The Foreign Account Tax Compliance Act (FATCA) is a serious headache for Americans living abroad. Indeed, that is probably an understatement. If FATCA is a headache, it is perhaps best characterized as a migraine, carrying significant compliance pain.
The offshore reporting requirements imposed by the sweeping law have made many banks wary of doing business with expatriates from the U.S. Meanwhile, Americans who live in another country find themselves struggling to keep up with a slew of detailed asset-reporting requirements under FATCA and other laws.
We’ve been following the unfolding story all year in this blog. In our February 19 post, for example, we discussed the FBAR Form (Report of Foreign Bank and Financial Accounts) and Form 8938 (Statement of Specified Foreign Assets).
In today’s post, we will discuss a proposal to create an exception to offshore reporting requirements for accounts held by U.S. taxpayers in the country they are living in. The exception would also apply to the financial institutions in those countries that house the accounts.
To be sure, the residency would have to be legitimate. It could not be merely nominal. But it would mean that if you lived, for example, in Canada, you would not be hit with FATCA filing obligations for accounts in that country.
For Americans living abroad, a same-country exception to FATCA reporting requirements would address a very real and growing problem. That problem is the difficulty many U.S. expatriates face finding a provider of financial services. Finding a provider is difficult because many foreign financial institutions refuse to do business with expats due to onerous offshore reporting requirements.
The good news is that there is serious talk in Congress of creating a same country exception. The co-chairs of the Americans Abroad Caucus have put the issue on the table. And the National Taxpayer Advocate supports it.
We shall keep you posted on the status of the proposal.