If you are one of the millions of expat Americans filing taxes in 2015, expect more complications, given two announcements recently made by the IRS.
The Foreign Account Tax Compliance Act has gone live with its International Data Exchange Service sending its first reports on Americans’ international financial accounts to the IRS.
The data exchange links tax authorities in 110 countries and more than 145,000 financial institutions with the IRS to ensure that individuals and institutions are compliant with FATCA.
FATCA is the controversial law that forces international financial institutions to basically become IRS agents if they decide to continue to have American clients. Banks must comply with IRS rules under FATCA, which means either reporting account information on their American clients or signing a statement to the IRS that states they have no U.S. clients. Noncompliant banks will see a 30% withholding on any U.S.-dollar wires to their bank. The law has caused many international institutions to simply close any American-held accounts and not take new American clients.
“The opening of the International Data Exchange Service is a milestone in the implementation of FATCA,” said IRS Commissioner John Koskinen. “With it, comes the start of a secure system of automated, standardized information exchanges among government tax authorities. This will enhance our ability to detect hidden accounts and help ensure fairness in the tax system.”
Despite these extra obligations, the IRS has also announced that it will be closing the last of its overseas taxpayer assistance centers due to budget cuts, saying the closures will save US$4 million. IRS funding and staffing has been in decline for the past several years, dropping by US$1.2 billion and around 11,000 employees since 2010.
The union representing the IRS employees disputed the alleged savings, saying that less manpower will hinder its ability to enforce tax code and will cost the Treasury in the long-term.
Following workforce reductions, IRS Commissioner John Koskinen has warned that refund checks may be delayed for millions of Americans this year
by Matt Chilliak – Live and invest overseas.