• 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
Trump an 'embarrassment' Springsteen tells Norway
Rock legend Bruce Springsteen interviewed by Fredrik Skavlan. Photo: SVT/Youtube

Rock legend Bruce Springsteen has described Donald Trump as an embarrassment to the United States.

Oslo to hit drivers’ wallets to combat air pollution
The cancel wants to raise toll rates fivefold by this winter. Photo: Vidar Ruud / NTB scanpix

The city council will quintuple road tolls on days with high levels of air pollution.

Freed hostage back in Norway after 'year in terror'
Sekkingstad addressed the Norwegian media in Oslo on Friday. Photo: Vidar Ruud / NTB scanpix

Kjartan Sekkingstad returned to Norway on Friday after a year of captivity in the Philippines.

New hijab discrimination case hits Norway
Model photo: Carina Johansen / NTB Scanpix

Officials in Oslo offered a young woman a job, but only if she would remove her headscarf.

Tesla sued in Norway over sluggish cars
A Telsa Model S being charged in Østfold. Photo: Tore Meek/NTB Scanpix

"When you notice that you didn't get what you paid for you feel cheated."

VIDEO: See Norway’s PM ride around on a rubbish truck
That's not something you see every day. Photo: Terje Bendiksby / NTB scanpix

Norwegian Prime Minister Erna Solberg has posted a video to Facebook showing her performing some rather unusual work in the name of green energy.

Why Americans pay more to fly Norwegian
It pays off to know the local language when booking with Norwegian. Photo: Håkon Mosvold Larsen / NTB scanpix

Americans looking to fly to Norway on Norwegian or take a cruise on Hurtigruten are being charged much higher prices than customers in Norway.

Norway man posed as girl on Facebook to exploit 60 boys
Photo: Stian Lysberg Solum / SCANPIX .

Police believe a Tromsø man used the internet to sexually exploit around 60 children and abused some of them in real life.

Norway files terror recruitment charges for first time
Ubaydullah Hussain has been in and out of the Norwegian court system several times. Photo: Terje Pedersen / NTB scanpix

Ubaydullah Hussain, an Islamist who has had numerous run-ins with the law, is the first person in Norway to be officially charged with recruiting terrorists.

Filipino militants got ransom for Norwegian: analysts
Kjartan Sekkingstad addressed the media on Sunday along with Filipino peace minister Jesus Dureza. Photo: Stringer/NTB Scanpix

Norway has denied paying a ransom but analysts say there is no way Abu Sayyaf released Kjartan Sekkingstad "out of the goodness of their hearts".

Sponsored Article
Why you should learn to trade (and just how easy it is)
'I am so very happy and lucky to be alive': Freed Norwegian
International
'I am so very happy and lucky to be alive': Freed Norwegian
Society
Hijab discrimination: Praise, Nazi comparisons and conspiracy theories
Facebook thanks Norway PM after censorship row
Society
Facebook thanks Norway PM after censorship row
Expats say it's not just Norway's weather that's cold
Society
Expats say Norway is a cold place (and they don't mean the weather)
Sponsored Article
Gran Canaria: 'So much more than beaches'
National
323 reindeer killed by lightning in Norway
Frozen effect bringing 'too many tourists' to Norway
Travel
Frozen effect bringing 'too many tourists' to Norway
Norway's angel princess divorces novelist husband
Norway's angel princess divorces novelist husband
Norwegian motorist kills 19 reindeer in bloody collision
National
Norwegian motorist kills 19 reindeer in bloody collision
'Tick here please': Changing gender in Norway gets easier
Lifestyle
'Tick here please': Changing gender in Norway gets easier
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
Norway boosts defence against Russia threat
International
Norway boosts defence against Russia threat
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'
2,050
jobs available