• Norway's news in English
 
app_header_v3
'The age of financial privacy is over'
Unsuspecting Americans have been hit hard by FATCA. Photo: Shutterstock

'The age of financial privacy is over'

· 27 Jan 2015, 12:30

Published: 27 Jan 2015 12:30 GMT+01:00

“I had been living in Switzerland for ten years, and then out of the blue I got a letter from my bank, saying that since I am an American citizen I had to file some extra paperwork,” Jonathan Weiss tells The Local. “Two weeks later my bank account was frozen.”

Weiss was born in the US, but has lived abroad since age ten, in both Asia and Europe.

“I was just living in Switzerland, working there, minding my own business,” Weiss recalls. “And then I was caught up this net.  I had no idea what to do.”

That was his first encounter with the long arm of US tax law – FATCA.

If you’re an American living abroad, chances are you’ve heard of FATCA. And if you haven’t, you probably should have. Or there may be serious consequences.

“FATCA requires foreign banks to report information to the IRS regarding all financial accounts held by American clients,” Ines Zemelman, a tax agent specializing in expatriate taxes, tells The Local.

“The age of financial privacy is over.”

Over 100 nations have already agreed to provide the IRS with such information, including Germany, France, Spain, Italy, Switzerland, Austria, Sweden, Denmark, and Norway.


A map showing countries which have agreed in some form to FATCA.

The acronym (which stands for Foreign Account Tax Compliance Act) has been floating around since about 2010, when it was signed into US law. However, the new rules only came into effect in July 2014.

“FATCA was attached as a rider to the 2010 jobs bill,” Deedee Gierow, an American expatriate living in Sweden, tells The Local. “The purpose of it was to go after wealthy people hiding money off-shore. But, as is often the case, it was not well thought-out.”

Americans who fail to report their foreign assets can face hefty delinquency fines – but it’s even more complicated than that.

“Most Americans living abroad do not make enough money in their country of residence to owe tax in the US, but they must nevertheless file taxes with the IRS,” Gierow explains.

“The US is one of only two countries in the world which has citizenship based taxation, the other being Eritrea.”

Gierow is chairman of Democrats Abroad in Sweden, and has spent the last year trying to inform fellow American expatriates about the complications of being a US taxpayer abroad. Many Americans in Sweden have been contacted by their banks about limiting services.

“There is no escaping anything anymore, even if you are perfectly innocent,” she says.

Weiss was one of those “perfectly innocent” American expats stung by the legislation.

“It’s targeted at people who are stashing money off-shore, but I just happened to live abroad,” Weiss says. “Anyone who has relations to the United States is being caught up in this net.”

Indeed, Zemelman says it’s not just people with US passports or green cards who are targeted, though they are among the first.

“That would be too simple,” she says.

Foreign banks have a list of various criteria to examine when determining if clients have a significant connection to the US. Every account is evaluated individually.

“A client may have transferred funds to the US or may have an American address,” Zemelman says.

In such cases the bank will send a form to the client asking if he or she is American – and lying on the statement is considered perjury.


Passport photo: Shutterstock

If foreign banks refuse to comply with FATCA, they are slapped with a 30 percent fine on all transactions they have with US banks.

But many countries have secrecy obligations and cannot hand information directly over to the IRS – so they send the information first to their own tax authorities, which then forward the information to the IRS.

“This is very expensive and time-consuming for the banks, and so many banks are closing or denying financial services to US citizens living overseas,” Gierow says.

Foreign banks that provide services to Americans have to ensure that all US tax obligations are met – which means that American clients must provide proof that they are current on their tax filing obligations and their FBAR (Foreign Bank Accounts Report). If not, their accounts can be frozen.

Weiss learned this the hard way.

“I wasn’t aware of any of these things and they only gave me two weeks to respond, and after that they froze my account without warning,” he explains. “They told me I needed to get a professional certification showing that I was compliant, that I had filed all of the FBARs and everything.”

And according to Zemelman, it’s only a matter of time before every American abroad has been contacted about compliance matters.

Zemelman, who has been working with expatriate taxes for 23 years, is also the founder and director of Taxes for Expats, a New York-based tax preparation firm that focuses solely on assisting Americans living abroad.

“Filing back taxes and missing FBARs can be a daunting task when approached solo,” Zemelman says. “But this is something we specialize in. We helped numerous individuals with frozen accounts in Switzerland last year.”

Weiss was one such client.

“I needed someone to help me take care of it urgently,” Weiss says. “It took three weeks to finish everything with Taxes for Expats, and they provided a letter of certification which I took to the bank, and they unfroze my account.”

While the initial compliance shock took him by surprise, Weiss now says that the process of staying compliant is fairly straightforward: he simply files his annual returns with Taxes for Expats who in turn make sure everything is sorted.

Luckily for Weiss, the IRS recently announced a new amnesty programme allowing delinquent American expatriates to get up to date on their FBARs without penalty.

“If you are still in a state of noncompliance, now is the time to act by taking advantage of the Streamlined Filing Procedures,” Zemelmansays. “We’ve helped hundreds of customers since the programme was announced.”

The programme includes filing three years of delinquent tax returns and up to six years of missing FBARs.


IRS photo: Shutterstock

"However, time is of the essence," Zemelman says, noting that Americans who have already received multiple non-filing notices will have slimmer chances the longer they wait.

“There is nothing permanent at the IRS,” Zemelman remarks. “The IRS uses carrot methods all the time, but this is the fifth programme of its type. Will the next one be better or harsher? There’s no way of knowing.”

The current amnesty programme was introduced during the summer of 2014, but there’s no telling how long it will last. For those who may not have been aware or up to date on their US tax obligations, the time to act is now.

