September 26, 2012 –
FATCA sparks interest from U.S. taxpayers living abroad in new streamlined disclosure program

The U.S. Treasury Department’s and the Internal Revenue Service’s (“IRS”) implementation of the Foreign Account Tax Compliance Act (“FATCA”) is fast approaching. Under FATCA, the IRS will obtain information from foreign financial institutions (“FFIs”) about their U.S. customers. Given that some of these U.S. customers have neglected to timely file U.S. income tax returns or Reports of Foreign Bank and Financial Accounts (“FBARs”) with the IRS in the past, these customers have expressed concern to FFIs regarding both the upcoming FATCA reporting regime and their potential past U.S. income tax liabilities.

Streamlined filing compliance procedures for nonresident, nonfiling U.S. taxpayers

In response to inquiries by their U.S. customers who live outside the U.S., FFIs should be aware of the New Streamlined Filing Compliance Procedures for Non-Resident U.S. Taxpayers (“Streamlined Filing for Non-Residents Procedure”) that took effect this month as a potential option for some of their U.S. customers. The Streamlined Filing for Non-Residents Procedure is available to non-resident U.S taxpayers (including, but not limited to, dual citizens) who have resided outside of the U.S. since January 1, 2009 and who have not filed a U.S. tax return during the same period.

Under the Streamlined Filing for Non-Residents Procedure, taxpayers will be required to file delinquent tax returns, with applicable related information returns such as Forms 3520 or 5471, for the past three (3) years and to file delinquent FBARs for the past six (6) years. Payment for the tax and interest must be remitted along with the delinquent returns. The Streamlined Filing for Non-Residents Procedure will allow these taxpayers to become tax-compliant, without necessarily facing penalties, if they are low-compliance risk taxpayers.

Undoubtedly, FATCA will bring about an increase in voluntary disclosures under the Streamlined Filing for Non-Residents Procedure. In light of the foregoing, certain FFIs have determined that in raising awareness about these types of programs amongst their U.S. customer base not only will they be strengthening their existing relationship with such customers; they will also make the transition to FATCA a much smoother one for all parties involved.

For more information about the Streamlined Filing for Non-Residents Procedure and similar voluntary disclosure programs available to Non-Filer U.S. Taxpayers, please contact Lu-Ann Dominguez or Alan S. Lederman.

For more information about FATCA and FFIs’ obligations in connection therewith, please contact Andres A. Fernandez or Gabriel Caballero.