Issue link: https://viewer.e-digitaledition.com/i/266572
H ISTORICALLY, U.S. BANKS have reported to the IRS interest, dividends, and gains and losses of U.S. taxpayer account holders. Foreign banks, however, previously had no reporting obliga- tions—making it difficult for the IRS to identif y taxable foreign assets. But, foreign banks through agreements reached with the IRS under the Foreign Account Tax Compliance Act (FATCA), will commence reporting income on July 1, 2014. Foreign banks then will issue Form 1099-type information returns to U.S. persons who earn income in foreign accounts. Several countries including Mexico, Switzerland, Ireland, United Kingdom, the Cayman Islands, and more already have agreements with the IRS that apply to their banks. It is possible though, in the absence of an agreement between the IRS and a foreign country, for banks themselves to enter into such agreements. FATCA requires U.S. financial and non-financial entities to withhold 30 percent of foreign bank's income if the bank is not covered by an agreement with the IRS. FATCA was drafted to f lush out undisclosed foreign accounts. Failure to report foreign accounts may be a crime, but the IRS is offering taxpayers an opportunity to get cur- rent with their tax returns and avoid criminal prosecution under its Offshore Voluntary Disclosure Program (OVDP). Eligible taxpayers who report previously unreported income and pay penalties could obtain an IRS agreement against criminal prosecution. Thus, FATCA and the OVDP encourage non-compliant taxpayers to disclose their foreign accounts and become current with their tax reporting obligations. Kristen Fitchko is an attorney with the law firm of Krugliak, Wilkins, Griffiths & Dougherty Co., LPA, in Canton. ■ NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice. Offshore, But Not off the IRS Radar By Kristen L. Fitchko, Esq. ++++++++++++++++++ +++ + +++ + ++++++++++++++++++ ❮ LEGAL EASE