Robert J. Fedor, Esq., L.L.C.

IRS law aims to target foreign account holders

There are a number of reasons why an individual or business owner may choose to hold assets in a foreign bank account. According to the Internal Revenue Service, evading taxes is chief among these reasons. After it was discovered that some U.S. citizens were using Swiss bank accounts to avoid paying taxes, the IRS sought to gain more information regarding U.S. citizens with foreign bank accounts. In 2010, the Foreign Account Tax Compliance Act was passed into law.

The FATCA impacts those individuals who have more than $50,000 in assets held in foreign accounts. Under the new law, foreign financial institutions are required to report on the account activity of those account holders with assets in excess of $50,000. While the new law is set to go into effect this coming June, concerns have been raised regarding whether or not the IRS is prepared to process and handle information provided from an estimated 200,000 to 400,000 foreign banks and financial institutions.

Concerns over the IRS's readiness recently lead to a request by the Treasury Inspector General for Tax Administration to delay the enacting of FATCA. The TIGTA argues that budgetary constraints continue to cripple the IRS and have prevented the agency from hiring staff and developing systems needed to handle the anticipated workload.

For now, the Obama administration has made no decision on whether or to delay when FATCA will go into effect. Regardless of when the new law goes into effect, individuals and business owners who have assets held in foreign accounts in excess of $50,000 may have questions and concerns. An attorney who handles criminal tax matters can answer questions and provide advice and assistance in how to ensure no current or planned tax laws are breached. 

Source: Money News, "IRS Not Fully Ready for Law Against Offshore Tax Evasion, Watchdog Warns," Dec. 9, 2013 

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