“It’s a hassle-free process,” Zemelman says. “You provide us with an overview of your financial situation, and we prepare and file the return.”

Now that he understands the laws and precisely what is expected of him, Weiss said he is not resentful of the new regulations. But he does wish he had known earlier.

“It was scary,” he says. “People should be aware of FATCA and deal with it proactively so they don’t have to go through what I did.”

This article was produced by The Local and sponsored by Taxes for Expats.

For more news from Norway, join us on Facebook and Twitter.

()

Today's headlines
Norway youth 'improves' 5,000-year-old skier carving
The carving of the skier at Tro can never be seen again in its original form, archeologists believe. Photo: Nordland County

The 5,000 year-old carving is among the earliest evidence of stone age man's use of skis.

Norway man in hospital after Pokémon brawl
A Pokémon monster lurking in Oslo's Vigeland sculpture park. Photo: Audun Braastad/NTB

Another victim falls to the Pokémon peril.

Statoil blows $2.5bn on Brazil oil field stake
Statoil's Peregrino A platform offshore Brazil. Photo: Øyvind Hagen/Statoil

Norwegian oil giant has made a big ticket acquisition despite cost cuts, staff reductions, and a recent unexpected loss.

Norwegian activity centre refuses refugee visit
Anti-Discrimination Ombud Hanne Bjurstrøm believes the centre leader may have broken the law by refusing service based on ethnicity or national origin. Photo: Gorm Kallestad/NTB scanpix

Owners of the Nissegården camping and activity centre in Lom municipality said no when local refugee services asked to book a visit for a group of refugees.

Norwegian tourism shrugs off Europe attacks
Photo: Torstein Bøe/NTB Scanpix

The tourism industry in major cities across Europe has been affected by the string of attacks across the continent in recent months, yet the tourist industry in Oslo and Norway in general appears to be heading for another record year.

Norwegian motorist kills 19 reindeer in bloody collision
Reindeer collisions are a frequent occurence on Norway's roads, but rarely on this scale. Photo: Alcino/Flickr

A Norwegian man crashed into a herd of reindeer Tuesday night, killing at least 19.

Norwegian renters’ association: Regulate AirBnB
Poster in Berlin aimed at deterring tourists from using AirBnB. Photo: Gunnhild Hokholt Bjerve / NTB Scanpix

The association is concerned that the popular holiday rental site may be driving up rental prices in Norway's biggest cities.

Researcher: Norwegian politicians should stay out of US election
Minister of Climate and Environment Vidar Helgesen. Photo: Håkon Mosvold Larsen/NTB Scanpix

Norwegian politicians have no business getting involved in the US presidential election, says Hilmar Mjelde from the University of Bergen.

Norwegian minister: Immigration reforms inadequate
Integration Minister Sylvi Listhaug. Photo: Lise Åserud/NTB Scanpix

Integration Minister Sylvi Listhaug of the anti-immigration Progress Party warned that further immigration and asylum restrictions may be on the way.

Tourist presumed dead after Norwegian waterfall drop
Photo: Ned Alley/NTB Scanpix

An American tourist is feared dead after falling from a height of at least 20 metres into a waterfall late Sunday afternoon.

Sponsored Article
Why you should attend an international job fair
Danish scientist: Mysterious 'blue blob' caused by weather
National
Danish scientist: Mysterious 'blue blob' caused by weather
Norwegian school permits burkini in swimming classes
Education
Norwegian school permits burkini in swimming classes
Norway's ‘biggest sovereignty concession’ to EU in years
National
Norway makes ‘biggest sovereignty concession’ to EU in years
Sponsored Article
Avoid hidden fees when sending money overseas
Norway boosts defence against Russia threat
International
Norway boosts defence against Russia threat
Sponsored Article
Why expats choose international health insurance
FACT-CHECK: No, Norway isn’t banning diesel and petrol cars
National
FACT-CHECK: No, Norway isn’t banning diesel and petrol cars – yet
Norway aims to be climate-neutral by 2030
National
Norway aims to be climate-neutral by 2030
Migrant numbers plunge as Norway now 'less attractive'
National
Migrant numbers plunge as Norway now 'less attractive'
Sponsored Article
Why Swiss hospitality graduates are in demand
Society
Record number of kids mark Norway's National Day
Sponsored Article
Gran Canaria: Where Swedes go to work (and play)
Take a ride on Norway's most spectacular road
Travel
Take a ride on Norway's most spectacular road
All 13 on board die in Norway helicopter crash
National
All 13 on board die in Norway helicopter crash
Sponsored Article
Five things Americans should know about voting abroad
National
Norway violated mass murderer's human rights: court
Sponsored Article
Avoid hidden fees when sending money overseas
Modern-day Norwegian Viking conquers Instagram
Lifestyle
Modern-day Norwegian Viking conquers Instagram
Global protests condemn 'legal kidnapping' in Norway
National
Global protests condemn 'legal kidnapping' in Norway
Norway to allow gay church weddings
Society
Church of Norway to allow same-sex weddings
Sponsored Article
Why expats choose international health insurance
'No means no': Norway sends migrants on anti-rape courses
National
'No means no': Norway sends migrants on anti-rape courses
For first time, majority in Norway don’t believe in God
Society
For first time, majority in Norway don’t believe in God
Sponsored Article
Why Swiss hospitality graduates are in demand
Norway preps 'breakthrough' on gender change
Health
Norway preps 'breakthrough' on gender change
Breivik says he'll fight 'to the death' for Nazism
National
Breivik says he'll fight 'to the death' for Nazism
2,081
jobs available