If you’re an American citizen and own a Swiss bank account, there’s a good chance you’ll be receiving a letter from the Swiss bank politely asking you to take your business elsewhere. A pending U.S. regulation, known as the Foreign Account Tax Compliance Act, or Fatca, requires foreign banks to identify Americans among their clients and to provide their financial information to the Internal Revenue Service. A devastating penalty equivalent to 30% of a bank’s U.S. income could be assessed if even one person is overlooked. Swiss banks are particularly on edge, as the U.S. has alleged that 11 Swiss banks have helped Americans avoid paying taxes. As a result they have begun ushering American clients out or limiting the range of products offered to them. The administrative cost of complying with the law, given the relatively small number and size of U.S. accounts, just isn’t worth it. While the impact can already be felt in Switzerland, banks world-wide are also concerned about the complexity of the new rules, and the difficulties and costs involved with Fatca, whose full enactment is viewed as inevitable.
Unreported Income
Got Unreported Foreign Assets? Get Out of Jail Free
The FBAR: Who Should File? Do you have income overseas you forgot to report? Did Grandpa leave you his foreign bank account when he passed away? If you have foreign bank accounts holding more than $10,000 in the aggregate anytime during the year, you are required to file an FBAR (Report of Foreign Bank Accounts) by June 30th of the following year. It doesn’t matter whether the foreign accounts generate income or not; just owning them, or having signature authority, requires you to file.
What’s the Big Deal? Failure to file can result in serious consequences. The sanctions for not completing the FBAR include numerous severe civil penalties and potential prosecution followed by a term in federal prison. [Read more…] about Got Unreported Foreign Assets? Get Out of Jail Free
Unreported Income Disclosed to IRS in Divorce Case
Patricia Spence V.S. Walter Guy Chalow
Patricia, the plaintiff, and Walter, the defendant, were divorced in January 1995, with two children. The PSA (property settlement agreement) incorporated into their final judgment a child support obligation upon the defendant of $150 week. The PSA noted that this amount was not “based on the child support guidelines because both parties are self-employed”(Walter was a contractor; Patricia, a “credit searcher”) their incomes fluctuate and cannot be precisely determined.” The court determined that the defendant’s annual income was $153,199 and set a child support obligation of $267 per week.
[Read more…] about Unreported Income Disclosed to IRS in Divorce Case