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US taxes and FATCA: ‘The time for hiding is over’

FATCA. Since July 2014, the five-letter acronym has instilled dread in the hearts of American expats all around the world.

US taxes and FATCA: 'The time for hiding is over'
Photo: Flickr/Pictures of Money

“The Foreign Account Tax Compliance Act (FATCA) requires banks to report information to the IRS regarding all financial accounts held by American clients,” Ines Zemelman, expat tax specialist and founder of Taxes for Expats, tells The Local. “The age of financial privacy is over.”

American citizens must report their worldwide earnings and assets to the IRS no matter where in the world they live.  With the implementation of FATCA, expats who have spent years avoiding this uncomfortable truth are being reminded of it — as well as being punished if they don’t comply.

This development has led to many foreign banks trying to track down their American clients – and in some cases, lessen their own burden by simply refusing Americans service.

Many expats have begun to receive a ‘FATCA Letter’ from their bank requesting certain information about their US tax status (and asking them to complete either Form W-9 or W-8). The letter usually offers a brief explanation of the FATCA legislation that requires the bank to share your name, address, and other personal details with the American tax authorities – the Internal Revenue Service.

But what if you're not compliant? Some expats choose to ignore the request – but this high-risk approach is likely to quickly bring about a negative outcome.

Your bank might simply close your account, or even freeze your funds. Alternatively, your details may be forwarded to the IRS anyways and you may end up with a big red flag by your name.

“If you are not presently compliant with US tax laws, the time for hiding is over,” Zemelman says. “Your goal should now be to make the appropriate IRS voluntary disclosure to come clean and resolve your undisclosed foreign accounts.”

For expats who are not yet compliant with US tax filings, including submitted FBARs (Foreign Bank Account Report) and tax returns, Taxes for Expats recommends three steps.

“Respond to the bank immediately and tell them you are in the process of filing,” advises Zemelman. “Ask to set up a timeline or get an extension.”

Next, contact a professional US expat tax preparation company such as Taxes for Expats.

“If you were not working against the clock you could try to do it all on your own – but it's not something we'd advise if the bank is already on your case,” Zemelman remarks.

Finally, make sure to take advantage of the Streamlined Filing Procedure, which can help you become fully compliant without the risk of penalties. The procedure requires completing three years of tax returns and six years of FBAR, and will put you in the clear once and for all.

Think your bank won’t know you’re American? You’re probably wrong, Zemelman warns.

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.

“Your birthplace is shown on your passport – even if it’s not a US one. Likewise, a client may have transferred funds to the US or may have an American address,” Zemelman says.

If banks fail to comply and report your information to the US, they get slapped with heavy fines – so instead they opt to play nice with Uncle Sam.

“If you are an American with an overseas bank account, it is likely that your bank has already asked or is going to ask about your US compliance status,” Zemelman says. She advises US citizens outside the US to plan for this – as foreign banks have essentially become enforcement agents of the IRS.

So what do you do when the bank in your country of residence starts sniffing around and asks about your US tax compliance status? It doesn’t have to be a nightmare, Zemelman says – if you handle it right.

“Don’t wait for the enforcement division to find you,” Zemelman concludes. “Come forward and fix your US tax situation first.”

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

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Tax returns in Norway: Five things you need to know

Norway’s tax season is upon us. We’ve put together some essential tips and information to help you understand the Norwegian tax system better. 

Tax returns in Norway: Five things you need to know

Keeping track of the key dates

Taxes can be tricky for some, but it can pay to be prepared. Keeping track of this year’s key dates when it comes to tax season can be a huge helping hand. 

Tax returns are already being sent out and will continue to be posted until April 4th. Then, April 30th will see the deadline to submit your tax return. 

If you feel like you need more time to assess the previous year’s finances, the end of April also sees the deadline for applications for a postponed deadline. 

READ MORE: The key Norwegian tax season dates you need to know about

You are able (and meant) to add any student loans from abroad to your tax return

You can add your student loan to your debts and claim the interest as tax-deductible. In fact, you are supposed to declare all overseas assets, received and earned interest, in addition to any debts and loans.  

However, this means the debt is visible to Norwegian lenders, which can impact your lending ability.

You can get a rough idea of whether you can expect a rebate or repay tax

After submitting your tax return, you will receive a tax assessment notice. In addition, you’ll receive a notice with information regarding how much money you’ll receive as a rebate or how much you’ll need to repay if you’ve overpaid. 

When you receive this will give you a fair idea of whether you can expect money back or if you’ll need to dig into your pockets to pay back any money you owe. 

If you receive your tax assessment notice in May, you will likely be due a refund, whereas if you receive it from June onwards, you’ll probably owe the tax man money. 

Tax return versus a tax receipt

Most people working in Norway will receive a tax return, which is an outline of your income, deductions, wealth and debt. However, not all people will receive a tax return, and some will receive a tax receipt. 

If you participate in the PAYE (Pay as You Earn) scheme, you will not receive a tax return. Instead, you will receive a tax receipt, which shows the amount of tax that you’ve paid in Norway. Those in the PAYE scheme play a flat rate of 25 percent. 

One of the key differences is that you cannot claim deductions with a tax receipt. Also, some lenders only accept tax returns rather than receipts when it comes to giving credit. This means those on the PAYE scheme may find it challenging to build a credit history in Norway as their income and earnings are not taken into account. 

You are expected to pay tax on your worldwide income 

Once you are considered a tax resident of Norway, you generally are required to pay tax on your worldwide income. Tax residency is slightly different to legal residence. 

The rules can be a bit complex, and if you are earning an income in two countries, several factors will come into play, such as whether Norway has a tax treaty with those countries and how much you are taxed on that income in other countries. 

If you have any questions or queries regarding your tax, it is best to contact The Norwegian Tax Administration or a qualified accountant. 

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