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Asset Protection Planning


By February 4, 2014December 14th, 2023No Comments

world-flagsTwo extensions have been granted by the U.S. Treasury before FATCA, Foreign Account Tax Compliance Act.  Very recently, notable organizations including the American Bankers Association, Clearing House Association, International Bankers Association, Securities Industry and Financial Markets Association as well as foreign governmental bodies are seeking a further delay.  However, the U.S. Treasury and the Internal Revenue Service had now clearly stated on 30 January 2014 that there will be no further extensions.  FATCA will become active on 1 July 2014.Many of my international clientele have expressed shock to me that their foreign financial institutions have been asking all account holders to complete an organizer to be shared with the IRS or have their long-standing bank accounts closed immediately.  From my various communications, in summary, these are the questions asked:

1.            Were you born in the USA?

2.            Do or did you ever have a U.S. Passport?

3.            Do or did you ever have a U.S. Green Card (Permanent residency status)?

4.            Do or did you ever live in the United States and, if so, provide all dates of residing in the U.S.?

5.            Do or did you ever have a physical address in the U.S.?

6.            Do or did you ever have a U.S. mailing address in your name?

7.            Do or did  you ever have a U.S. mailing address in care of your name?

8.            Do or did you ever have legal representation in the U.S.?

If you answered yes to any one of the above questions, some banks immediately closed your account and forwarded on the balance to you and other banks sent W-8BEN and/or W-9 IRS forms for completion and mailing back to the bank upon which a possible 30% U.S. tax withholding would be levied upon your accounts.

Now the immediately above paragraph is the “Good News”, if you can absorb this into your thinking.

With FATCA, this above personal information will be shared with the IRS as of 1 July 2014.  The IRS also been preparing teams of employees and custom designed computer programs specially created to mine this information for targeting individuals for proposed tax assessments for current and past tax years.  How many past years?  This depends on how good your U.S. Tax Attorney is with negotiating with the IRS.  If you are not represented competently or go forward alone; then the statute is 8 years.  As an example, if the IRS contacts you from the information provided by your foreign financial institution, then your exposure is for reporting all 9 years.  If this happens to you, then the possibility of resolving the matter by merely filing the past tax returns and paying the taxes, interest and penalties will NOT be an options any longer.  Remember, if the IRS contacts you first, the Voluntary Tax Amnesty no longer is available to you.  In hard money, this means that you will suffer much higher penalties and be audited for all 9 years of tax reporting.  From my experience representing Americans living overseas undergoing IRS audits, the final resolution generally takes from 9 months to 2 years.  Shocking yes and that is for only one year.  Of course, it is possible to consolidate all years in questions, but even then the time will exceed 12 months to get a proper outcome utilizing all of your rights and appeals.

Under current U.S. tax law, before the imposition of FATCA, penalties are up to the greater of $100,000 OR 50% of the highest historical account balance in EACH account. These are penalties routinely imposed by the IRS.  There are still options available to you, but once the IRS makes contact with you, as noted above, the options all disappear.  What you will have will be a complete different strategy trying to keep the IRS inquiry from quickly developing into a CRIMINAL proceeding with the Criminal Investigation Division of the U.S. Treasury.  You certainly need immediate and vigorous legal representation in an organized and intelligent presentation of your case to the IRS Tax Examiners!

The FATCA registration rules are complicated and replete with conditions and exceptions for foreign trustees, foreign trust companies, foreign banks and financial institution that many have now asked us our  advice.  So, not only are foreign countries now entering into tax information agreements between themselves, which will ultimately be shared with the IRS, but once private information with Trust Companies and Trustees will now be solicited by their own countries and shared via the internet with the IRS.   It truly is now only a matter of time.  Don’t freeze in the headlights of this final news of FATCA implementation; act now.  Give us a call under the Attorney/Client privileged communications and learn of your exposure and possible options before it is too late.

Also,there are now additional forms for American with foreign financial institutions’ accounts.  Below is a brief comparison of the new Form 8938 and From 114, a replacement form for the form 90-22.1.

Comparison of Form 8938 and FBAR Requirements

The new Form 8938 filing requirement does not replace or otherwise affect a taxpayer’s obligation to file FinCEN  Form 114 (Report of Foreign Bank and Financial Accounts). Individuals must file each form for which they meet the relevant reporting threshold.


Form 8938, Statement of Specified Foreign Financial Assets

FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR)

Who Must File?

