Thousands of US expats who use a US address as a staging post for online shopping may be trapped under the new tax laws.
The Foreign Account Tax Compliance Act (FATCA) laws start from January 1, 2013 and are aimed at US residents with investments and earnings abroad.
However, tax experts are warning even non-US residents need to file paperwork with the Internal Revenue Service (IRS) under FATCA to avoid an investigation if they ship goods with US-based couriers.
Anyone with a US address or using a US company as an agent is subject to the FATCA rules, warns Allison Peart, of Ernst & Young Jamaica.
She gave an example of a non-US resident buying goods online with Mailpac – a courier service that lets offshore shoppers send goods around the world via a Miami warehouse.
Mailpac customers, she suggested, should complete a Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding form, known as the W-8BEN, to prove their non-American status.
FATCA requires banks to the IRS about all accounts belonging to US persons that have a balance of at least US$50,000. Failing to report comes with fines and other sanctions, like stopping a bank’s access to the US money markets.
“If you are a US person, wherever in the world you pick up you go, you are still subject to US taxes, and FATCA is here to make sure of that,” said Peart.
“If you have a Mailpac account with a US address or a US telephone number, my advice is you fill out a W8 form to prove that you are not a US person. If you don’t, then question marks are going to arise.
The problem, Peart explained, is you also have to prove you are not a US taxpayer if you ship goods or money through the US, otherwise tax may be due.