Big Data and an ever aggressive approach by the IRS toward ferreting out Americans living abroad who are not current with their US tax filing has, so far, not yielded the results that the US government hoped for. With a tax system that is based largely upon voluntary compliance, the United States wields a big stick, and yet they realize that in reality a carrot may yield a much better result. The big stick in this circumstance is FATCA, the Foreign Account Tax Compliance Act, which so far has signed on 77 thousand banks worldwide and 70 countries to report to the US where Americans reside and what accounts they hold. The carrot, on the other hand is the New Streamlined Procedure …
Archive for Greg Dewald
IRS Finally Gets It Right – This Is The Penalty-Free Path Forward American Late Filers Have Been Waiting For
You are an American citizen living abroad and you have just found out, through one source and then another source that you are required to file US income taxes every year. Who knew? You may feel overcome with an angst and a fear that life abroad – once blissful and so secure – is about to change and change a lot.While it is true that, indeed, as an American citizen you do need to file taxes with the United States on your worldwide income each year, the fact that you have not been compliant is not as ominous as it may at first seem. One often hears horror stories, mostly hearsay, of how this American or another’s life had been opened up and read like a book by the IRS. The reality though is not so scary. The IRS realizes that many Americans living abroad did not know of their obligation to file their US taxes and are offering a safe and worry-free path forward … Read more
The IRS has declared filing three years back taxes is adequate for most US expat tax filers who are delinquent and there shall be no penalties for late FBARs (Foreign Bank Account Reports) from those who were unaware of the requirement to file.
This brings a clarity and welcome relief to many American expats who in the past may have been reluctant to file US income taxes because there was no assurance that they would not be further harassed (or assessed exorbitant penalties and fees) because they simply didn’t know – or they didn’t trust the potential outcome if they did attempt to come forward and become compliant with US tax laws…
Tick, Tick, Tick | US Now Collaborating With Fifty Plus Countries To Retrieve Financial Data On US Expats
The United States Treasury Department is now actively working with more than 50 nations to share Americans’ personal financial data that will reveal who is tax compliant, including American expats living overseas. The effort is in support of new FATCA (Foreign Account Tax Compliance Act) laws that require foreign financial entities to report Americans’ account information to US authorities and to undertake mandatory withholding from them to assure compliance with American income tax laws.
The trade-off is that the United States will reciprocate with the data of partner countries’ own citizens with accounts in the States. The laws have been rolling out in varying levels since its enactment in 2010. The US has principal agreements with the 5 big sovereigns of Europe, including the United Kingdom, Germany, France, Spain and Italy, and has signed a “model agreement” with the United Kingdom …
The inception of, roll out and implementation of FATCA has been clever, if not masterful on the part of the US Treasury. The United States enacted FATCA and began by leaning, mostly, on foreign financial entities and mandating that they comply with certain new rules, including reporting of data on American clients and withholding of monies, to ensure Americans were compliant with US tax laws. Foreign financial interests, in turn, desperately sought relief from their own governments. The US mandates were burdensome and cost prohibitive for them to implement. The solution for financiers was for their own governments, many of whom already have the data the US Read more
This is the last US tax filing season for American expats to become current with the IRS before new laws come into play that will reveal your identity, location and foreign accounts to the US government. Now is the last best chance for Americans living abroad to become current with your US tax filing. With new US FATCA laws (Foreign Account Tax Compliance Act) coming online, your local foreign bank will now be required to disclose your personal details to the US government. As if this was not enough, in addition, the foreign government under which Americans reside overseas will be doing the same thing – collecting what was once private financial data from their country’s banks to be handed over to the US government so that the IRS can locate you and your assets. These FATCA reporting laws and accompanying enforcement take effect on January 1st, 2014.
FATCA – One Hundred Ninety Five Countries – One IRS
With the unfolding of these new mandates, there are only two possible paths that remain for US expats – either to file your US taxes and accompanying forms that disclose your foreign assets to become current with the IRS or the United States will do it for you. How does the US this? The IRS will complete an assessment of what they believe you should owe (and their assessments are astronomically high) and present you with the bill. Whether you choose to file of your own volition or wait to hear from the IRS, the difference in outcomes is staggering.
Amen and Hallelujah – IRS Creates A Sure and Safe Path Forward For US Expats Read more
“Give that Man Some Fiscal Cliff!”
I worry sometimes. Sometimes a lot. I’ve been living in and outside the States for some years and one time as I was leaving, back in 2010, I knew for sure that upon looking back at my beloved country – our United States of America, within a short period (I don’t know, months?) I’d be witness to the buckling and ultimate collapse of the American behemoth. The leviathan that America had become was groaning under the stress of its own unsupportable fiscal weight and was about to give way. I fully expected to be watching, in awed disbelief, as the United States succumbed to greater financial forces and had to face a fiscal reckoning of its own making. I’ve always been fascinated by finance and economics (for me, it was finance instead of sports) and as the last couple years have unfolded, astonishingly, not only did the United States not collapse, I happened upon a whole new way of looking at economies and how macro-fiscal matters really unfold.