Specified individuals, which include U.S citizens, resident aliens, and certain non-resident aliens that have an interest in specified foreign financial assets and meet the reporting threshold U.S. persons, which include U.S. citizens, resident aliens, trusts, estates, and domestic entities that have an interest in foreign financial accounts and meet the reporting threshold

Does the United States include U.S. territories?

No Yes, resident aliens of U.S territories and U.S. territory entities are subject to FBAR reporting

Reporting Threshold (Total Value of Assets)

$50,000 on the last day of the tax year or $75,000 at any time during the tax year (higher threshold amounts apply to married individuals filing jointly and individuals living abroad) $10,000 at any time during the calendar year

When do you have an interest in an account or asset?

If any income, gains, losses, deductions, credits, gross proceeds, or distributions from holding or disposing of the account or asset are or would be required to be reported, included, or otherwise reflected on your income tax return Financial interest: you are the owner of record or holder of legal title; the owner of record or holder of legal title is your agent or representative; you have a sufficient interest in the entity that is the owner of record or holder of legal title.

Signature authority: you have authority to control the disposition of the assets in the account by direct communication with the financial institution maintaining the account.

See instructions for further details.

What is Reported?

Maximum value of specified foreign financial assets, which include financial accounts with foreign financial institutions and certain other foreign non-account investment assets Maximum value of financial accounts maintained by a financial institution physically located in a foreign country

How are maximum account or asset values determined and reported?

Fair market value in U.S. dollars in accord with the Form 8938 instructions for each account and asset reported

Convert to U.S. dollars using the end of the taxable year exchange rate and report in U.S. dollars.

Use periodic account statements to determine the maximum value in the currency of the account.

Convert to U.S. dollars using the end of the calendar year exchange rate and report in U.S. dollars.

When Due?

By due date, including extension, if any, for income tax return Received by June 30 (no extensions of time granted)

Where to File?

File with income tax return pursuant to instructions for filing the return File electronically through FinCENs  BSA E-Filing System. The FBAR is not filed with a federal tax return.


Up to $10,000 for failure to disclose and an additional $10,000 for each 30 days of non-filing after IRS notice of a failure to disclose, for a potential maximum penalty of $60,000; criminal penalties may also apply If non-willful, up to $10,000; if willful, up to the greater of $100,000 or 50 percent of account balances; criminal penalties may also apply

Types of Foreign Assets and Whether They are Reportable

Financial (deposit and custodial) accounts held at foreign financial institutions

Yes Yes

Financial account held at a foreign branch of a U.S. financial institution

No Yes

Financial account held at a U.S. branch of a foreign financial institution

No No

Foreign financial account for which you have signature authority

No, unless you otherwise have an interest in the account as described above Yes, subject to exceptions

Foreign stock or securities held in a financial account at a foreign financial institution

The account itself is subject to reporting, but the contents of the account do not have to be separately reported The account itself is subject to reporting, but the contents of the account do not have to be separately reported

Foreign stock or securities not held in a financial account

Yes No

Foreign partnership interests

Yes No

Indirect interests in foreign financial assets through an entity

No Yes, if sufficient ownership or beneficial interest (i.e., a greater than 50 percent interest) in the entity. See instructions for further detail.

Foreign mutual funds

Yes Yes

Domestic mutual fund investing in foreign stocks and securities

No No

Foreign accounts and foreign non-account investment assets held by foreign or domestic grantor trust for which you are the grantor

Yes, as to both foreign accounts and foreign non-account investment assets Yes, as to foreign accounts

Foreign-issued life insurance or annuity contract with a cash-value

Yes Yes

Foreign hedge funds and foreign private equity funds

Yes No

Foreign real estate held directly

No No

Foreign real estate held through a foreign entity

No, but the foreign entity itself is a specified foreign financial asset and its maximum value includes the value of the real estate No

Foreign currency held directly

No No

Precious Metals held directly

No No

Personal property, held directly, such as art, antiques, jewelry, cars and other collectibles

No No

‘Social Security’- type program benefits provided by a foreign government

No No



Michael Nelson

Michael has great depth of experiences and skills that evolved from over 35 years of representing international businesses, executives, expatriates and multi-national families. From these years of successful legal representations of CEOs of Fortune 500 Companies to family clients with needs from complex estate planning to international trusts and private foundations. He is committed to his clients, always finding better alternatives or options for his clients. Dedication to the client is synonymous with his name.