Living In The Philippines Forum

It’s Your Money => Taxes => Topic started by: Art, just a re(tired) Fil-Am on June 06, 2014, 11:38:55 AM

Title: Who's FATCA anyway? Should anyone be afraid of FATCA?
Post by: Art, just a re(tired) Fil-Am on June 06, 2014, 11:38:55 AM
http://research.bworldonline.com/publications/story.php?id=394&title=Who%E2%80%99s-afraid-of-FATCA (http://research.bworldonline.com/publications/story.php?id=394&title=Who%E2%80%99s-afraid-of-FATCA)

Ready or not, Philippine banks registered with the US Internal Revenue Service (IRS) as “foreign financial institutions” (FFIs) under the Foreign Account Tax Compliance Act (FATCA). A few did as early as January but questions over how the US law would affect their operations made most hesitate, even fearful. Some signed up in the next three months but majority did so on May 5 when it became apparent the IRS would no longer give another deadline extension and was set implementing the FATCA more than four years after it was passed.
Many banks’ questions are still unanswered but what is clear is they don’t want to be branded as non-compliant or pay the 30% withholding tax on their US-sourced income.

Now, they need to confront issues on bank secrecy while think of how procedures should be changed --"both at their front end and back end --" to accommodate the requirements of FATCA
Title: Re: Who's FATCA anyway? Should anyone be afraid of FATCA?
Post by: Tally J on June 07, 2014, 09:13:36 AM
Beware! This law also affects certain foreign resident US tax payers.  At a minimum you may be subject to filing two new forms - Form 8938, Statement of Specified Foreign Financial Assets and FinCen Form 14, Report of Foreign Bank and Financial Accounts (FBAR).  I am currently trying to assess the impact of this on me, but as with all IRS information it is slow going.
Title: Re: Who's FATCA anyway? Should anyone be afraid of FATCA?
Post by: Lee2 on July 02, 2014, 05:58:42 AM
If a US person never had over US $10,000 or its equivalent in any and all foreign banks, then IMO there is nothing to fear from any and all accounts being reported to the US, as there was never a requirement for US persons in the past to report foreign accounts to the US unless all your foreign accounts equaled over US $10,000 and there still is no requirement that I know of as long as all your foreign accounts stay below a total of US $10,000 in total.

What all this is now, is that the US is insisting on all banks reporting all accounts, thus then having the ability to check them against FBAR reports of the past and FinCEN reports for 2013.

 Who Must File an FBAR  http://tinyurl.com/m9ds7d8 (http://tinyurl.com/m9ds7d8)
United States persons are required to file an FBAR if:
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
The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.
United States person includes U.S. citizens; U.S. 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.

Also the withholding can be waved by those who are in good tax standing.
Title: Re: Who's FATCA anyway? Should anyone be afraid of FATCA?
Post by: Lee2 on July 02, 2014, 07:25:01 AM
I really do not know what if anything they might do to you for failure to file during those years. Below is what I find when I look it up.

http://www.irs.gov/irm/part4/irm_04-026-016.html (http://www.irs.gov/irm/part4/irm_04-026-016.html)

I guess it might be best you talk to an accountant or lawyer who handles those types of matters to get the correct answer.
Title: Re: Who's FATCA anyway? Should anyone be afraid of FATCA?
Post by: Gray Wolf on July 02, 2014, 10:06:55 PM
If you're lucky penalties might only be a warning letter.  See highlights in red below:

4.26.16.4  (07-01-2008)
FBAR Penalties

    The IRS has been delegated authority to assess FBAR civil penalties.

    There are civil penalties for negligence, pattern of negligence, non-willful, and willful violations.

    Whenever there is an FBAR violation, the examiner will either issue the FBAR warning letter, Letter 3800,or determine a penalty.  See IRM 4.26.17 for the Letter 3800procedures .

    Penalties should be asserted only to promote compliance with the FBAR reporting and recordkeeping requirements. In exercising their discretion, examiners should consider whether the issuance of a warning letter and the securing of delinquent FBARs, rather than the assertion of a penalty, will achieve the desired result of improving compliance in the future.

    FBAR civil penalties have varying upper limits, but no floor. The examiner has discretion in determining the amount of the penalty, if any. Examiner discretion is necessary because the total amount of penalties that can be applied under the statute can greatly exceed an amount that would be appropriate in view of the violation.

