He wants to become president, but first he wants to take on the Internal Revenue Service and Treasury Department. Sen. Rand Paul is suing the two entities over rules that force foreign banks to disclose financial information about American accountholders.
Paul argues in his complaint filed in Ohio that the Foreign Account Tax Compliance Act is unconstitutional, violating citizens' privacy rights. The lawsuit asks the federal court to eliminate requirements that Americans file reports with the IRS on overseas accounts of $10,000 and more.
The Kentucky senator claims FATCA "is severely impinging on the ability of U.S. citizens to live and work abroad," in addition to its violations of the Constitution. It's also expensive, Paul says, putting "enormous economic costs" on to the backs of banks and citizens alike.
Bloomberg reports that President Barack Obama signed the law five years ago, but in doing so, exceeded his authority, Paul says in the suit.
Those who willfully violate FATCA requirements can be subject to penalties of 50 percent of the balance of the account. Paul says in the lawsuit filed in U.S. District Court, Southern District of Ohio, that the fines are unconstitutionally excessive.
While no one knows yet what will become of Paul's attempts to have the court rule the law unconstitutional, we do know that for now FATCA is in effect and being enforced by the IRS and Justice Department. Criminal prosecution is possible in some situations, while large penalties, taxes and interest loom over others.
A tax attorney deeply familiar with FATCA, FBAR (Report of Foreign Bank and Financial Accounts) and non-prosecution agreements can help you navigate the murky waters of foreign account tax compliance. The attorneys at Robert J. Fedor, Esq., LLC are ready to help. Please see our Offshore Tax Issues page for more information.