Freaked out wrt FATCA

Has anyone been denied banking services in the UK because you are a US citizen and the new FATCA reporting regulations? Here's a letter I sent to my senators about it.
Maybe you should do the same

Dear xxxxxxx

I'm writing to you about my concerns regarding the Foreign Account Tax Compliance Act (FATCA) and how it will affect the 5 million US citizens resident abroad.

I have recently been making provisions to move to the UK to look after my 86 year old mother as her health is beginning to fail. As part of that planning I have researched my IRS and the HMRC (the UK equivalent) tax reporting requirements. The regulations are complicated, and if any area of US taxation needs simplification it is the international aspects, however, regulations like FBAR and PFIC, while onerous, do not actively hinder daily life for the US expatriate as FATCA will.

FATCA will impose reporting and tax with holding regulations on Foreign Financial Institutions (FFI) with US clients that will probably result in the denial of local banking services to US expatriates. Combine that with the refusal of US banks to provide accounts for US citizens living abroad and the non-resident is left in a denial of banking service "Catch-22" situation.

There must be a way to make FATCA a more precise tool for preventing tax evasion rather than it's current sledge hammer incarnation that assumes all US citizens with foreign accounts are trying to evade their tax responsibilities. One change I would like to see is the exemption of FFI's from the reporting requirements with respect to their US clients who can show they they are a bona fide resident of a foreign country. The US citizen would still be required to report foreign accounts above some dollar amount to the IRS, but the local bank would have no reason to deny them banking services.

Five million potential voters would certainly appreciate some action and understanding on this matter.

What banking services do you mean?

In the past couple of months, I've opened a current account with HSBC (already have another current account and another savings account with them) and a current account and a savings account with Lloyds.

No problems.

What banking services do you mean?

In the past couple of months, I've opened a current account with HSBC (already have another current account and another savings account with them) and a current account and a savings account with Lloyds.

No problems.

Well if the the value of the account exceeds $50k the bank has to report it's details to the IRS and you have to submit extra forms over and above those required by FBAR. For that reason some foreign banks have been closing the accounts of US citizens and refusing to open new ones. Just wondered if that's happening in the UK

Nope, I think it's the aggregate of the accounts, like the $10k FBAR limit. But now you mention it how would different banks know the balance of a customers accounts unless they talked to one another......

There's lots of talk about this in the banking and finance industries, but it's not been fully implemented yet. The regulations right now require foreign financial institutions to find out if their customer is a US citizen and then to report info to the IRS on accounts over $50k. If they can't comply with FATVCA then they have to close the account....seems like a US over reach to me.

Nope, I think it's the aggregate of the accounts, like the $10k FBAR limit. But now you mention it how would different banks know the balance of a customers accounts unless they talked to one another......

I was thinking that, too.

Apparently the new provisions will come into effect after December 31, 2012... so a couple more years to go.

So far, the representatives at my (current account) bank claim to know of no immediate actions. I do seem to remember a post on here about 8 to 10 months ago where someone was denied opening a shares account by a firm in the U.K. due to ‘U.S. regulations’. Ultimately, it will be the decision of each individual institution, and I’m not sure if it will be only those accounts above $50,000 (constantly varying exchange equivalent) or any account, due to the costly reporting penalties if the bank (or the account holder) makes an error. I would imagine some will just not want to be bothered, irrespective of a set figure. Hence, they’ll not want any U.S. Persons on their books. Many accounts have been closed in Switzerland, yet others remain open. The press is certainly reporting that some accounts ‘owned’ by U.S. Persons have been closed in the U.K.

Well if the the value of the account exceeds $50k the bank has to report it's details to the IRS and you have to submit extra forms over and above those required by FBAR.

It will be Form 8938, to be filed with your 1040. Yes, it’s an aggregate figure of all accounts for the taxpayer. It's an aggregate of all accounts held by that institution for the bank, which gets very interesting if you look at the structure of Lloyds Bank, for example.

If you have a look at the (U.S.) Treasuries Green Book for 2010 (proposals by the current Administration), you’ll find about 10 pages worth of proposals regarding the reporting of Foreign Accounts. The reason given for the implementation of each proposal is ‘potential tax evasion by U.S. Persons with foreign accounts’. Don’t be surprised, in the current legislative climate, to see some more ‘Hero’ moves by headline grabbing Senators like Sen. Chuck Grassley (R-Iowa) and his caps on housing deductions.

Nightdragon, I hope you’re right about the implementation date. For a while it was unclear. I seem to remember that some reporting requirements (Trust accounts?) were to come into effect in March of this year. If it’s 2012, that means I’ve got a couple more years to spend all my savings. My wife’s going to love this. I can see the list now!

I also posted something about this over at Bogleheads.org and got some good replies. The IRS has had lots of comments from the banking community about FATCA.....which mostly criticize it in it's current form as it's completely impractical for the banks to implement. One counter proposal is to have it only apply to accounts/banks/countries where there is a substantial risk of tax evasion. Let's hope some sense descends on Treasury and the IRS in how this is implemented so regular US expats can buy houses, invest and spend money abroad without the presumption that we are tax frauds.

Let's hope some sense descends on Treasury and the IRS in how this is implemented so regular US expats can buy houses, invest and spend money abroad without the presumption that we are tax frauds.

If this were to go through as proposed, I'll just be happy to have an account that I can pay the gas bill from, or somewhere for those Social Security payments to be deposited. My worst nightmare is a very few banks in the U.K. that will accept U.S. Persons, with high charges for a current account (to cover their costs) and no interest on any savings on deposit. They would certainly have a captured client base with few alternatives. But, I'm sure they wouldn't consider overcharging to make any additional profits, would they?