The government and Cayman Finance hosted a tax seminar Tuesday afternoon intended to let US citizens and others subject to US income tax know about the potential effects of the Foreign Account Tax Compliance Act.
FATCA requires banks and other financial institutions here to report information on accounts held by people deemed US persons to the Internal Revenue Service starting in 2013.
For Americans and others US taxpayers who have diligently and honestly filed their annual income tax returns and the separate declaration of their foreign financial accounts, and paid any taxes due, FATCA really won’t create anything more than a minor inconvenience.
However, for Cayman’s financial institutions and those who haven’t been making the required filings to the IRS or paying any taxes due, FATCA represents an expensive nightmare.
Although the provisions of FATCA will likely change some before the main parts of the Act take effect in 2013, it is doubtful it will see an outright repeal. Cayman’s financial institutions are already preparing for eventualities of FATCA, and American citizens – including Caymanians holding dual citizenship – should do the same.
FATCA will give the IRS direct knowledge of which US taxpayers have assets here, and it will be an easy exercise from there to determine if these people have been making their required filings. You can bet that when the IRS learns of bank accounts held by US persons here who aren’t making their required filings, investigations and trouble will ensue.
Some have complained the Cayman government hasn’t done anything about FATCA, but there is really nothing it could say or do to change the intentions of the US. Indeed, FATCA has riled far bigger entities than Cayman, including the European Union, but it doesn’t appear the US will back down.
What the Cayman government can do, and started to do with the hosting of a tax seminar Tuesday, is to try and educate people who could find themselves in trouble with the IRS about their options, no matter how bleak.