Rich people in a panic over new IRS rules
Sep 9th 2009 12:20PM
Updated Dec 4th 2009 3:17PM
Wealthy Americans are ringing up their financial advisors and attorneys in a panic ahead of a looming September 23 IRS deadline to correctly report assets being held offshore.
A United States citizen or resident must file a Report of Foreign Bank and Financial Accounts (FBAR) if the aggregate value of the accounts in a foreign country exceeds $10,000 at any time during the calendar year. This includes any bank, securities, securities derivatives, along with any savings, checking, deposit, or other account maintained with a financial institution, according to the law firm Nixon Peabody.
"The FBAR is a tool to help the United States government identify persons who may be using foreign financial accounts to circumvent United States law," according to the IRS web site. "Investigators use FBARs to help identify or trace funds used for illicit purposes or to identify unreported income maintained or generated abroad."
There is widespread fear among U.S. overseas residents that they will run afoul of the new IRS regulations.
According to the Financial Times, lawyers and tax advisers from London to Hong Kong have had a surge in inquiries from expatriate Americans. Inquiries rose ten-fold to one advisor, following the settlement of the U.S. government's case against Swiss banking giant UBS AG (UBS). Earlier this year, the company agreed to pay $780 million in fines for helping wealthy Americans hide $20 billion in assets overseas.
Apparently, many taxpayers have only recently become aware that they have to comply with FBAR. Taxpayers may escape serious IRS penalties if they come forward to the agency as long as they are not already under investigation. An amnesty is available.
Look for the IRS to crack down on offshore tax havens as the government tries to recoup the billions hidden in these countries. "A recent GAO report found that 83 of the 100 largest publicly traded U.S. corporations reported having subsidiaries in these countries that don't tax corporate profits," according to Citizens for Tax Justice.