Usa'S Irs Extending Its Reach To Thai Ex-Pats

[bitterbatter]

I didn't see any mention of this already in the Thai Visa Forum so I thought I would post it.

US Expats on Alert: New US Tax Law Extends IRS’s Reach Internationally

by THAILAND LAWYER on JUNE 15, 2011

The US quietly passed an extensive tax law last year that will soon be touching the lives of any American citizen living abroad who has assets in a foreign account.

The Foreign Account Tax Compliance Act was passed by the US Congress in 2010 in conjunction with the US HIRE Act as part of a package of legislation intended to help the United States address issues of tax evasion on behalf of US citizens. We wrote a previous post on the US HIRE Act providing more details specific to this act.

Any US citizen living abroad, green card holder (Permanent Resident), dual citizen with the United States or other US residents for income tax purposes will fall under the regulations imposed by this act starting in 2013.

Additionally US citizens living abroad are also already subject to another type of report related to their financial account information for the tax year 2010, called the Report of Foreign Bank and Financial Accounts (the “FBAR”). This form must be submitted at the same time as the typical Income Tax Return form that Americans are required to submit to the IRS every year.

However, the purpose of the FBAR is to submit detailed information about any financial interest in or signature authority over an account held in a foreign country by an American citizen. Instead of being submitted directly to the IRS for reporting (although it is linked with the income tax information stored by the IRS), the FBAR must be sent to the US Department of Treasury and must be received on or before June 30^th, 2011.

What is the significance of the FBAR and the Foreign Account Tax Compliance Act?

FBAR

Let’s start with the FBAR, as it is a bit easier to dissect. Basically, an individual falling into one of the US citizenship categories mentioned above is now required to file an FBAR if the aggregate value of their foreign financial accounts exceeds $10,000 at any point in time during the tax calendar year.

To clear up any potential misconceptions, this blanket amount of $10,000 applies to the aggregate value of ALL foreign financial accounts owned/held by that person. For example, if the individual has three accounts, one with $3,000 total, one with $5,000 total and one with $2,000 total, the total aggregate amount is $10,000 and all accounts must be reported on the FBAR.

The FBAR also covers any financial accounts that the individual might hold with another person (joint account), such as an account held with a foreign spouse, as a guardian for children, with friends, etc.

Now, on to the types of accounts covered by this law. For FBAR purposes, financial accounts that fall under reporting regulations include any foreign account such as a savings, checking, demand, brokerage, securities, deposit, time deposit, commodity futures, options account, insurance policy with cash value, an annuity policy with cash value, shares in a mutual fun, or any other similar account held with a foreign financial institution or pooled fund account.

To add insult to injury, the extremely comprehensive list includes foreign whole of life insurance policies, foreign pensions, annuities, foreign money market funds and investment accounts containing foreign mutual funds.

For more information on the different categories that can apply to a United States citizen and require them to file the FBAR, please consult information from the IRS on the Foreign Account Tax Compliance Act (FATCA).

The Nitty Gritty of the Foreign Account Tax Compliance Act

One of the main aspects of the Foreign Account Tax Compliance Act that has foreign banks in a tizzy is the requirement (beginning January 13, 2011), for all foreign financial institutions to report their American clients holding assets in a foreign account to the IRS in America. This is no easy task, and will place exorbitant costs on banks to comply with this far-reaching tax law in regards to their American customers.

In a meeting last week between international senior bank executives and the US Treasury Secretary, Tim Geithner, the executives strongly asked for reconsideration of certain aspects of the law and for modifications to be made that might be more realistic for banks to enforce. The banks could incur billions of dollars in costs if forced to go through records to locate all accounts held by US citizens and then report the accounts to the IRS. This process could also potentially conflict with the domestic privacy laws in existence for that particular country.

If foreign banks do not comply with the new law, they will face a 30 percent withholding tax on any payments made to the bank from the United States. This 30 percent tax will then be provided to the IRS as tax.

Those that are critical of the new law state that the threat of the withholding tax, along with the act of force by the US to conscript foreign, sovereign institutions to become arms of US tax law, state that this law will eventually lead to foreign interests vacating US capital markets.

