April 24, 2012
Last week, the Internal Revenue Service (IRS) extended its reach and tightened its grip on every cent Americans earn or try to preserve anywhere in the world. The final regulations of the Foreign Account Tax Compliance Act (FATCA) were announced.
Enacted in March 2010 as part of the Hiring Incentives to Restore Employment (HIRE) Act, FATCA seeks to have foreign financial institutions report on accounts held by any American living in the United States or abroad. You can take your money and run, but you cannot hide from an IRS that functions as a taxation clearing house to the world. If you have never lived in the United States but have American parents, then you will still fall under the jurisdiction of the IRS and the Department of the Treasury. Only the costly and cumbersome act of renouncing American citizenship can provide protection.
Americans are already required by tax law to disclose any foreign accounts that total more than $10,000; that controversial requirement is called the Report of Foreign Bank and Financial Accounts, or FBAR. (FATCA broadens the sort of assets that must be reported and raises the reporting requirement to $50,000 for an individual or $100,000 for a couple.) But using FBAR to rake in money that has fled to more friendly environs relies too much on the voluntary compliance of foreign-account holders.