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PRESENTED BY TAXES FOR EXPATS

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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MONEY

EXPLAINED: Everything you need to know about Austria’s climate bonus payment

Residents in Austria will receive up to €200 to compensate for the increase in energy and fuel prices created by the eco-social tax reform. Here's what you need to know.

EXPLAINED: Everything you need to know about Austria's climate bonus payment

The climate bonus, or Klimabonus in German, is an essential part of Austria’s eco-tax reform, a larger project with several measures to incentivise environmental choices such as riding the public transport.

The bonus would offset some of the costs brought by a new CO2 tax in Austria.

READ ALSO: Austrian government unveils ‘eco’ tax reform

“With the Klimabonus, we ensure that climate-friendly behaviour is rewarded and the people in our country are relieved. If you take good care of the climate, you pay less CO2 tax and end up having more of this money left”, Climate Minister Leonore Gewessler (Greens) said on Twitter.

The Austrian government plans to set up a web site with more information on the bonus in June. Until then, here is what you need to know about the new compensation and how to get it.

Who is entitled to the payment?

Anyone who has had their primary residence in Austria for at least 183 days will be entitled to the bonus. Children are also entitled, but if they are younger than 18 years old, they will receive 50 per cent of the respective amount of the climate bonus.

READ ALSO: EXPLAINED: How to get your €500 Kurzarbeit bonus in Austria

“This is the first time that all people, regardless of age, place of residence, regardless of employment or pension or training status, have received a federal payment,” said Gewessler on Friday in the Ö1 broadcast.

What is this ‘respective amount’?

Not everyone will receive the same amount of money. The value changes depending on where the recipient lives and what is the offer of public transport there. Viennese, then, will receive the lowest amount of money: a one-off € 100 payment.

READ ALSO: EXPLAINED: How to claim your €200 voucher for electronics repair in Austria

There are four levels of payment depending on the municipality: €100 for urban centres with the highest-ranking development (which is only Vienna), €233 for urban centres with good development of public transport, €167 in centres and surrounding areas with good basic development of the public system, and € 200 for rural municipalities.

If you live in Austria’s second-largest city, Graz, you fall into the second category and should expect a €133 bonus.

Some exceptions to the geographical rule apply, so people with disabilities who cannot use public transport will receive the total climate bonus (€200) regardless of where they live.

The Federal Government had already stated it estimated that a third of Austria’s population would receive the highest bonus.

How to get the bonus?

The payment is pretty straightforward; there is no need to apply for it, and it will be done directly into your bank account, just make sure that you have it up to date on the FinanzOnline website – the final date to do so is June 30th.

Those who receive a pension and other benefits will receive the bonus in that same bank account.

READ ALSO: EXPLAINED: How freelancers in Austria can pay four times less in social insurance

It is worth mentioning that the bank account doesn’t necessarily need to be from an Austrian bank.

People who don’t have a registered bank account will receive a letter with a voucher that can be redeemed in shops or exchanged for cash at a bank, Gewessler said.

According to the Ministry, payments should start at the beginning of October, and those receiving a transfer will not have to wait for long to see the money in their bank accounts. However, people receiving letters with the vouchers could have to wait a few weeks.

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