This new tax law has stirred up significant controversy from abroad, from both US citizens living as expats overseas, as well as from foreign financial institutions and other domestic and foreign stakeholders. It is not beyond the realm of possibility that these tough requirements could lead foreign banks to deny banking services to US citizens living abroad.

As the Foreign Account Tax Compliance Act will be affecting all Americans or other individuals tied to an American account in an official capacity, now is the time to seriously consider hiring a certified accountant experienced in assisting American expats with their taxes. Other forms not mentioned above are also linked to the FBAR process, and some US citizens will fall under the requirements for submission of the additional forms.

How will Americans living abroad react to the news of the fresh, strict requirements? Is it possible that America will experience a higher number of American expats renouncing their US citizenship, particularly if they have been living abroad for a number of years if not most of their life?

We think this might not be too far off the mark, and it will be interesting to see statistics recorded from 2013 after the new law is enforced.

Related Documents:

A Little Known US Law Packing a Huge Punch: The US Hire Act and How It Affects US Expat Taxes

[Soutpeel]

"It is not beyond the realm of possibility that these tough requirements could lead foreign banks to deny banking services to US citizens living abroad"

It is already in place...a lot of international banks will not touch US citizens who try and open offshore accounts.

[vpi78]

Not much new here ... move along.

[dekestone]

"It is not beyond the realm of possibility that these tough requirements could lead foreign banks to deny banking services to US citizens living abroad"

It is already in place...a lot of international banks will not touch US citizens who try and open offshore accounts.

Seems like this would be the easiest for Thai banks, rather than trying to track down every American who has a deposit in their bank -- then they wouldn't have to worry about the 30% withholding tax. But in my case, my company deposits my monthly salary directly into a local bank, so I wonder what's gonna happen with that.

Oh and FBAR has been around for a long time. It's only recently that the IRS is making a lot of noise about stricter enforcement.

[thaihome]

The latest news is if you have signature authority on a foreign bank account, even if you have no personal interest in the account (i.e. a corporate account), you must include that bank account(s) in your FBAR filing.

The good news is if you have already filed your 2010 return and did not indicate on it that you have a foreign account that needs to be reported, you only need to file a FBAR by June 30, 2011 (which as already passed) that includes those accounts and any accounts that you personally hold even if they never individually or in total went over $10k.

TH

[Ken]

The latest news is if you have signature authority on a foreign bank account, even if you have no personal interest in the account (i.e. a corporate account), you must include that bank account(s) in your FBAR filing.

The good news is if you have already filed your 2010 return and did not indicate on it that you have a foreign account that needs to be reported, you only need to file a FBAR by June 30, 2011 (which as already passed) that includes those accounts and any accounts that you personally hold even if they never individually or in total went over $10k.

TH

I just took a look at the latest FBAR and it says you do not need to report if the aggregate value of the accounts did not exceed $10,000:

File this form with: U.S. Department of the Treasury, P.O. Box 32621, Detroit, MI 48232-0621

This form should be used to report a financial interest in, signature authority, or other authority over one or more financial accounts in foreign

countries, as required by the Department of the Treasury Regulations 31 CFR 1010.350 (formerly 31 CFR 103.24). No report is required if the aggregate

value of the accounts did not exceed $10,000. See Instructions For Definitions.

Form:

TD F 90-22.1

(Rev. March 2011)

Department of the Treasury

[jayjayjayjay]

I can see US citizenship taking a dive. Last one to leave turn out the lights...... la la laa oh deedle dum.

[KeyserSoze01]

"It is not beyond the realm of possibility that these tough requirements could lead foreign banks to deny banking services to US citizens living abroad"

It is already in place...a lot of international banks will not touch US citizens who try and open offshore accounts.

I had a non-US financial institution freeze my accounts when this went into effect. They informed me that they were severing all ties with US financial insitutions and citizens. They then asked me a ACH routing information to return my funds.

