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As Americans prepare to celebrate Independence Day, the Internal Revenue Service has unleashed a massive new regulation under the guise of reducing tax evasion. The Foreign Account Tax Compliance Act - FATCA - took effect July 1, imposing substantial new compliance requirements and paperwork burdens on foreign financial institutions, which must now track the financial activity of U.S. citizens and report that information to the IRS. While there is scant evidence that this regulation will add significantly to federal revenues, there is more than a sinking feeling that the new law infringes upon the civil liberties of American citizens.
Like many of the edicts emanating from Washington recently, FATCA came into being with little public debate or analysis of its impact. Instead, this mammoth expansion of IRS power was tucked into a 2010 jobs bill, the HIRE Act, and passed without fanfare. And like something that NSA might concoct, the new regulations require information-gathering on American citizens on a global scale. Just how much information is the IRS gathering? Here is what foreign financial institutions are required to provide for compliance under FATCA:
The name, address, and TIN [Tax Identification Number] of each account holder that is a specified U.S. person;
The name, address, and TIN of each substantial U.S. owner of any account holder that is a U.S.-owned foreign entity;
The account number;
The account balance or value (determined at such time and in such manner as the Secretary provides); and
The gross receipts and gross withdrawals or payments from the account (determined for such period and in such manner as the Secretary may provide).
The burdens and complexities of FATCA are already generating unintended consequences that are hurting Americans living abroad.