As details emerge about the Foreign Account Tax Compliance Act (FATCA), taxpayers face the potential for duplicate reporting and steep penalties for non-compliance. FATCA seeks to close many of the loopholes allowing US taxpayers to hide assets overseas. Part of this is accomplished by taxing foreign banks that choose not to share information about US account holders.

One of the largest concerns is the possibility for several large taxpayers to file duplicate forms for compliance. For example, taxpayers with offshore accounts in excess of $10,000 are currently required to file a Report of Foreign Bank and Financial Accounts. FATCA would separately require taxpayers to report accounts of $50,000.

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Effective October 1, 2010, the Large and Mid-Size Business (LMSB) division of the IRS will change to the Large Business and International (LB&I) Division. This organizational shift is the latest in a series of initiatives aimed at placing much greater emphasis on international compliance for U.S. businesses.

“Executing our international strategy is a top priority, and our work continues to intensify in this area,” said IRS Commissioner Doug Shulman. “Every day, we are moving forward in our international compliance efforts. Bringing together our top international personnel in this new group will help us advance our global tax administration efforts and ensure focus and fairness in a critical area for our nation.”

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Prior to the Fifth Protocol amendments to the Canada-U.S. Income Tax Convention (the Treaty), the Canada Revenue Agency (CRA) held the position that a fiscally transparent U.S. limited liability company (LLC) was not entitled to Treaty benefits because the U.S. LLC was not itself liable to tax in the U.S. and, therefore, not a resident of the U.S. for Treaty purposes.

This had adverse consequences for fiscally transparent U.S. LLCs, including:

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If your business has a foreign bank account or other foreign financial interest, you need to make certain that you comply with reporting rules because the penalties for noncompliance can be substantial.

U.S. persons with a financial interest in or signature authority over a foreign financial account are generally required to file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (“FBAR”) with the Department of the Treasury. The FBAR is due by June 30 for a foreign account in which the aggregate value exceeded $10,000 at any time during the previous calendar year.

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An increasingly global marketplace, coupled with decreased barriers to entry, can make the prospect of international expansion both more alluring and more possible for many businesses. This month, at an event hosted by the Technology Association of Georgia (TAG)’s International Business Society, a panel of industry experts discussed the many pitfalls and best practices of moving business outside the US. The Atlanta Business Chronicle was present to cover the discussion.

Among the panelists were Paul Hamm, President and CEO of Endavo Media; Quinn Frazier, director of international business for UPS; Sergio Pacheco, associate vice president of technology for Equifax; and Cherry Bekaert & Holland’s Bill Elliott. Topics ranged from the understanding necessary to navigate cultural divides, to the legal implications of conducting multinational affairs.

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Cherry, Bekaert & Holland, L.L.P. (CB&H), one of the largest regional public accounting and consulting firms headquartered in the Southeast, is pleased to announce the addition of Matthew Legg as Senior International Tax Manager. Based in the Washington, D.C. office, Matt assists the Firm’s clients in understanding the foreign and domestic tax considerations associated with their global business operations.

A member of the Firm’s National Specialty Tax Practice, Matt assists clients firmwide in identifying, developing, and implementing international tax planning strategies designed to maximize cash tax savings. In this new role, he provides specialized services addressing a wide array of international tax concerns, including: foreign expansion assistance; transfer pricing; tax treaty analysis; foreign holding companies; acquisitions and divestitures planning; cash repatriation; foreign tax credit planning; U.S. anti-deferral rules, and international tax compliance projects.

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CB&H’s Bill Elliott, Firm Director of International Tax Services, will be a panelist at the International Business Council’s upcoming event “Going Global: A Path to Growth in the New Decade” on Wednesday, April 21, 2010.

Bill will join executives from Tata Communications, ICF International, U.S. Export Assistance Center and others as industry experts share their experiences related to identifying opportunities for growth, real world challenges and critical preparation.

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On March 18, 2010, President Obama signed into law the Hiring Incentives to Restore Employment (HIRE) Act (HR 2847). This legislation, estimated to cost $18 billion, will be paid for, in part, by tighter enforcement and increased reporting and withholding requirements associated with foreign accounts and certain payments to foreign financial institutions.

INDIVIDUAL DISCLOSURES FOR “SPECIFIED FOREIGN FINANCIAL ASSETS”

The HIRE Act imposes additional reporting and disclosure requirements for U.S. persons with any interest in a “specified foreign financial asset” if the aggregate value of all such assets exceeds $50,000. These reporting requirements apply to any domestic entity formed or availed of for purposes of holding directly or indirectly “specified foreign financial assets” as if the entity were an individual taxpayer.

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Earlier this month, the Financial Crimes Enforcement Network (FinCEN), part of the Treasury Department, released proposed amendments to the Bank Secrecy Act (BSA) regarding the implementation of the Report of Foreign Band and Financial Accounts (FBAR). The FBAR form must be filled out by United States persons with a financial interest in, or signature or other authority over, reportable financial account in foreign countries. The proposed rule clarifies the definition of several of these conditions.

Any FBAR filings must be received by the Treasury Department no later than June 30, 2010.

United States Person – A citizen or resident of the US, or a domestic entity (including corporations, LLCs, partnerships and trusts) organized under the laws of the US is considered a United States Person, and eligible for FBAR filing. A resident is essentially the same as defined by the Internal Revenue Code.

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The international tax professionals at Cherry, Bekaert & Holland recently posted a brief individuals guide to Afghanistan income tax law.

It is recommended that government contractors performing work within Afghanistan consult legal and/or tax council to determine if they are covered as an “administrative and technical staff,” allowing them to be exempt from certain Afghanistan taxes.

Click here to access a pdf of the guide.