Senate panel takes aim at 'gaping loopholes' in FATCA

Americans who have had to deal with the headaches resulting from enforcement of the Foreign Account Tax Compliance Act might tend to disagree with the assessment of the law issued this week by U.S. Senate investigators.

The report came out on Tuesday and the Senate Permanent Subcommittee on Investigations doesn't appear to pull its punches regarding FATCA. Members say the law, which was passed in 2010 with the stated objective of countering suspected tax evasion by Americans using offshore bank accounts, has "gaping loopholes" that shell corporations could easily take advantage of.

Specifically, the subcommittee says that FATCA rules implemented by the Obama administration allow foreign banks to forego reporting about accounts held by foreign shell entities, even if American taxpayers own and control them. The panel says the law doesn't allow for such largesse and that the Treasury Department and the Internal Revenue Service should be taking steps now to close the loopholes.

A Treasury Department spokeswoman, commenting on the report, said this week that the implementation rules reflect a desire to strike a balance between strong enforcement without creating too much difficulty for foreign banks.

But some critics unaffiliated with the Senate panel say the criticism of the rules are valid. They say they could actually encourage some U.S. taxpayers to evade taxes through shell companies.

Any confrontation with the IRS over taxes can be fraught with tension and create anxiety. Protection of your rights and resolution of the issues should be a priority and may be most effectively achieved if you consult with an attorney experienced in such matters.

Source: Reuters, "Senate panel faults new U.S. law to fight offshore tax dodging," Patrick Temple-West, Feb. 27, 2014

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