FATCA Compliance Delayed in the Cayman Islands, but Reporting Is Coming
Few laws have had the global impact that Foreign Account Tax Compliance Act have had. FATCA ushered in a new global banking regime where practices that were previously tolerated to a certain degree – like secret accounts – became untenable. Under FATCA, American taxpayers and U.S. persons holding overseas and offshore accounts and assets are required to make annual disclosures of their accounts. The failure to make these discloses can result in significant penalties.
Since FATCA’s passage in 2010, the U.S. government has reached many international government agreements (IGAs) to implement the law. To date, more than 100 nations across the globe have agreed to the terms of an IGA or signed and implemented an IGA. The Cayman Islands had their signed IGA with the United States go into full-effect in 2014, but delays have beset the implementation process.
What Does the Cayman Islands’ Two-Month FATCA Delay Mean?
As has been previously announced by the Cayman Islands government, the official version of the Cayman Islands Common Reporting Standard went into effect on January 1, 2016. Originally, their government had announced that it would take a soft approach to an April 30, 2016 U.S. FATCA notification deadline. It would also take a similar approach to the original May 31, 2016 reporting deadline. Under the terms of this plan, covered foreign financial institutions that submitted notifications prior to Jun 10, 2016, or reports prior to July 8, 2016, would not face enforcement action or penalties.
However, the Cayman Islands government has released an advisory regarding a final extension of time for FFIs to comply with both the notification and reporting obligation. The new extended deadline sets forth a final deadline of August 10, 2016 for both the notification and reporting obligation. Are you concerned about your tax filing? Contact a Roseville tax lawyer of NewPoint Law Group.
What Does the Extended Deadline for FATCA Mean for Foreign Account Holders?
Some individuals may believe that the additional time provides them cover or an excuse to delay their FATCA disclosures. If you have failed to file FATCA or have been advised by asset protection companies to avoid disclosures of covered accounts to keep accounts secret, you are in a particularly dangerous position. In the past, the risk of the U.S. government discovering foreign accounts in Costa Rica, the Cayman Islands, or other offshore jurisdictions was rather limited; but FATCA changed the equation.
Under FATCA, foreign banks are required to provide information regarding U.S. persons to either the local government tax agency or directly to the IRS. The method of reporting varies based on whether a Model 1 or Model 2 IGA is in effect in the jurisdiction. That being said, if you have an account in an FATCA jurisdiction, it is a near certainty that the U.S. government will find out about the account. If you have failed to disclose the account or pay taxes on an interest-bearing account, you can expect to face serious penalties.
What Are the Penalties for FATCA Noncompliance?
The failure to satisfy one’s FATCA disclosure obligation by filing IRS Form 8938 can result in significant penalties. If the failure to disclose also involved the failure to pay taxes on foreign income, penalties become even more serious. The failure to file FATCA disclosures can result in a penalty of up to $10,000 to start. Continued failure to comply with one’s disclosure obligations can result in additional fines of up to $50,000. If the disclosure failure also includes unpaid taxes, an understatement penalty of 40 percent can apply. In particularly egregious cases of willful non-reporting, criminal tax evasion charges could apply.
Work with a Sacramento Tax Attorney to Correct FATCA Filing Failures
If you are concerned with potential criminal consequences due to a failure to file FATCA or pay taxes on foreign income, work only with a lawyer. Only the attorney-client privilege is robust enough to protect any disclosures you may make in the course of seeking assistance to fix your FATCA and foreign disclosure issues. If you make disclosures to a CPA or accountant, you run the risk of him or her being subpoenaed. If an accountant is necessary, your tax lawyer can extend a derivative attorney-client privilege to the needed professional through certain procedures.
A Sacramento tax attorney at the NewPoint Law Group can help you correct FATCA concerns, tax law matters, and other foreign disclosure problems. To schedule a confidential tax consultation, call the firm at 1-800-358-0305 today or contact the firm online.