Banks Chase US Expats With FATCA Letters

US expats worldwide are receiving letters from their banks demanding they prove their identity and disclose their tax details.

This chasing down of the 6 million or so US expats was triggered by the start of Foreign Account Tax Compliance Act (FATCA) reporting earlier this year.

After five years of huffing, puffing and false starts, the Internal Revenue Service (IRS) has finally got their FATCA act in some sort of order and is eagerly awaiting the first batches of data from foreign banks.

FATCA obliges foreign financial institutions to tell the IRS about any accounts controlled by American tax resident customers with a balance of more than $50,000.

The threshold is more generous for expats – $200,000.

Penalties hiked

Banks are targetting their American customers after a surge of penalty action against Swiss banks in recent years and others do not want to follow their lead.

The IRS offers American taxpayers an offshore voluntary disclosure facility. This allows Americans to own up to hiding the cash and assets overseas in return for reduced penalties of 27.5% of tax due.

However, if the bank where the US expat has their account is blacklisted because of legal action, the penalty is hiked up to 50%.

The list includes some big names:

  • UBS
  • Credit Suisse
  • Wegelin & Co
  • Liechtensteinische Landesbank AG
  • Zurcher Kantonalbank
  • Swisspartners
  • CIBC First Caribbean International Bank
  • Stanford International Bank,
  • HSBC India
  • Bank Leumi

To Americans, it must seem the whole financial world has ganged up against them as this list is just the tip of the iceberg.

Tax information network

At least 100 Swiss banks have agreed to hand over account information to the IRS and other tax authorities, like HM Revenue & Customs (HMRC) and those in France, Germany and Austria.

FATCA is a network of international banks, tax authorities and governments. For most governments, the IRS has agreed to pass financial information about their nationals with bank and investing accounts in the US in return for the same information about US nationals in their jurisdictions.

US taxpayers do not have to take any action other than declare their offshore assets on their annual tax returns.

The IRS then checks this against data held on file from overseas to sniff out taxpayers who might be misdeclaring their true earnings in order to avoid tax.

Download the latest FATCA list of financial institutions complying with the law

3 thoughts on “Banks Chase US Expats With FATCA Letters”

  1. Where do you get these numbers? As far as I know, any account worth 10000$ is reportable by FATCA, regardless of where the US person resides.

  2. This article is seriously flawed and could cost readers lots of money in IRS fines if they relied on it.

    U.S. taxpayers normally have to do the following things regarding foreign bank accounts:

    1) Include interest received from foreign accounts on schedule B of their tax form, listing accounts and interest received.(due 15 June with tax return for overseas filers)

    2) If they have more than $10,000 in their combined foreign accounts at any time during the year, they are supposed to fill in an FBAR (due 30 June). This requirement precedes FATCA.

    3) FATCA added the very similar form 8938. If U.S. residents have more than $50,000 in foreign accounts at the end of the year or $75,000 at any time of the year, they need to file this form. If U.S. taxpayers residing overseas have over $200,000 in foreign accounts at the end of the year or more than $300,000 at any time during the tax year, they need to fill in a form 8938 (due 15 June).

    I would encourage anyone affected by this, of course, to go directly to the IRS instructions.

    There are massive fines for not filing FBARs and 8938 when required, even if you don’t owe the IRS a penny.

    The article also is not accurate about what gets reported under FATCA,

  3. Hwlp mw plese. I am a retiree who lives abroad. I do not work. I live on my Pensions from CALPERS and a small bit os Social Security. I tried to set up an account, was notified that therre woud be an answer to declining me an account. Please help me


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