I have heard other horror stories from first-hand experiences where expats had their accounts frozen until they could prove that the funds in the accounts were not illegally gained. Imagine living in a foreign country and having all of your available funds frozen until you can prove you are legal and above board. A bunch of BS if you ask me.

I don't believe many will renounce their US citizenship. Well, at least not as long as social security is still around. After that, all bets are off.

Nothing like cutting off your nose to spite your face. The US political and financial environments are a joke. If any of us ran our finances the way the US does, we would all be in the lockup.

[thedivezone]

Every evening before bedtime I say a prayer to say thanks that i was not born a us citizen !

Edited July 7, 2011 by thedivezone

[BEENTHEREDONETHAT]

If you have the 800,000 baht in the bank retirement visa, you are $crewed if you hadn't reported it.

That is why so many people are getting second citizenship and passport. Open account with non USA passport.

[Heng]

No biggie. Just get an additional citizenship for your offshore funds. Allow your American 'self' to be an average -not worth auditing- citizen living hand to mouth/month to month (like about 200 million others).

[happyrobert]

No biggie. Just get an additional citizenship for your offshore funds. Allow your American 'self' to be an average -not worth auditing- citizen living hand to mouth/month to month (like about 200 million others).

Please explain in clear detail the steps one would take to get an additional citizenship. Might it include a trip to Iran?

[Heng]

No biggie. Just get an additional citizenship for your offshore funds. Allow your American 'self' to be an average -not worth auditing- citizen living hand to mouth/month to month (like about 200 million others).

Please explain in clear detail the steps one would take to get an additional citizenship. Might it include a trip to Iran?

There's a thread on getting local citizenship here on this forum. You might also Google variations of: citizenship by investment for whatever your preferred tax haven is.

[JimGant]

As the Foreign Account Tax Compliance Act will be affecting all Americans or other individuals tied to an American account in an official capacity, now is the time to seriously consider hiring a certified accountant experienced in assisting American expats with their taxes.

Obviously, this quote from the thailawyer article at the beginning of this thread is a scare tactic meant to solicit customers. As a retired CPA, -- yawn.

The cutoff minimum point for reporting Yank bank deposits is $50k (per the Foreign Acct Tax Compliance Act, effective 1 Jan 2013). This limits the burden to Thai banks (how many Yanks here have over $50k?), and thus would easily be accomplished. Furthermore, banks like Bangkok Bank, with a presence in New York, will not jeopardize this business link by refusing to report those with over $50k.

If you have the 800,000 baht in the bank retirement visa, you are $crewed if you hadn't reported it.

Nah. This is an Al Capone thingy. The Feds are looking for big-time money launderers -- and this would be the easiest hook to hang someone on who's brought attention to himself through various -- but not sufficiently evident -- slippery schemes.

As most, if not all, of your inputs to Thai banking was via SWIFT, you're covered from the laundering aspect. That these SWIFT deposits, totaling more than $10k per year, don't show up in a FBAR statement is not startling. Most probably you spent them right off, building your new house. Or whatever. But, again, that your money arrived via SWIFT encoding, means FBAR is a non-player towards any potential criminal investigation -- assuming you've not brought attention to the Feds otherwise, i.e., assuming you're not a money launderer.

Heck, the FBAR guys are even a separate branch of Treasury from the IRS, so the fact that you haven't declared $60 or so in interest from Bangkok Bank on your tax return, won't create any alarm bells -- anywhere (remember, no 1099's). Plus, like with the FBAR cops, the IRS has no way of knowing, should they become aware of money you sent abroad, whether that sat in an account earning taxable interest -- or immediately went to building a house.

But, yeah, should your Thai bank account go over $50k after Jan 1, 2013, best declare the interest on your 1040, since it will now be receiving 1099-equivalent treatment. But feel good by being a tax cheat no more...

I can see US citizenship taking a dive. Last one to leave turn out the lights.

Nope. Give up your US citizenship if you will. But if it's for the purpose of evading US income taxes, it won't work. You'll still be liable for US taxes. This is even written into the US-Thai tax treaty. Dual citizenship won't help either.

Every evening before bedtime I say a prayer to say thanks that i was not born a us citizen !

