United States taxpayers may own foreign bank and investment accounts, but are required to report the existence and income from such accounts. Foreign financial institutions must also report the accounts to the IRS. We discussed the changes rolling out in 2014 for British Virgin Island account holders, as well as the possible penalties for some with Swiss bank accounts.
One month ago, the Internal Revenue Services (IRS) finalized a draft of Revenue Procedure 2014-13, which sets forth the reporting requirements for foreign financial institutions (FFI). These requirements apply to certain financial institutions in an intergovernmental agreement (IGA). Tax planners and asset protection attorneys have speculated over the possible requirements and advising clients holding foreign accounts of the pending changes. Now, the requirements are clear and a list of areas that have entered into an IGA is available. (Image provided by Wealth Management)
What are the differences between Model 1 IGAs and Model 2 IGAs?
Model 1 IGA: Local tax authorities receive information about US accounts and report details to the IRS. This is required for compliance with Foreign Account Tax Compliance Act (FACTA). No FFI agreement required.
Model 2 IGA: The IRS receives account information directly from the FFI. No consent of the account holder is required.
The United States Department of Treasury maintains a complete up-to-date list of the jurisdictions and their model status. If you have a foreign account in one of the jurisdictions affected by the new tax reporting requirements, schedule a review with your tax attorney. Even with the new regulations, offshore trusts and foreign accounts retain many benefits, as long as they are formed properly and annual reporting requirements are filed appropriately.
Our tax and asset protection attorneys serve North Carolina, Florida, New York, and Tennessee—helping individuals navigate international, multi-state, and federal tax law. Learn more about asset protection tools.(Chart provided by Wealth Management)