One of the precursors for sharing information requires systems to speak to each other. Similar data must be gathered and then entered into automatic annual exchanges.
The OECD and G20 approved Common Reporting Standards (CRS) back in 2014. Information on offshore financial accounts will be shared with taxing authorities in the account holder’s country of residence. Currently, 102 jurisdictions have signed a public commitment to implement the CRS.
In the intervening years, an international legal framework has defined the timing, scope and conditions for exChanging information. Domestic legislation was also needed to ensure that financial institutions would know how to identify and report on accounts held by non-residents.
The first exchanges had committed to a 2017 timeframe and now 49 have activated their exchange relationships. In addition, another group of jurisdictions are on track to have their exchanges up next year.
Offshore account reporting
The IRS continues to focus enforcement efforts on offshore accounts. The United States taxes income regardless of where earned and thus requires you to report all international and offshore income.
U.S. citizens with foreign financial accounts or signature authority over these accounts need to file a yearly disclosure statement (FBAR, now FinCEN Form 114) when account values, taken together, exceed $10,000 at any time in a year. Failing to file the disclosure is a crime in itself with serious penalties.
Reporting requirements are broad and apply to brokerage accounts, insurance policies and annuities. As information sharing between countries ramps up, complete a portfolio analysis to ensure all the necessary disclosures have been filed. Options exist to come into compliance when there have been omissions.