Americans abroad, hear this: The U.S. needs your money and will cross borders to get it.

That was the message conveyed today by speakers at a Canadian Institute conference looking closely at the new U.S. Internal Revenue Service proposal governing accounts held by American citizens residing abroad.

The Foreign Account Tax Compliance Act (FATCA) is the latest in efforts by the U.S. to improve tax compliance involving foreign financial assets and offshore accounts. Translation: We’re going after tax cheats who live abroad.

Read: Tax cheats beware

The IRS has gotten an earful from the financial services industry, which is singing in unison about its inability to meet established compliance dates.

For its part, speakers say the U.S. government won’t back down from its deadlines, because “it wants to put pressure on the system.”

Read: Americans in Canada: a taxing situation

So far, five countries (France, Germany, Italy, Spain and the U.K.) have announced their intentions to partner with the U.S. on the new law. To date, Canada has not said whether it will join, but aspects of existing U.S./Canada tax treaties suggest participation is inevitable.

“It’s a mistake to think FATCA is just a U.S. thing,” John Staples, a partner Burt, Staples & Maner, a Washington, DC-based law firm, told attendees. “You have to think about FATCA on a multinational level.”

Signers are obligated to enable foreign financial institutions to apply due diligence to identify U.S. accounts (read: residents) abroad. Also, they must authorize automatic exchange of U.S. account information to the IRS.

Both financial institutions and political jurisdictions outside the U.S. are complaining their local privacy laws will conflict with FATCA requirements.

Read: Cross-border planning CE Course

FATCA reporting can apply to the following:

  • U.S. account information;
  • Payments that are subject to withholding taxes; and
  • Information about non-participating foreign financial institutions.

Compliance dates are staggered. Speakers say these are likely phase-in dates:

  • January 1, 2013 for new account procedures and system upgrades by U.S. financial institutions;
  • July 1, 2013 for participating foreign financial institutions;
  • January 1, 2014 for withholding for U.S. source Fixed, Determinable, Annual, or Periodical (FDAP) income;
  • January 1, 2015 for U.S.-source gross proceeds; and
  • Not before 2017 for foreign pass-through payments.

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Just Me

Yes, GATCA is being created, or a Global FATCA under the forceful direction of the IRS, and everyone is just rolling over and merely begging for more time to be compliant. Sometimes you wonder, where is the back bone or the will to resist the unilateral imposition of Congressional will that votes for these laws without ever reading or understand what it is they are creating.

As Will Rogers said. With Congress, every time they make a joke it’s a law, and every time they make a law it’s a joke.”

The ultimate irony is the joke is on the Congressman who voted for FATCA. The IRS is imposing a Domestic version of FATCA, or DATCA imposed on their local U.S. banks unilaterally. This is so that it has a faux reciprocity tool to lever recalcitrant governments into that a FATCA pack.

Now they are protesting and want to stop the IRS from collecting the interest payment information on money held in US banks by non residents for fear that this will cause Capital flight. They are probably right, but if they didn’t want that, why did they vote for FATCA joke in the first place?

More on this subject on Isaac Brock Society under the title DATCA is not Dead! It lives on…

Wednesday, May 30 @ 11:03 pm //////

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