    Examiners are expected to exercise discretion, taking into account the facts and circumstances of each case, in determining whether penalties should be asserted and the total amount of penalties to be asserted. Because FBAR penalties do not have a set amount, IRS has developed penalty mitigation guidelines to assist examiners in the exercise of their discretion in applying these penalties. The mitigation guidelines are only intended as an aid for the examiner in determining an appropriate penalty amount. The examiner must still consider whether a warning letter or a penalty amount that is less than what would be called for under the mitigation guidelines would be more appropriate given the facts and circumstances of a particular case. For example, if an individual failed to report the existence of five small foreign accounts with a combined balance of $20,000 for all five accounts but the income from each account was properly reported and the taxpayer made no effort to conceal the existence of the account, it may be more appropriate to issue a warning letter rather than assert penalties under the mitigation guidelines.

    FBAR penalties are determined per account, not per unfiled FBAR, for each person required to file. Penalties apply for each year of each violation. As noted above, however, examiners are expected to exercise discretion, taking into account the facts and circumstances of each case, in determining whether penalties should be asserted and the total amount of penalties to be asserted.

    There may be multiple FBAR civil penalty assessments arising from one account. FBAR civil penalties can apply to each person with a financial interest in, or signature or other authority over, the foreign financial account. Thus there may be multiple penalty assessments if there is more than one account owner or if a person other than the account owner has signature or other authority over the foreign account. Each person can be liable for the full amount of the penalty.

Title: Re: Who's FATCA anyway? Should anyone be afraid of FATCA?
Post by: Steve & Myrlita on July 03, 2014, 11:40:47 AM
In other words....Report it or we take it.....Don't like it? Too bad.....It doesn't matter.....We are the IRS and you now work for us...... :D Couldn't resist that one. God Bless.....
Title: Re: Who's FATCA anyway? Should anyone be afraid of FATCA?
Post by: Gray Wolf on July 04, 2014, 03:11:48 AM
That just about sums it up, brother Steve!   :)
Title: Re: Who's FATCA anyway? Should anyone be afraid of FATCA?
Post by: swandivr on September 01, 2014, 11:18:03 AM
Ok.Late to the party.

What is all this gibberish anyway?Does this pertain to any business interests we might have in the PI?The IRS is just wanting to make sure everyone "pays up" (excluding Exxon GE Westinghouse etc.)? This takes effect in 2015? I have an inheritance coming in the next few months.I want to deposit it in my bank here,but I sure as heck don't want it confiscated.

Anybody?
Title: Re: Who's FATCA anyway? Should anyone be afraid of FATCA?
Post by: coleman2347 on September 01, 2014, 01:14:02 PM
The way I see it, is if your married to a Philippine citizen and you trust them (why would you get married if you didn't) then just put everything in their name.  Problem solved..If your not, Im sure there are ways....think, for the most part things here are not on computer, most of the stuff I run into here is kept in a file drawer somewhere..
Title: Re: Who's FATCA anyway? Should anyone be afraid of FATCA?
Post by: Lee2 on September 01, 2014, 08:14:41 PM
I had filed those reports numerous times over the years when buying or paying off our condos in the Philippines and to date I have had no issues. I believe they look for much larger sums. which IMO would be over $100,000, even though they require reports on $10,000. IMHO if the money comes from legitimate sources, then I feel there is nothing to worry about, in relations to filing the proper forms. I feel we would have to worry if we did not file the required form since the govt could then confiscate our money or possibly toss us into jail. Why take the chance is my opinion, file the report and not have to look over your shoulder the rest of your life waiting for the hammer to possibly fall.

I suspect the govt could also confiscate your social security to cover the taxes or fees for violations that they feel was due them. I know of an expat in the Philippines who had half his ss taken to pay back child support that was from way in the past, so if they could do it for that, I am sure they could also do it for a fine or back money owned them.
Title: Re: Who's FATCA anyway? Should anyone be afraid of FATCA?
Post by: bigrod on September 01, 2014, 10:40:38 PM
Lee,

Child support/alimony deductions can go up to 65% of your social security.  Deductions for back taxes, student loans, and other federal agency garnishments are capped at 15%.

