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Expats with green cards may fall foul of FATCA
| Published: | 7 Dec at 6 PM |
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Tagged: Property Abroad, USA
The US Foreign Accounts Tax Compliance Act, (FATCA) will compel all US taxpayers to inform the IRS of overseas earnings and investments in their annual tax return, but expats holding green cards may also be liable.
Many expats working in the USA may not realise that holding a green card will soon drag them into the FATCA net, forcing them to declare and pay US taxes on overseas investment earnings and income. The ruling has already caught out many expats who had retained their home country bank accounts, savings and investment portfolios.
Further problems surface when it’s time to surrender the green card and return to the home country, as expats in the system are liable for an exit tax, dependent on the net worth of each individual. The ‘damned if you and damned if you don’t’ controversy is set to continue as another, less-quoted and more recent law, states that those entering the US for work and tax residency are deemed to have disposed of property outside the US prior to leaving, although any gain may be subject to capital gains tax.
FATCA reporting comes into force on 1 January, 2014, with the rush by 50 nations to negotiate FATCA treaties with US tax officials already gathering momentum. Expats are expected to be caught in the collision of a number of contrasting tax laws at exactly that point, and even now are forced to file their foreign bank account details along with their tax returns.
Given the complexity and confusion around the issue, expats heading for the USA are advised to consult a qualified tax lawyer well before the deadline. IRS penalties are known to be harsh and exceptions are complicated.
Many expats working in the USA may not realise that holding a green card will soon drag them into the FATCA net, forcing them to declare and pay US taxes on overseas investment earnings and income. The ruling has already caught out many expats who had retained their home country bank accounts, savings and investment portfolios.
Further problems surface when it’s time to surrender the green card and return to the home country, as expats in the system are liable for an exit tax, dependent on the net worth of each individual. The ‘damned if you and damned if you don’t’ controversy is set to continue as another, less-quoted and more recent law, states that those entering the US for work and tax residency are deemed to have disposed of property outside the US prior to leaving, although any gain may be subject to capital gains tax.
FATCA reporting comes into force on 1 January, 2014, with the rush by 50 nations to negotiate FATCA treaties with US tax officials already gathering momentum. Expats are expected to be caught in the collision of a number of contrasting tax laws at exactly that point, and even now are forced to file their foreign bank account details along with their tax returns.
Given the complexity and confusion around the issue, expats heading for the USA are advised to consult a qualified tax lawyer well before the deadline. IRS penalties are known to be harsh and exceptions are complicated.
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