I've just received an email from Democrats Abroad with information on the extension of IRS deadlines and the new Foreign Account Tax Compliance Act which will come into effect in a couple of years.
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IRS Deadlines have been extended.
We are reaching out to you today in an effort to alert our global membership about IRS regulations that directly affect the American community residing outside of the United States. While Democrats Abroad is not offering you legal advice on filing the forms described below, we do want to provide you with the necessary information to make informed decisions about these changes. Should you have questions that you are not able to find answers to in the links provided, we would encourage you to seek professional accounting advice. If by any chance the links do not open directly when clicked you can find them listed at the bottom of this message under the signature - copy and paste them into your browser.
We note from recent articles that have run in newspapers around the world that there is a growing concern about the impact of new US income tax regulations on US citizens who live anywhere abroad.
In addition to filing one’s 1040 income tax return, every US citizen has also the obligation to file with the Treasury Department TD F 90-22.1 i.e. the Foreign Bank Account and Financial Records (FBAR) form of which many of us have only recently become aware. It has a non-willful penalty of up to $10,000 for not filing. The FBAR must be filed every year if one has assets or deposits in foreign accounts (i.e., checking, savings, stocks, pension, etc.) that in the aggregate are over $10,000.
The IRS advises those who have filed their 1040s but did not file their FBARs, that they should file the delinquent FBAR reports (back to 2003) (send to Department of Treasury, Post Office Box 32621, Detroit, MI 48232-0621) and attach a statement explaining why the reports are filed late. The IRS has stated they will not impose a penalty for the failure to file the delinquent FBARs if there are no underreported tax liabilities and the FBARs are filed by the new deadline of September 9, 2011 (Q #17). FBARs for this year 2010 were due on June 30, 2011 and had to be filed by that date.
US citizens who have not previously been filing a 1040 income tax return may want to take advantage of the IRS’ voluntary disclosure program (announced in February 2011) which is designed to bring US taxpayers into the US tax system and provide them with a mechanism for resolving their US tax issues. The new IRS initiative applies to calendar years 2003 through 2010 and is available now by extension to September 9, 2011. Another 90 day extension if afforded upon request. The voluntary disclosure program is designed to eliminate the risk of criminal prosecution and provides for lesser civil penalties than would apply if the non-compliance came to the IRS' attention through other means. Seek professional accounting advice as soon as possible to discuss your alternatives as Democrats Abroad does not provide tax advice.
Finally, starting in 2014 (moved from 2013), foreign financial institutions will be required by the US government under the Foreign Account Tax Compliance Act (FATCA) to report information regarding accounts of US citizens to the IRS. This law requires foreign financial institutions (FFI) like your local bank, stock brokers, hedge funds, pension funds, insurance companies, trusts, etc. - to report directly to the IRS all their clients who are US persons. The penalties for the institutions that do not cooperate are steep. There is no clear idea of what foreign banking institutions will do with their US clients.
FATCA also requires US citizens who have foreign financial assets in excess of $50,000 to report those assets on a new draft version of Form 8938 to be filed with the 1040 tax return starting fiscal year 2011.
We have been in touch with Congresswoman Carolyn Maloney’s (NY-14) office as she is the Co-Chair of the Americans Abroad Caucus in the US House of Representatives about our concerns. She has sent several letters over the past 3 years expressing her concerns on these important issues and how they affect Americans living outside of the U.S. She has asked Treasury Secretary Geithner to provide to her “in detail what specific steps the Treasury Department will take to ensure that current U.S. banking laws and regulations do not prevent Americans abroad from accessing the same banking services available to all Americans.”
Should you want to read more about what other Americans Abroad organizations are saying about FATCA, please visit American Citizens Abroad (ACA) which is based in Geneva.
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(Apologies, I couldn't copy the links within the email).
Use the following link and have a look at the draft form 8938 - we'll be required to provide bank account details directly to IRS, as well as details of other assets (not sure exactly what this will include).
http://www.irs.gov/businesses/corporations/article/0,,id=236667,00.html
