The IRS estimates that will collect more than US$165 billion in additional taxes from Americans overseas over the next decade through the new Foreign Account Tax Compliance Act (FATCA) and enforcement of the Foreign Bank Account Reporting (FBAR) requirement. Critics question both the IRS’s focus and its math.
“The perspective from the IRS is that they are uncovering wealthy tax evaders when in reality they are destroying average, hardworking people’s lives, many who have simply made errors of oversight,” American Citizens Abroad (ACA) executive director Marylouise Serrato says.
Uncle Sam will spend billions on new compliance and enforcement procedures, including hiring 600 new overseas examiners, and force banks across the globe to share records with the US government.
“If the foreign banking community states that compliance will cost them many billions, there must be a heavy cost and administrative burden on the IRS side as well,” ACA director Jackie Bugnion says. “FATCA is described by many as an administrative monster which creates such an enormous haystack that no needle will be found.”
Aside from the potential time and money to find a fraction of the $800 billion given to the wealthiest 2% of Americans through extension of their George W Bush era tax cuts, numerous US citizens and money managers believe the new requirements are an invasion of privacy, the financial equivalent of full body scanners used in airports, according to one adviser based in China who requested anonymity.
Come clean – or else
Before the government hunts for undeclared overseas holdings, Americans have one last chance to “come clean” – , in the words of IRS Commissioner Doug Shulman – under its voluntary disclosure plan, which features fines and penalties including partial confiscation of hidden assets