FATCA Update: Tax Evaders Don’t Have a Prayer

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Going to confession won’t be enough anymore. Now that the Vatican has signed an agreement with US authorities to report information about overseas accounts under the Foreign Account Tax Compliance Act (FATCA), more taxpayers must be on their best behavior.

This is believed to be the first intergovernmental agreement between the United States and the Holy See, and has been characterized by the Vatican as a “very significant step” in combined efforts to thwart tax evasion.

The agreement, which was announced on June 10, culminates negotiations that heated up around Christmastime last year. Be aware that the Holy See is not part of Vatican City, per se. It represents the ecclesiastical jurisdiction of the Catholic Church running the Vatican Bank. The bank itself has been under a dark cloud recently as charges of corruption have come to light. In fact, Pope Francis has made the cleanup of this financial mess one of his top priorities.

FATCA was enacted in 2010 to help uncover assets held in foreign banks and other offshore accounts by US taxpayers. These locations are often touted as “safe havens” from US taxing authorities. The law went into effect on July 1, 2014, and has spawned intergovernmental pacts with more than 100 countries, including notorious fence-sitters, such as Russia and China, as well as traditional tax havens, such as the Caribbean and Switzerland.

To promote compliance with US tax law, FATCA requires foreign financial institutions to report information about accounts held by US taxpayers directly to the IRS, even if the accounts hold only foreign assets. Similarly, they must report information on accounts held by foreign entities in which US taxpayers have a substantial ownership interest. If a bank refuses to disclose the information, it can be assessed a 30 percent withholding tax on certain US source payments, whether or not the recipient is a US taxpayer.

Note that FATCA doesn’t eliminate the requirement to file the dreaded FBAR (Report of Foreign Bank and Financial Account). This filing requirement applies to US taxpayers who have a financial interest in – or signature authority over – any financial account in a foreign country if the aggregate value of those accounts exceeds $10,000.

An FBAR must be filed with the IRS regardless of any other agreements. It just adds another layer of oversight. Clients who admit to being tax cheats may seek protection under the umbrella of the Offshore Voluntary Disclosure Program (OVDP). The IRS recently revised and streamlined the OVDP to make it more appealing to taxpayers. However, the maximum penalty was practically doubled from 27.5 percent to 50 percent, effective Aug. 4, 2014.

The joint announcement by the United States and the Vatican is another reminder that troubles for tax evaders won’t disappear by some sort of miracle. Confession is good for the soul.

Related articles:

FATCA Pacts with US Grow as Law Takes Effect
IRS Chief Highlights Changes to Offshore Disclosure Initiative

About Ken Berry

Ken Berry

Ken Berry, Esq., is a nationally known writer and editor specializing in tax, financial, and legal matters. During his long career, he has served as managing editor of a publisher of content-based marketing tools and vice president of an online continuing education company. As a freelance writer, Ken has authored thousands of articles for a wide variety of newsletters, magazines, and other periodicals.           

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By WhiteKat
Jun 26th 2015 01:12

Confession isn't good for my soul!

I (and millions of other so-called 'US persons') have done nothing wrong other than to have been born on American soil or born to an American parent. Telling USA where to go is what God would want me to do!

USA is the only country in the world that considers those who neither live nor earn within its borders to be taxpayers on their non-US sourced income (with one other unnoteworthy exception - Eritrea).

Broke and in debt, through extraterritorial FATCA law (with threat of 30% withholding on US sourced payments to ensure compliance), USA is forcing barbaric, hitherto unenforceable, not well known, and not well followed, 'citizenship based taxation' (more accurately called 'place of birth taxation' or 'circumstance of birth taxation') on people with the most tenuous of US ties (ex's: born in US to Canadian parents but left as an infant; born outside USA to an American parent but never stepped foot on American soil).

The Vatican should be ashamed for going along with this, another example of US hegemony. The Holy See should be the one going to confession, not people like me who pay taxes already to the governments of the countries where we actually live and are citizens of.

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By DoubleTaxed
Jun 26th 2015 01:12

Time For America to Join the Rest of The Developed World and Adopt: Residence Based Taxation.

Americans in the US trumpet how great their freedom is. However the freedom of Americans is inferior to the freedom enjoyed by citizens of many countries such as Australia, Canada, and the UK and this freedom is this: the freedom to work and live in another country, and the freedom to leave one’s country.

America’s tax and compliance laws have increasingly acted to keep Americans in by punishing harshly those who have left.

Those impacted very much are part of the 99%, most part of the lower and middle class. If you are a US person living overseas, and there are 7+ million, then you are already getting taxed in the country where you live and receive government services. You receive $0 in US government services, other then those paid for on a fee basis.

The US with Citizenship Based Taxation wants to tax you as if you live in the US. The US allows tax credits for your taxes paid in your country of residence. The conundrum comes in where the US has taxes that your country does not, then this flows on top of all taxes paid as double taxation. A more technical term for this is ‘tax treaty gaps.’ Most US persons already live in relatively high tax countries such as Australia, Canada, and the UK, and the US taxes representing double taxation get put on top; so these people pay way higher total tax than US persons with the same income living in the US.

US persons living overseas are tremendously disadvantaged by US tax and compliance policies.

All other countries of the OECD practice Residence Based Taxation. As a result while US persons overseas are tripped up by double taxation, reporting all their accounts, and onerous compliance and penalties; nationals from all other countries are free from such interference from their home countries.

Any US persons living overseas caught up in all this – which very much includes taxation without representation, an American founding principle that the US government has ignored for US citizens abroad - must visit the message boards of The Isaac Brock Society, whose motto is: Liberty and Justice for all United States Persons Abroad. ADCS has initiated legal action against the Canadian FATCA IGA and is seeking donations in its fight against US government injustices against US persons overseas – check it out on The Isaac Brock Website: http://isaacbrocksociety.ca/

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By Cvc
Jun 26th 2015 01:12

America condemns Eritrea for taxing its citizens overseas!
Nina Olson who heads the Taxpayers Advocacy Service, a part of the IRS, has asked her colleagues why they torture expats?
America wants to eliminate so called tax havens like Switzerland and the Cayman Islands. There is something very askew here because to top it all off, we have Delaware and Wyoming which are tax havens within America and nobody stops them. AL Jazeera once wrote that America wants to get rid of foreign tax havens to eliminate the competition.
And last but not least in this web of lies, America refuses to reciprocate by giving up bank information on drug cartel money from South American countries in banks in Florida and Texas.

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By DoubleTaxed
Jun 26th 2015 01:12

Re: Tax Evaders Don't Have A Prayer. They will just move their funds to the 139 markets who have not signed up for FATCA, leaving US Persons resident in FATCA countries ensnarled in its enforced discrimination and regulation.

https://twitter.com/search?q=1...

Tax Evaders from other countries always have access to the US and states like Delaware which are very lax in identifying any beneficiaries.

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