Streamlined Filing Procedure, which can help you become fully compliant without the risk of penalties. The procedure requires completing three years of tax returns and six years of FBAR, and will put you in the clear once and for all.

Think your bank won’t know you’re American? You’re probably wrong, Zemelman warns.

Foreign banks have a list of various criteria to examine when determining if clients have a significant connection to the US. Every account is evaluated individually.

“Your birthplace is shown on your passport - even if it’s not a US one. Likewise, a client may have transferred funds to the US or may have an American address,” Zemelman says.

If banks fail to comply and report your information to the US, they get slapped with heavy fines - so instead they opt to play nice with Uncle Sam.

“If you are an American with an overseas bank account, it is likely that your bank has already asked or is going to ask about your US compliance status,” Zemelman says. She advises US citizens outside the US to plan for this - as foreign banks have essentially become enforcement agents of the IRS.

So what do you do when the bank in your country of residence starts sniffing around and asks about your US tax compliance status? It doesn’t have to be a nightmare, Zemelman says – if you handle it right.

“Don’t wait for the enforcement division to find you,” Zemelman concludes. “Come forward and fix your US tax situation first.”

This article was produced by The Local and sponsored by Taxes for Expats.

For more news from Sweden, join us on Facebook and Twitter.

Today's headlines
Sweden votes yes to controversial Nato deal
A Nato exercise in Spain 2014. Photo: AP Photo/Daniel Tejedor

A bid to stall the decision was voted down.

Swedish pensioner 'pulled fake gun' on salesman
A file photo of an airsoft gun not linked to the story. Photo: AP Photo/Eric Risberg

We know that many of you have probably had your patience tried by salespeople in the past. But don't do this at home, kids.

Swedish PM shakes up cabinet in key reshuffle
Ann Linde, Peter Eriksson, Isabella Lövin, Stefan Löfven, Karolina Skog and Ibrahim Baylan. Photo: Jonas Ekströmer/TT

UPDATED: Will this turn a page on weeks of scandals for Sweden's coalition?

Why this Swedish handyman wore high heels to work
Not the ideal footwear for manual labour. Photo: Emil Andersson

Laying a floor in a fourth floor apartment turned out to be pretty difficult in high heels.

Julian Assange
Stockholm court upholds Assange arrest warrant
WikiLeaks founder Julian Assange. Photo: AP Photo/Frank Augstein

UPDATED: A Stockholm district court has maintained a European arrest warrant against WikiLeaks founder Julian Assange.

The Local List
Ten ridiculous things Zlatan has compared himself to
Thinking about that time he compared himself to Rambo? Photo: Claudio Bresciani/TT

Is it a Ferrari? Is it a shark? No, it's Zlatan Ibrahimovic.

Sweden sees dramatic rise in syphilis cases
New figures show a significant increase in Swedish syphilis cases. Photo: Claudio Bresciani/TT

Syphilis is on the increase in Sweden, with the number of new cases more than tripling in some parts of the country.

Why Sweden's teachers have no time for their students
A Swedish classroom. Photo: Jessica Gow/TT

Teachers in Sweden are drowning in paperwork and have insufficient time to properly plan lessons, a new report suggests.

Foreigners in Sweden still more likely to be unemployed
A grim outlook is predicted for foreigners in Sweden. Photo: Jessica Gow/TT

Unemployment is falling among native Swedes, but foreign-born citizens are struggling to keep pace.

'Help! My name is Jihad'
Jihad Eshmawi. Photo: Private

My name doesn’t make life easy for me, Jihad Eshmawi tells us.

Sponsored Article
How to find student housing in Malmö: 5 tips
Business & Money
Why Swedes don't want the euro
Sponsored Article
'Sweden gives artists the space to follow their dreams'
Fastighetsbyrån
Gallery
Property of the week: Vika, Falun
National
Is this the most Swedish tattoo ever?
Blog updates

20 May

Editor’s blog, May 20th (The Local Sweden) »

"Hello readers, Do not mention Abba! Or cuckoo clocks! Our most read article this week was…" READ »

 

17 May

What about “att”? (The Swedish Teacher) »

"Hej! It often seems like the small words are the ones that cause the most confusion.…" READ »

 
 
 
Sponsored Article
Food, fun, and reliable sun: Summer in Dubrovnik
Gallery
People-watching: May 20th-22nd
Sponsored Article
How Stockholm startups help new employees feel at home
National
How to really annoy a Swede abroad
National
How this war veteran is warming hearts in Sweden
Gallery
People-watching: May 18th
Sponsored Article
Can you afford to live in Stockholm? (Hint: yes)
National
How this Swede's viral ad totally nailed Stockholm's housing crisis
Sponsored Article
Eat, learn, live: unforgettable holidays in France
Gallery
Property of the week: Vasastaden, Gothenburg
Lifestyle
The best Swedish cities for dating
Sponsored Article
'Only soft power can defeat radicalism'
Gallery
People-watching: May 13th-15th
Sponsored Article
Why Stockholm attracts so many successful researchers
Culture
BLOG: Eurovision as it happened
National
Why a 116-year-old Swede isn't the world's oldest woman
Sponsored Article
'Sweden gives artists the space to follow their dreams'
National
Youth unemployment falls in Sweden
Sponsored Article
Retiring abroad: ensuring your health is covered
Gallery
People-watching: May 11th
Sponsored Article
Can you afford to live in Stockholm? (Hint: yes)
Gallery
People-watching: May 6th-8th
Sponsored Article
Stockholm makes it easier for refugees to meet startups
Politics
Why Sweden's Greens are in free fall
National
Can these cartoon Swedes help foreigners blend in?
National
Why this fearless woman is the talk of Sweden
National
Sweden set for sunny weekend
Fastighetsbyrån
Gallery
Property of the week: Vollsjö, Sjöbo
Features
How to be a cool Swede during a hot summer
Gallery
People-watching: April 29th - May 1st
3,282
jobs available
PSD Media
PSD Media is marketing company that offers innovative solutions for online retailers. We provide modern solutions that help increase traffic and raise conversion. Visit our site at:
psdmedia.se