Chuck








Title: Re: Who's FATCA anyway? Should anyone be afraid of FATCA?
Post by: Art, just a re(tired) Fil-Am on September 01, 2014, 10:50:53 PM
Chuck,
I have none of those you listed! Sorry for those who do! Ouch! :)
Child support
Alimony
Back taxes
Student loan
Garnishments
Title: Re: Who's FATCA anyway? Should anyone be afraid of FATCA?
Post by: Lee2 on September 02, 2014, 12:22:31 AM
Lee,

Child support/alimony deductions can go up to 65% of your social security.  Deductions for back taxes, student loans, and other federal agency garnishments are capped at 15%.

Chuck


Chuck while I agree with you that those numbers are probably real, failure to declare under that law can mean stiff penalties and the govt somehow always manages to get their money by locking peoples accounts that have accounts in the US, or by putting liens on property they have in the US, or possibly by taking some of their income, to what degree we will never know until it happens, as I do not know anyone where their SS was taken for that but there can always be a first time if it has never happened yet.

Quote
A penalty for failing to file the Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts, commonly known as an “FBAR”). United States citizens, residents and certain other persons must annually report their direct or indirect financial interest in, or signature authority (or other authority that is comparable to signature authority) over, a financial account that is maintained with a financial institution located in a foreign country if, for any calendar year, the aggregate value of all foreign accounts exceeded $10,000 at any time during the year. Generally, the civil penalty for willfully failing to file an FBAR can be as high as the greater of $100,000 or 50 percent of the total balance of the foreign account per violation. See 31 U.S.C. § 5321(a)(5). Non-willful violations that the IRS determines were not due to reasonable cause are subject to a $10,000 penalty per violation.

Beginning with the 2011 tax year, a penalty for failing to file form 8938 reporting the taxpayer’s interest in certain foreign financial assets, including financial accounts, certain foreign securities and interests in foreign entities, as required by I.R.C. §6038D. The penalty for failing to file each one of these information returns is $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return.
There is more at the link. [url]http://tinyurl.com/9oolgde[/url] ([url]http://tinyurl.com/9oolgde[/url])
Title: Re: Who's FATCA anyway? Should anyone be afraid of FATCA?
Post by: trev. on September 02, 2014, 01:30:24 AM
After reading these posts my question is... Say for instance you buy a condo or build a house with legal funds from the U.S. say with money from a retirement fund, IRA or what ever. You paid taxes on the withdrawals. So now you sell the condo or house and you have a large amount in the bank. Remember every thing is done legit. I am just curious on how the government would look at that. The Ph. government and the U.S. (IRS).
I imagine one would need to explain where all the money comes from?
Title: Re: Who's FATCA anyway? Should anyone be afraid of FATCA?
Post by: Lee2 on September 02, 2014, 04:40:12 AM
After reading these posts my question is... Say for instance you buy a condo or build a house with legal funds from the U.S. say with money from a retirement fund, IRA or what ever. You paid taxes on the withdrawals. So now you sell the condo or house and you have a large amount in the bank. Remember every thing is done legit. I am just curious on how the government would look at that. The Ph. government and the U.S. (IRS).
I imagine one would need to explain where all the money comes from?

In the Philippines, when you sell a home or condo, they charge you a straight tax on the sale price, it does not matter if you made a profit or lost your butt.
http://real-estate-guide.philsite.net/taxes.htm (http://real-estate-guide.philsite.net/taxes.htm)
Quote
The SELLER pays for the:
Capital Gains Tax equivalent to 6% of the selling price on the Deed of Sale or the zonal value, whichever is higher. (Withholding Tax if the seller is a corporation)
Unpaid real estate taxes due (if any).
Agent / Broker's commission.

As for the US, if you made a profit then you would supposedly have to declare it but as far as the money, as long as you had proof where it came from and proof of the profit or loss, then you would be covered having it but for exact details on how it would be declared, then possibly a member who sold one could answer that for us?

As for FATCA you would have to declare the money any year that you had $10,000 or over in any account or accounts outside the US and in any currency totaling a value equal to US $10,000 or more.
Title: Re: Who's FATCA anyway? Should anyone be afraid of FATCA?
Post by: suzukig1 on September 02, 2014, 08:43:33 AM
People are confusing FATCA and FBAR.

Limits for money in foreign accounts that require form filing:

FBAR: $10,000

FATCA: $50,000 if living in the U.S.  Much higher if living overseas.
Title: Re: Who's FATCA anyway? Should anyone be afraid of FATCA?
Post by: suzukig1 on September 02, 2014, 08:50:41 AM
The way I see it, is if your married to a Philippine citizen and you trust them (why would you get married if you didn't) then just put everything in their name.  Problem solved..If your not, Im sure there are ways....think, for the most part things here are not on computer, most of the stuff I run into here is kept in a file drawer somewhere..