I used to believe economics was science – borne of great minds, like Keynes, Hayek, von Mises. Through quantification, calculation and forward analysis, though from different economic schools of thought, they predicted probable outcomes based on their own particular certainties. Using historical modeling as reference and for proof to support their forward projections, they captured the imagination of a larger population of thinkers. Given their disparate philosophies of how economies work great debates ensued and they continue to this day. Each side, right vs. left, continually outdoes the other with proofs and ‘precise outcomes’ that favor their worldview as events unfold.
“Show Me the Fiscal Cliff”
I’ve reached a new conclusion though. Economics is more political and social than it is reliant upon numbers and hard math. The math is the final arbiter. It brings us to the end of the story, but the real intrigue, the part that matters, because it is what we live, is the drama that is played out before economies and civilizations rise and fall. It is always a story that is long and deep and nuanced and highly unpredictable.
The math of economics assumes rational, predictive behavior. However, the social aspect of economics mandates that, even if governments act in the greater interest, there are both winners and losers. In the United States, our social construct and our democracy relies upon the consent of the governed. Those who are governed must participate in our democracy, by voting, in order for it to ‘work’. As long as we the governed are in agreement that we are active in a participatory democracy, then we support events and outcomes as they unfold. After all, we have been ‘instrumental’ in bringing these things about.
The answer to the fiscal problems the United States faces, in reality, are insurmountable. They cannot be solved. The math says so. The amount of debt the United States has accrued and the monetary steps necessary to remedy that are impossible to implement to any meaningful degree. It’s a complicated problem of unfathomable proportions that is politically inexpedient and, therefore, virtually impossible to address. The average American cannot get his head around, much less embrace, the necessary reduction in entitlements and increase in taxes that would be necessary to actually fix our upside down American economy.
“Fiscal Cliff Prevents that Sinking Feeling”
The so called ‘answer’ to this quandary has emerged and has captured the imagination, not just of the U.S., but of the world. It is a manifestation of political and social theater that is brilliant in its inception – and masterful in its execution. The answer is the Fiscal Cliff. The sound of the words themselves are ominous enough to give one pause. ‘Fiscal Cliff’ has the ring of impending doom. They are words that both terrify – and unify those who hear it. Upon hearing such words, most Americans would be ready and willing to marshal whatever resources are necessary to avert this looming catastrophe.
So Americans rallied. They participated in presidential elections and chose a person whom they believed had the right stuff and the wherewithal to master the beast. They chose a man who could reach forward and grasp us just as we were at the precipice and with calm and determination pull us back to safer ground. We are safe now. We did not go over the cliff. Disaster has been averted. We, as Americans, pulled together and by exercising our democratic rights we solved the crisis. We prevailed. Our mood as a society is better now. Now we can move forward with more confidence that we’ve faced the crisis and did what it took to ‘solve it’.
It’s not really solved though. It’s not even close to being solved. All that was gained by the ‘grand bargain’ that was struck between the opposing parties regarding the Fiscal Cliff is a minimal tax increase that makes no appreciable dent in our debt outstanding and a ‘promise’ to address spending cuts a few months hence. My expectation is that these cuts, like most other promised cuts, will never actually materialize. They never seem to. The actual agreement results in deficits that are 4 trillion dollars higher than they are now. Some cut. Some Fiscal Cliff. Did we address the reality of our situation? No. But the theater? Superb.
“More Fiscal Cliff Please”
Our immediate reality is clear then: There is no politically palatable way for the United States to fix what ails us. The fiscal imbroglio that engulfs us is bad – unimaginably bad, but there is no realistic way forward that will actually fix it. Politicians themselves know this and are primarily focused on the next best thing and that is to keep the music playing. Louis XV was attributed with saying, “Après moi, le déluge” (“After me, the deluge”), suggesting his only concern was for his life and his lifetime. Today in the States, the governing class focuses on the present and in the present the participation of the governed is essential lest the music stops. Should the music stop, order breaks down and mayhem ensues (in the case of France, after Louis XV, it was the French Revolution).
It’s not the sort of picture anyone wishes to visualize. And so, looking at our reality through a more tinted lens now, as I ponder our fiscal plight I don’t worry so much anymore. What I once worried about was the end game. What I’ve learned is that the end game, though certain, is impossible to predict. In the meantime, I’ll be enjoying and listening as the music plays – “More fiscal cliff please”.