I am going to take a break on this topic for a little while. But before that, here are a few more accounts to help homebound Americans understand why many of their expat fellow citizens are worried about the practical application of the new "FATCA" and "FBAR" laws, as previously recounted here and here. I've added emphasis in several places.
One aspect of the FATCA law not mentioned in your pieces as yet is the issue of joint accounts. If an American has signatory power on an overseas account (and assuming it reaches the relevant limits in equivalent dollar amounts), it must be reported. There are two common cases where this can be a disaster. One is the case of a jointly held account where the American's spouse is a foreign national. As you might imagine, said foreign national might not be eager to hand the IRS 25% of their life savings simply for the fact of not having previously told the IRS that these life savings were in a bank account that is outside the U.S. and for which there might well be (and probably is) no income whatsoever owed to the IRS. I must think that the easiest and probably the most common way out of this dilemma will be for the American spouse to simply relinquish signature authority on the account. This is not something the U.S. government should be forcing to happen.
The same thing applies in the case of a joint business venture of some kind where the American is one of several people with signature authority on a business-related bank account. Naturally the foreign partners would be horrified at the idea of subjecting such an account to the whimsical grabbing of the IRS. And again, we are talking about cases in which the penalty is simply for non-reporting; there is no question of income tax being owed, the penalty is assessed merely for having failed to report the account. As in the case of a marital account, the simple solution is for the American to relinquish signature authority. And as in the case of the marital account, this is not something that the U.S. government should be forcing to happen to its overseas businessmen, IMO.
The biggest problems stemming from this law are here in Canada because there are so many dual American/ Canadian citizens. Canadian banks are beside themselves with worry and exasperation because they do so much business in the U.S. that they can't afford to offend the IRS but complying will break our privacy laws...
There is another problem connected to this, namely who is, or is not, an American citizen. My husband and I were both born in the U.S. to Canadian citizens but have lived in Canada most of our lives. When we came of age, in the 1950's, dual citizenship was not available so we both elected to be Canadian citizens because we were, after all, Canadians. We applied for and received Canadian citizenship certificates and believed that we were not American citizens.
However, years later, your country decided to rescind this law so that dual citizenship became possible. Moreover, you made it retroactive. So now, all sorts of people who never considered themselves American citizens are told that they are citizens and have to follow American tax law. As far as we are concerned, the IRS can betake itself to some nether region, given that we are getting too old to care but there are others who are much younger who do care. Some say they will reject their American citizenship but are told they can't do that until they settle their tax problems.
I don't know how this is going to work out but I do know that it makes me very angry. Americans are great people but clueless about other countries, especially Canada; your government is something else again.
After the jump, a view from the Baltic.