Today the meeting at the BCP started early, at 10:15, not because I changed the time, but because the room was full, and the doors were closed. The topic of great interest to US taxpayers, taxes and the new federal requirements imposed by FATCA. I wrote about FATCA May 19 2011, the post brought us the speaker who did todays presentation. Mr. Mopsick read my post and asked if he could speak to at our meeting, I of course said yes.
Mr. Mopsick has years of experience as a Tax attorney both within and outside the IRS and he provided a detailed and clear presentation of the changes FATCA imposes on the ordinary expatriate taxpayer. He did point out our concerns about this seemingly draconian law are not shared in the US, there people are both unaffected and unconcerned, as US citizens abroad are being presented new hurdles and reporting requirements.
The text below is full of links to the IRS and tax sources for forms and circulars, some are PDF links and will download forms to your computer.
The summary is this, the new law adds to the reporting requirements of US taxpayers with assets out of the US. The original requirement of filing a FBAR Form TDF 90-22.1. This form requires you to report all foreign bank accounts if the total deposited in the sum of all those accounts $10,000 or more at any time in the year.
He pointed out that despite Panamanian laws if you control the check book or assets of a corporation or foundation, even if you are not the owner of the stock, to the IRS it is your asset. Those accounts count for the FBAR. If you are like many people here you have never heard of a FBAR and never filed one. If not, the penalty for failing to file is $10,000, BUT if you have had taxable earnings in the off shore entities you can retroactively complete a pile of FBAR’s and mail them in with a letter saying, oops, sorry I was ignorant and the IRS will not assess a penalty.
If however you had taxable earnings and did not report them under the current amnesty program you can pay the tax bill with interest and a sizable penalty of 27.5% of assets at their highest point of value to avoid criminal charges. I would certainly talk to a Tax Attorney before recommending this action.
If this was not enough to aggravate, there is a new form effective with your 2011 tax return. The form number 8938 requires much more information about your offshore assets. The circular explaining it is at this link .
If you live in Panama this portion might take you off the hook for this form.
“Taxpayers living abroad.
If your tax home is in a foreign country and you meet one of the presence abroad tests described next, you satisfy the reporting threshold if you are not filing a joint return and the total value of in determining the total value of your specified foreign financial assets is more than $200,000 on the last day during the tax year or more than $300,000 at any time during the tax year.
If you are married and file a joint income tax return, you satisfy the reporting threshold only if the total maximum
value of all specified foreign financial assets you or your spouse owns is more than $400,000 on the last day of the tax year or more than $600,000 any time during the tax year. plan.
You satisfy the presence abroad test if you are one of the following.
• A U.S. citizen who has been a bona fide resident of a foreign country or countries for an uninterrupted during the tax year.
• A U.S. citizen or resident who is present in a foreign country or countries at least 330 full days during any period of 12 consecutive months during the tax year being
If you do not qualify as a foreign resident the threshold for reporting is much lower, read the linked document above.
This is a link to the current draft form : Form 8938
Other forms to make life fun for US citizens include
Reporting a foreign Corporation Form 5471
Reporting a Foreign Partnership Form 8865
Reporting a Foreign Trust (Foundation) Form 3520
Mr Mopsick explained that it is to your advantage to use a qualified CPA or other tax consultant approved by the IRS to assist in tax preparation, he does not suggest you do it yourself.
The meeting lasted from 10:15 to 1pm and many many questions, I am only going to clarify two points here.
1. The fear that in 2013 you will need to pay 30% to the IRS to remove your money from the US. The FATCA regulations have not yet been published for comment and therefore are not available. But the intent of the law is to force non US banks into contracting with the IRS and reporting on US Taxpayers. If you move your money from a US bank to a complying foreign bank there will be no 30% witholding. If you go to an ATM and withdraw your money there will be nothing withheld. Beyond that we need to wait for regulations.
2. As far as the IRS is concerned our local corporations and fundaciones are transparent. They will attribute assets and income to whomever controls the money. This in no way effects the laws of Panama but does mean if you have checkbook on a Panama Foundation or Corporation as far as the IRS is concerned it is your money.
There was much more and I will let others post more under comments. I am not sure if Mr. Mopsick is looking for clients in Panama, he is heading out to seminar lawyers and bankers in Panama City next. Still I am posting his contact information if you wish to followup with him.
Steven J. Mopsick
Federal Tax Attorney
Not admitted in California
Practice Limited to Matters before the
Internal Revenue Service
United States Treasury Department
United States Tax Court