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Climate change: offshore accounts in a new era, part 1

The phrase “global warming” is an oversimplified misnomer. Most experts agree that what we are really experiencing is the much broader phenomenon of climate change. That change means not only generally warmer weather; it means more extremes, such as drought, torrential rain, and unpredictable swings in temperature.

In other words, “global warming” really consists of “global weirding.” And similar points could be made, by analogy, to U.S. tax law on offshore accounts. In only four years, an era of unprecedented change has taken hold. And the consequences are often unpredictable for taxpayers.

We’ve been following these evolving offshore issues closely from week to week. In this post, let’s consider the apparent fact that, as with climate change, the cumulative effect of the changes has been to usher in a new era.

In that new era, the ability of U.S. taxpayers to keep their foreign accounts confidential has changed radically.

To be sure, the requirement to file a so-called FBAR form -- the Report of Foreign Bank and Financial Accounts – has long been part of the U.S. tax code for accounts valued at more than $10,000.

But in 2009, U.S. authorities began aggressive efforts to enforce requirements that U.S. taxpayers disclose foreign accounts. U.S. officials nailed the Swiss banking giant UBS for facilitating tax evasion by U.S. taxpayers through foreign accounts. To head off criminal charges, UBS paid a huge civil penalty and gave American authorities the names of thousands of account holders.

Also in 2009, the IRS began offering voluntary disclosure programs that promised partial amnesty to taxpayers with previously undisclosed foreign accounts. To avoid criminal charges, taxpayers were required to not only disclose the accounts, but also to pay back taxes and penalties and cooperate with authorities.

In part two of this post, we will explain how the offshore account climate changed even further with the advent of the Foreign Account Tax Compliance Act (FATCA).

Source: The Wall Street Journal, "Offshore Accounts: No Place to Hide?" Laura Saunders, September 20, 2013

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