Most people file joint returns because it usually lowers their taxes.  It would not do any good to put things in your wife's name if you file a joint return.  If you file a joint return your Phl citizen wife is subject to the same IRS rules/laws as a U.S. resident would be; filing all forms, taxed on world wide income, etc.
Title: Re: Who's FATCA anyway? Should anyone be afraid of FATCA?
Post by: bcnorth on September 07, 2015, 09:21:14 AM
“The federal government's campaign to track down money held by U.S. taxpayers in foreign countries . . . (began) July 1, 2014. That is when the main provisions of the Foreign Account Tax Compliance Act, known as Fatca, came into force. The law . . . is pushing tens of thousands of foreign banks and other financial institutions to disclose information about U.S. customers. It will make life more complex and expensive for many U.S. taxpayers with financial ties abroad, affecting everything from retirement savings to investments to divorce settlements.  Fatca is an ambitious effort to root out wealthy U.S. taxpayers hiding money offshore and put an end to tax evasion as a profitable line of business for banks” (June 20th 2014 Wall Street Journal). 
However, if one does not want to go through all of the worry and filing of Fatca, there are other somewhat dubious ways of dealing with the Fatca problem. Suppose a U.S. Citizen living in the Philippines is primarily interested in just filing his/her own tax return and has little or no interest in how tax laws affect banks or large corporations.  Fatca still requires non U.S. owned banks to file the amount of U.S. funds for each and every U. S. citizen account held by an American and the banks can be punished if they don’t follow the American Internal Revenue Service guidelines. If the bank refuses then it will have great difficulty working with any banks in the U.S. Consequently, thousands of banks located worldwide now file with Fatca the amount of funds held by U.S. citizens. However, there are a small number of  banks that refuse to do this. As an example, Canadian Direct Financial, a subsidiary of Edmonton’s Canadian Western Bank refuses to do so but has some restrictions.  It will not hold the funds of an American. If a new client is not an American say a Filipino girlfriend, then she can place funds in Canadian Direct Financial, the online bank, for Canadian Western Bank. Then she can send the funds to her account in a Philippine bank. Then she can provide funds to her American husband/boyfriend in cash or into his Filipino account making sure the bank never obtains his Social Security number. All of the banks in the Philippines supply information on American financial dealings to Fatca but they are unconcerned with Philippine citizen account holders. But suppose an American, without a compliant girlfriend, would like to keep his banking somewhat private and not have his financial affairs exposed to Fatca, what can the person do? One option would be to contact GWS (http://gws-offshore.com/ (http://gws-offshore.com/)) that deals specifically in helping individuals and corporations to ensure their financial dealings are kept confidential. As an example it will set up a very private corporation in the Marshall Islands for less than $1400 U.S. with a small yearly charge. Money could easily be moved into this XYZ corporation and just as easily be moved out. By doing this a person doesn’t have to go through the immense amount of administrative work involved with a Fatca filing. My advice, for whatever it is worth, is to contact whoever does your legal work to determine whether such an activity is questionable or it is downright illegal before proceeding to do so.
Also, following is a report that may be helpful on your foreign income filing: US Taxes Abroad for Dummies (update) - American Citizens ... <https://americansabroad.org/issues/taxation/us-taxes-abroad-dummies/>




