We have in the past in this space discussed Sen. Rand Paul's lawsuit aimed at derailing the Foreign Account Tax Compliance Act (FATCA). Paul and other plaintiffs are also out to upend the requirement to file a Report of Foreign Bank and Financial Accounts (FBAR).
Presidential contender Paul has yet to be asked about the litigation during the two debates held thus far -- including the opening debate held in Cleveland -- but he and six others continue to press forward with it.
They argue in Crawford v. United States (before the U.S. District Court for the Southern District of Ohio) that FATCA places greater value on efficiency than on the Bill of Rights. It's more cost-efficient to strong-arm foreign financial institutions into reporting on Americans' accounts than it is to have the IRS and Justice Department search for people committing tax crimes, but it's unconstitutional, Paul and others say.
The federal government says those privacy rights regarding financial information don't exist. If financial information is private, how can the government require businesses to report wages paid and taxes withheld? If privacy rights extend to financial information, how can American banks rightfully be required to disclose information on account-holders?
Forbes questions the positions on both sides of the issue, noting that if Paul and company prevail, it could essentially turn our nation's taxation into an honor system. While that outcome seems unlikely, Paul and others make a case that both FATCA and FBAR are efforts to force foreign banks and American citizens to prove that they are law-abiding, rather than keeping the burden of proof on the government.
An experienced tax attorney can negotiate a non-prosecution agreement with the IRS and help bring you and your foreign accounts into compliance. A knowledgeable tax lawyer can discuss other options with you as well, and help you pursue a strategy suited to your offshore tax issues.