Amen. I'm glad you weren't either. And I thank you for not (presumably) applying for US immigration, as you would have hogged a spot better utilized by someone trying to get ahead in life. To his benefit -- and that of the US.

Edited July 8, 2011 by JimGant

[happyrobert]

No biggie. Just get an additional citizenship for your offshore funds. Allow your American 'self' to be an average -not worth auditing- citizen living hand to mouth/month to month (like about 200 million others).

Please explain in clear detail the steps one would take to get an additional citizenship. Might it include a trip to Iran?

There's a thread on getting local citizenship here on this forum. You might also Google variations of: citizenship by investment for whatever your preferred tax haven is.

Ah, yes. $50k will get you full citizenship in Panama, among other places, but that does not help here in the LOS...

[NancyL]

I really don't see the fuss. The first year we were here, I didn't know about the FBAR requirements and filed that first report a couple of months late with a little note about how I didn't know. Never heard anything back. Now I file the FBAR statement every year when I do our IRS 1040 filing in March. Yes, I even report the interest we receive from Bangkok Bank for my 800,000 baht reitrement funds account as interest income on our 1040. If you follow the laws of your home country and your host country, all this shouldn't be an issue.

[Heng]

No biggie. Just get an additional citizenship for your offshore funds. Allow your American 'self' to be an average -not worth auditing- citizen living hand to mouth/month to month (like about 200 million others).

Please explain in clear detail the steps one would take to get an additional citizenship. Might it include a trip to Iran?

There's a thread on getting local citizenship here on this forum. You might also Google variations of: citizenship by investment for whatever your preferred tax haven is.

Ah, yes. $50k will get you full citizenship in Panama, among other places, but that does not help here in the LOS...

You don't actually have to keep your funds in the country(s) whose citizenship you acquire. For instance, hypothetically... I have US, Thai, and (one other) citizenship, but I don't keep the bulk of my funds in any of those countries. I don't of course completely avoid paying taxes in any of those countries as well. Just what I deem is reasonable and 'enough.' You then use one or more of those other than US identities (even better if you spell those names just a little differently, maybe off by a letter or two), in a third and fourth, etc. tax haven under those names. As long as you're just dealing with relatively small amounts (and don't actually move funds around much like some kind of wheeler dealer), you're still a very small fish in the big picture that no one will make much effort to find.

Considering that the US is still paying social security and welfare to dead people among others unqualified to receive such benefits, it'll be awhile before the dinosaur figures out a way to enforce tax law upon what it can only classify as citizens of other countries.

[JSixpack]

Obviously, this quote from the thailawyer article at the beginning of this thread is a scare tactic meant to solicit customers. As a retired CPA, -- yawn.

. . .

Thank you for a thoughtful and informative post amid all the usual crap.

[californiabeachboy]

If you have the 800,000 baht in the bank retirement visa, you are $crewed if you hadn't reported it.

Nah. This is an Al Capone thingy. The Feds are looking for big-time money launderers -- and this would be the easiest hook to hang someone on who's brought attention to himself through various -- but not sufficiently evident -- slippery schemes.

As most, if not all, of your inputs to Thai banking was via SWIFT, you're covered from the laundering aspect. That these SWIFT deposits, totaling more than $10k per year, don't show up in a FBAR statement is not startling. Most probably you spent them right off, building your new house. Or whatever. But, again, that your money arrived via SWIFT encoding, means FBAR is a non-player towards any potential criminal investigation -- assuming you've not brought attention to the Feds otherwise, i.e., assuming you're not a money launderer.

Heck, the FBAR guys are even a separate branch of Treasury from the IRS, so the fact that you haven't declared $60 or so in interest from Bangkok Bank on your tax return, won't create any alarm bells -- anywhere (remember, no 1099's). Plus, like with the FBAR cops, the IRS has no way of knowing, should they become aware of money you sent abroad, whether that sat in an account earning taxable interest -- or immediately went to building a house.

But, yeah, should your Thai bank account go over $50k after Jan 1, 2013, best declare the interest on your 1040, since it will now be receiving 1099-equivalent treatment. But feel good by being a tax cheat no more...

