Tuesday, May 15, 2012
Dubai American expatriates in the UAE are being urged to seek specialist tax advice as the US government clamps down on people cheating the system.
A piece of legislation known as the Foreign Account Tax Compliance Act, or Fatca, is causing great concern among Americans living overseas as they face up to new filing demands that critics say are excessive and overblown.
Some UAE-based Americans with dual-citizenship are even looking to renounce their US passports in a bid to avoid complying with the new regulations.
“Expats who have fallen out of compliance with the US tax rules or who are unsure if they have been filing correctly should speak to a US tax attorney, not an accountant, in order to receive attorney client privilege,” said Virginia La Torre Jeker, J.D., a Dubai-based tax specialist.
“As for trying to fix up past mistakes, proper advice must be sought. It is too risky to fill in the FBAR (report of foreign bank and financial accounts) on your own, at least initially.
“The pace has really picked up; people have been reading about convictions for criminal tax evasion and they are getting scared, especially those close to retirement age. They know when they return to the US and are drawing on social security, it can be taken away if the IRS comes calling. People are scared and, in fact, they should be scared,” she added.
Fatca is a piece of government legislation that requires certain US taxpayers holding foreign financial assets with an aggregate value exceeding $50,000 to report certain information about those assets on a new form (Form 8938), which must be attached to the taxpayer’s annual tax return.
Wilful blindness
According to Jeker, claiming ignorance of US tax obligations will not be deemed a sufficient excuse to avoid penalties as Fatca has been well publicised in recent months. “The IRS has a concept of “wilful blindness” and if the IRS can demonstrate a taxpayer evidenced wilful blindness in not meeting his tax obligations, this can lead to severe penalties,” she said. Reporting applies for assets held in taxable years beginning after March 18, 2010. For most taxpayers this will be the 2011 tax return they file during the 2012 tax filing season. According to the IRS, failure to report foreign financial assets on Form 8938 will result in a penalty of $10,000, and a penalty up to $50,000 for continued failure after further notification.
By Kevin Scott?Staff Reporter
Gulf News 2012. All rights reserved.
