According to Swiss international financial advisors, the Foreign Account Tax Compliance Act (FATCA) continues to impact dealings when it comes to international accounts and investments. This is true even though we hear talk of phasing FATCA out.
FATCA went into effect in 2010. It requires foreign banks and institutions to report information concerning U.S. citizens with more than $10,000 in accounts. By requiring such information, the IRS can learn the identities of individuals who have not reported offshore financial assets. The penalties for failing to report on such assets are severe. These penalties include bank levees, seized assets, wage garnishments, and even jail time.
FATCA and specialization of financial institutions
Due to FATCA, financial institutions have increasingly specialized. In Switzerland, it is mostly financial advisors connected with the U.S. Securities and Exchange Commission (SEC) who interact with U.S. citizens.
For this reason, many foreign banks will not do business with U.S. citizens. Others will simply choose to do business with a single market rather than multiple markets. Because of complexities, many financial institutions choose not to deal with the FATCA processes. And some simply do not understand FATCA requirements.
Protect your foreign assets
It is understandable why banks are nervous about noncompliance with FATCA. Even for financial institutions, the penalties for violations are severe. As one oversea executive stated, “It is pretty simple – either you comply or you are out of business.”
We don’t expect U.S. citizens to give up their foreign assets. Yet when even financial institutions find it difficult to understand FATCA, one can only imagine the concerns Michigan residents have trying to understand it.
Guidance from an experienced tax attorney, as well as legal representation, can be essential when it comes to reporting on foreign assets. It may prevent unwanted attention from the IRS.