I can see US citizenship taking a dive. Last one to leave turn out the lights.

Nope. Give up your US citizenship if you will. But if it's for the purpose of evading US income taxes, it won't work. You'll still be liable for US taxes. This is even written into the US-Thai tax treaty. Dual citizenship won't help either.

Every evening before bedtime I say a prayer to say thanks that i was not born a us citizen !

Amen. I'm glad you weren't either. And I thank you for not (presumably) applying for US immigration, as you would have hogged a spot better utilized by someone trying to get ahead in life. To his benefit -- and that of the US.

Great post. I particularly like the last part. I certainly understand the desire to minimize taxes, but as one who pays his fair share, I do not understand the glee some take in "beating the system" and not paying the taxes they owe, knowing that as a result someone (a working person, most likely) will have to make up the difference. To the extent this law insures people pay their fair share, no problems at all.

[el jefe]

From yesterday's NY Times:

Voluntarily Disclose Your Offshore Accounts, or Else

[chops]

Easy solution. Don't use banks.

Give your Thai lady a pile of cash and have her use offshore banks. Is that possible?? Dunno.

If you were rich enough, you can buy anything like citizenship in some African country.

[migrant]

I work with a lot of clients that have offshore accounts (I'm a CPA) and as has been reported, the IRS is looking for the big boys.

That being said I would still report your accounts, and any earnings. The penalties are stiff and the IRS does like to make examples from time to time.

I probably report 30+ clients with foreign accounts each year and, so far, none have been audited. Not a lot of clients, but FYI.

Most of mine are banking in areas such as Nevis, and Cook Islands, well known for asset protection, and the average account was probably $750,000 usd so doubt if the 800,000 baht accounts will get much interest.

But after 30+ years of dealing with the IRS there is no guarantees!!

[flying]

The cutoff minimum point for reporting Yank bank deposits is $50k (per the Foreign Acct Tax Compliance Act, effective 1 Jan 2013). This limits the burden to Thai banks (how many Yanks here have over $50k?), and thus would easily be accomplished. Furthermore, banks like Bangkok Bank, with a presence in New York, will not jeopardize this business link by refusing to report those with over $50k.

Yes that is the cutoff for the banks to report. It is just a follow up of the stricter law placed on US citizens living abroad.

It is already in place for citizens that if you ever in the past year had an aggregate value exceeded 10k total for all accounts abroad combined then you must report it.

The US is just starting to look under every stone for more blood to suck. It will get worse as they continue to live beyond their means.

Of course all of these new laws will be under the guise of the Patriot Act <sic> The claim being they are looking for $$ that may be being funneled to terrorist.

The US is the equivalent of the Hotel California.

You can check out any time you like..but you can never leave

Who Must File an FBAR

United States persons are required to file an FBAR if:

1. The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and

2. The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.

United States person means United States citizens; United States residents; entities, including but not limited to, corporations, partnerships, or limited liability companies created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.

Edited August 28, 2011 by flying

[robblok]

Why do Americans, who live outside of the USA pay taxes in the USA ?

[Soutpeel]

Why do Americans, who live outside of the USA pay taxes in the USA ?

Because they insisted that they didnt want to be a British colony anymore....

If they had stayed a colony, they would have had the benefit's enjoyed by many commonwealth countries today in that citizens do not have to pay tax in their home countries if they are no longer resident in said country....

So its their own fault...

[partington]

Why do Americans, who live outside of the USA pay taxes in the USA ?

Because they insisted that they didnt want to be a British colony anymore....

If they had stayed a colony, they would have had the benefit's enjoyed by many commonwealth countries today in that citizens do not have to pay tax in their home countries if they are no longer resident in said country....

So its their own fault...

Not just many commonwealth countries, but all (and almost all other countries in the world in addition) do not levy tax on citizens living outside their country of citizenship on money received outside that country.

I think , but cannot prove with reference, that the US is actually the ONLY country that does this.

