Call Now (800) 681-1295

IRS Crackdown on Offshore Accounts Drawing International Criticism

Table of Contents

    In 2010, the U.S. passed the Foreign Account Tax Compliance Act, or FATCA, in an attempt to collect taxes on Americans using offshore accounts to avoid tax compliance. However, foreign banks have since declared the legislation overly stringent and written extensively to the U.S. Treasury to protest. Reuters recently quoted the Swiss-American Chamber of Commerce as calling FATCA “the neutron bomb of the global economic system” and experts worry that FATCA will negatively influence everything from investment in U.S. Securities to account privacy and corporate borrowing from foreign banks.


    Beginning in 2014, U.S. clients of foreign financial institutions with accounts of $50,000 or more will either have money from that account collected by the IRS or have 30 percent of the proceeds from investment payments withheld from the financial institution itself, with that money instead going to the IRS. The IRS will bill any bank or financial entity that refuses to comply 40 percent of whatever the amount that should have been given to the IRS.

    FATCA may cost foreign banks $100 million to implement. The Economic Times quoted JP Morgan Asset Management Head James Broderick as stating “”it would be easier to just write a cheque to the IRS.”

    However, a repeal of FATCA is unlikely, as the U.S. expects to gain approximately $8 billion in international tax revenue over ten years once the new compliance regulations are in place. Responding to the criticisms, the IRS delayed the implementation of the new regulations until January 1, 2014 while it irons out some of the more controversial aspects of the law. Previously the law was to go into effect in June of 2013.


    While the revenue in question is potentially quite large, it is unclear how many foreign financial institutions will comply with the new regulations. In addition, governments are exempt from FATCA. This means that some banks regulated by its government, such as Swiss Cantonal banks, may be exempt from compliance. In addition, FATCA only covers U.S. investments, so it may be possible for U.S. taxpayers to still avoid tax compliance through foreign investments.


    FATCA is an extension of an ongoing effort by the IRS to reduce the number of offshore accounts used to avoid tax compliance. If you have questions regarding how the new law may affect your individual or business taxes, speak to a tax lawyer knowledgeable about new FATCA regulations.


    Tax Help Videos

    Representing Clients from U.S. and International Locations Regarding Federal and California Tax Issues

    tax lawyers

    Main Office

    Orange County
    2601 Main St. Penthouse Suite
    Irvine, CA 92614
    (949) 681-3502

    Our headquarters is located in Irvine, CA. Our beautiful 19,700 office space is staffed full-time and always available for our clients to meet with our highly qualified and experienced staff of Attorneys, Certified Public Accountants and Enrolled Agents. We also offer virtual consultations and can travel to meet with clients in one of our satellite offices.

    Outside of our 4 hour initial consultation option, we do not charge travel time or travel expenses when traveling to one of our Satellite offices, or surrounding business districts, where it is necessary to meet personally with taxing authority personnel, make court appearances, or any in person meeting deemed necessary for the effective representation of a client. To make this as flexible, efficient, and convenient as possible, David W. Klasing is an Instrument Rated Private Pilot and Utilizes the Firms Cirrus SR22 to service client’s in California and in the Southwest by air. Offices outside these areas are serviced via commercial jet airlines. None of these costs are charged to our clients.

    Satellite Offices

    (310) 492-5583
    (760) 338-7035
    (916) 290-6625
    (415) 287-6568
    (909) 991-7557
    (619) 780-2538
    (661) 432-1480
    (818) 935-6098
    (805) 200-4053
    (510) 764-1020
    (408) 643-0573
    (760) 338-7035
    (602) 975-0296
    New Mexico
    (505) 206-5308
    New York
    (332) 224-8515
    (512) 828-6646
    Washington, DC
    (202) 918-9329
    (702) 997-6465
    (786) 999-8406
    (385) 501-5934