People who keep some of their money in foreign banks or investments had better make sure they are reporting that income to the proper tax authorities. The IRS has begun exchanging taxpayer information with their colleagues in as many as 34 other countries, The Wall Street Journal reports.
Beginning on Sept. 30, a new IRS program involves sharing things like a taxpayer’s name, address, tax ID number, account numbers and balances with foreign tax officials. The program is the result of the Foreign Account Tax Compliance Act, or FATCA. Congress passed FATCA in 2010, after it came to light that financial firms abroad, especially in Switzerland, were encouraging Americans to hide their money in foreign countries to avoid paying taxes on it.
The IRS won’t say how many countries actually have received information so far. This list of countries eligible for data exchanges includes nations as far-flung as Australia, Germany, South Africa and India. The IRS says that it will only share info with foreign government that meet “stringent safeguard, privacy and technical standards.”
The discovery that a taxpayer did not report all of his or her taxable income, and put some of it in an overseas account instead, could lead to serious problems with the IRS. Many people in this situation did not purposely try to be deceitful. They simply did not understand the law and made a mistake. A good way to avoid this unfortunate result is to consult with a tax attorney with a deep understanding of the law first.