Bit of an obsession of mine, as they neglect to tell visitors that a stay of longer than 8 years on a green card earns you the privilege of being considered a citizen for tax purposes, in perpetuity, while conferring none of the other rights of citizenship.

Truly amazing.

[KeyserSoze01]

I think , but cannot prove with reference, that the US is actually the ONLY country that does this.

Truly amazing.

Hold all calls as we have a winner.

The US of A taxes their citizens on all income earned anywhere in the world, not just in North America. The IRS does provide a bit a leeway in that the first $92,900 of foreign earned income is not subject to federal income tax, but only if you spend more that 335 days a year outside the continental US.

This is part of the reason that US companies currently hold over two trillion USD in foreign banks that they will not repatriate to the US due to double-taxation. The corporate earnings are taxed by the country where they were earned at local rates and once again the earnings must be reported when transferred to US bank accounts.

http://www.irs.gov/businesses/small/international/article/0,,id=97130,00.html

[el jefe]

Yeah, it must really suck to be an American. I wonder why 3/4 of the world's population wants to move there?!

What you're forgetting is that USA has one of the lowest tax rates on individuals. While it's unfortunate that expats that never set foot in the US and green card holders are required to pay tax on their worldwide income, what the IRS is really looking for are people living in the US who are hiding their millions in overseas accounts. Most of you are complaining about reporting your 800k baht. What's the big deal? If you've got it in a Thai bank and are earning 2% interest, the US tax is less than $100 for most of you. And there is a legal way around it. Give up your citizenship. Hmmm, I wonder why so few people do that?

As for the above comment about double taxation of US corporate profits when they are repatriated, yes, that is a problem. The laws regarding taxation of huge multi-national corporations are way beyond the scope of TV (and really has nothing to do with this thread). But if the US govt comes up with a plan whereby those companies can repatriate some of that money at a reduced tax rate it will solve many of the current economic problems in the US. Most of Europe doesn't have a plan or a clue.

Ooops. How do I get those worms back in the can?

[flying]

And there is a legal way around it. Give up your citizenship. Hmmm, I wonder why so few people do that?

I am not saying giving up a citizenship is a good idea but....

Here are a couple of possible reasons/answers to your question

1) You are not allowed to give up your US citizenship unless you have another already in place.

(you cannot be a man without a country)

2) If you decide to do so you will be hit with another nice tax called an exit tax

As of June 17th 2008 if you are wealthy enough, giving up your US citizenship proves to be a rather expensive step.

$626,000 for 2009 is the threshold

As I said before the USA is like the Hotel California

You can check-out any time you like, But you can never leave

Free of charge that is

[robblok]

Yeah, it must really suck to be an American. I wonder why 3/4 of the world's population wants to move there?!

What you're forgetting is that USA has one of the lowest tax rates on individuals. While it's unfortunate that expats that never set foot in the US and green card holders are required to pay tax on their worldwide income, what the IRS is really looking for are people living in the US who are hiding their millions in overseas accounts. Most of you are complaining about reporting your 800k baht. What's the big deal? If you've got it in a Thai bank and are earning 2% interest, the US tax is less than $100 for most of you. And there is a legal way around it. Give up your citizenship. Hmmm, I wonder why so few people do that?

As for the above comment about double taxation of US corporate profits when they are repatriated, yes, that is a problem. The laws regarding taxation of huge multi-national corporations are way beyond the scope of TV (and really has nothing to do with this thread). But if the US govt comes up with a plan whereby those companies can repatriate some of that money at a reduced tax rate it will solve many of the current economic problems in the US. Most of Europe doesn't have a plan or a clue.

Ooops. How do I get those worms back in the can?

Funny guy, you might be right that it was done to discourage people hiding their money offshore but for people truly living somewhere else it gives them double taxation. Does not sound fair to me. The whole world except the US seems to think this way. We cant all be wrong.

As your other comment about Europe and the US. I have lots more faith in Europe then in the US to be honest. The debt of the US is so high its crazy. If the Chinese ever decide on an other world currency America is fuc_ked. If oil will be traded in euro's instead of $ US is fuc_ked too.

Im not saying its all doom and gloom im saying the US has some serious problems.