Title: Re: Who's FATCA anyway? Should anyone be afraid of FATCA?
Post by: Art, just a re(tired) Fil-Am on September 07, 2015, 09:43:21 AM
"The federal government's campaign to track down money held by U.S. taxpayers in foreign countries" (began) July 1, 2014.
"Fatca is an ambitious effort to root out wealthy U.S. taxpayers hiding money offshore and put an end to tax evasion as a profitable line of business for banks” (June 20th 2014 Wall Street Journal). 
Not too many retirees residing permanently in the Philippines are wealthy U.S. taxpayers hiding money offshore! So what's all the fuss about, unless one is having a home built and needs large sums of money or buys a new luxury vehicle or needs large sums of money for medical bills and or funeral costs to bury a loved one, then maybe one will need to file with Facta or to whomever?  ::) ??? :o
Title: Re: Who's FATCA anyway? Should anyone be afraid of FATCA?
Post by: bcnorth on September 07, 2015, 02:11:26 PM
Art, I quoted the Wall Street Journal that used the term "wealthy" wrongly. I apologize. I have been a dual American/Canadian citizen for more than 30 years and have dutifully filed my income taxes in both countries each year. Tax time always was, and still is unpleasant. Then, it became increasingly complicated. In 2014 I sent in 67 pages of tax materials. My income is simple; a small amount of  Social Security, a small amount of Canada Pension, Canadian university retirement income and a relatively small sum for teaching a single university course on-line.  As you are undoubtedly aware, the U.S. is one of only three countries in the world taxing its citizenry on the basis of their worldwide income. The purpose of Fatca is to enable the government to discover every dollar a citizen receives outside the U.S. and what the citizen is doing with his/her money. Taxes for the top one percent have substantially decreased in recent years and many large corporations such as  General Electric have paid no income  taxes in years. Both Republicans and Democrats have hit middle class family income and lower middle class family income extremely hard. A hard hitting Fatca is meant to rectify a huge loss of government income. Foreign banks refusing to turn over income and outgo of U.S. citizens are continiously threatened. My reading of Fatca is that anything over $10,000 in a foreign bank is examined very, very carefully. Moreover, it is not just rumor, but is true that once the IRS believes someone is cheating that in every following year the person is examined very closely.
Title: Re: Who's FATCA anyway? Should anyone be afraid of FATCA?
Post by: Art, just a re(tired) Fil-Am on September 07, 2015, 04:56:40 PM
Since retiring, our taxes have been so simple and nothing to fuss about really!
Why would FACTA, IRS or whomever be interested as to what I do with my
meager pensions compared to those who are still working and earning huge
salaries in 5 or 6 figures, where $10,000 is just chump change?     
Title: Re: Who's FATCA anyway? Should anyone be afraid of FATCA?
Post by: BudM on September 07, 2015, 11:50:18 PM
Who gives a crap unless you are hiding damn money?  I don't have squat to hide even if I wanted to and so what if the IRS examines close and then gets a wild hair and examines closer from there on out.  For someone who thinks FATCA is such a good idea for catching the people doing the hiding, you didn't waste any time talking about the offshore accounts and giving a link in case you want to keep it private.  Keep it private?  Keep what private?  Yeah, I hope they nail them all.  And nail them good.

If you are just a regular person like most of us on here, even if you have to file it, there is nothing to it but spending a little bit of time.  It think this FATCA subject has been run in to the ground.
Title: Re: Who's FATCA anyway? Should anyone be afraid of FATCA?
Post by: bcnorth on September 08, 2015, 01:28:56 AM
Bud, Like you, I hope the government is able to catch the large tax cheaters. However, a decision was made in 2012 to catch any American citizen living outside the U.S. whether the person purposefully does not file  fifty or a hundred dollars of income or whether the person simply makes a mistake. The IRS doesn't accept  mistake arguments. I believe I made reference to a firm in Hong Kong that discusses how to keep one's income secret. However, it is a law firm that emphatically emphasizes its advice is legal advice.
Title: Re: Who's FATCA anyway? Should anyone be afraid of FATCA?
Post by: hitekcountry on September 08, 2015, 03:54:08 PM
Two points I would make.

First the point that this is aimed at the wealthy and that doesn’t include us, I would remind you that the income tax when it was first introduced was only going to affect the wealthy, the top 1% it was not anything everyone else needed to be concerned about. Yeah well laws often get modified and that one certainly did.

The second point that it’s all about tracking down tax cheats and you say I’m not a tax cheat so why worry?  Yeah as long as that’s the real purpose and nothing changes then we’re good right? Well there are people who know a lot more about this subject then I do that claim the “Tax Cheat” claim is bogus, and that the amount of “tax cheat” money that is out there in no way justifies this huge program.
 
What they claim the real purpose is to have in place the ability to institute capital controls if and when the Gov. or the banking system feel it’s necessary for whatever reason.

http://beforeitsnews.com/economy/2012/06/fbar-8398-fatca-and-capital-controls-the-trail-that-leads-to-the-forced-repatriation-of-your-foreign-assets-2291684.html (http://beforeitsnews.com/economy/2012/06/fbar-8398-fatca-and-capital-controls-the-trail-that-leads-to-the-forced-repatriation-of-your-foreign-assets-2291684.html)