Thread: The January 1st 2012 30% take on $ wired out of US?

I have read but am not positive about a new law that starting Jan. 1st 2012 the IRS will require banks to automatically withhold 30% of money being transferred out of the US. Is this part of the Free Trade Agreement? So, does this mean that if I have my bank account opened in the begining of Dec.2011 and transfer the bulk of my money that I can avoid this penalty? 30% is a big chunk of money that has already taken a hit from this crap down turn in the economy. And as my mother's pension and SS are direct deposit into a bank in US, she too will be imposed this 30% withhold? I have yet to sit down with my accountant here in the states to find out all the tax ramifiactions I will be facing. With the state of the economy, layoffs & forclosures it is become impossible to live in the US. Now they will be making it impossible to live in Panama if they impose an automatic 30% withholding of money leaving the US. I hope I have this wrong or misinterpeted what was posted in another forum.
Can someone clear this up for me?
Thanks,
Corinna & Pam

i believe it is part of the H.I.R.E. act , google that . and i think i read it does not start until 2013 , but do some research, and yes Corinna you want to get your loot out as soon as you can

Hi and thank you for your reply. I will definitely google the H.I.R.E act. I also just rec'd the same message that it won't go into effect until 2013 which gives me a little breathing space as apposed to a few weeks. I knew something to the effect was going to be implemented in the near future but after reading a warning from some posts on the ex-pat exchange Panama forum early this morning I kinda wigged out when they were tossing around the date of 1/1/13.
Back to packing..........

Hi,

Then would you suggest taking all money out of U.S. before 2013 and deposit it into a Panama bank?

Also, if I have direct deposits of SS, pension, and other income to my U.S. Bank, then I guess I will need to keep everything the way it is and try to get money out of ATM's in Panama from my U.S. Bank? What are other people doing?

Thank you. My first post. Will be moving to David in January 2012.

Warm regards,


Kathy

Don't sweat the hyperbole here... I assume you already file a tax return and will continue to do so. The tough part will be much farther down the road deciding if you want to try and not report additional income earned from foreign sources. With a pension or investment income I think you'll find you pay a LOT less than 30% on a fraction of the income. It'll just be another headache to file, so whats new? An effect of this sort of thing in Panama is that a few of the larger banks wont accept you as a client.This will greatly narrow your choices for banking and investment.

This is all such an new experience in trying to do things like taxes in the US while in Panama. I am sure with time I will get the swing of things. I guess fax and e-mail make help. I am planning on setting up an account with a mail forwarding company that will give me a physical address, scan my mail for me to approve or for them to shred and discard, to accept packages and then repackage them before shipment to me. What company I will use I have yet to choose. There are so many things to do before we arrive in December and so many things to learn. These forums and the people on them have been a tremendous help.

The learning curve is damned near vertical, and it keeps shifting. Welcome to the fun. Ask EdBowers about mail and panama...or search the forum for the headaches and solutions. I use airbox express for my mail forwarding because I'm out of the city and they have a convenient location. Also they will mail USPS letters for $20. Not cheap though. If you receive a lot of mail MBE or Aeropost may be better. Oh... something important. Shipping anything to and fro is prohibitively expensive and you don't get any sort of tax break unless you're already pensionado. Customs here are brutal! You can't even ship sunscreen without a massive hassle and fees. Stick as much as you can at a relatives house or storage and try to find an option later. It's an asspain to look at your things after a few months and throw em out because it's not worth shipping back. Also the climate destroys certain things, worse than florida, so...yeah, come on down and see.

There's been some very good discussions previously on this forum regarding the HIRE Act and the extent to which foreign banks will sign up to compliance with U.S. laws. If I knew how to link, I would! EdBowers at one time attached a memo explaining the law. As pam says, why wait and take a chance.

The following is commentary from our buddies at The Sovereign Society for your reading pleasure (along with my editorial comments):

[ARTICLE:]
Growing numbers of Americans living abroad are renouncing their U.S. citizenship because of the Foreign Account Tax Compliance Act (FATCA) - not to mention the ever more burdensome and complex IRS reporting obligations that now come with the treat of financial and even criminal penalties. The United States is one the few major nations that requires their citizens living abroad to pay income taxes. The only way to end that U.S. tax obligation is to terminate U.S. citizenship. The latest statistics reveal that more than 1,500 Americans living offshore did just that. According to the Federal Register, that’s up from 743 people in 2009 and 235 in 2008.

Jackie Bugnion, director of American Citizens Abroad, a Geneva, Switzerland-based group, says the exodus [Bala Note: These number are not quite what I would call an "exodus"] is a backlash on the part of U.S. expatriates and the offshore financial sector to the radical IRS claim that its jurisdiction extends to every bank and financial institution in the entire world. That extraordinary IRS claim is embodied in FATCA, and was adopted in 2010 by the then Democrat-dominated Congress as part of the Hiring Incentives to Restore Employment Act and signed with approval by President Obama. [Bala Note: aka "HIRE Act"] This law threatens foreign financial banks and financial institutions of all kinds with a 30% withholding tax if they fail to comply with an onerous reporting regime on their U.S. clients.

Dangerous to the U.S. Economy

No hearings were held on this radical proposal and few knew it was even contained within the pending bill - just as its sponsors wanted it. This summer, American Citizens Abroad launched an international campaign to repeal FATCA, which they describe as “misconceived” and “dangerous for the U.S. economy.” This complements a U.S. drive to repeal FATCA led by the Coalition for Tax Competition, of which The Sovereign Society is a member. While the reaction of an increasing number of Americans has been to acquire a second passport and dual citizenship as a prelude to ending their U.S. status, numerous foreign banks have reacted by dumping existing American clients and refusing new ones. [Bala Note: This is exactly what Congress intended--make Americans financial pariahs outside the U.S.!]

As if the threat of FACTA were not enough, the IRS has an active prejudice against U.S. persons with offshore bank accounts and business interests, automatically assuming any American who dares to engage in offshore financial activity is probably a tax evader or worse. Add to that prejudice the arbitrary application of a complex U.S. tax code, plus the attitude that the taxpayer is always guilty until they can prove otherwise.

Preposterous Claims

The IRS makes the preposterous claim that enforcement of FACTA possibly can produce additional tax revenues of US$8 billion over 10 years. At the same time, estimates of the cost of implementing FACTA run into hundreds of billions of dollars, plus at least $10 billion per year for filing requirements. [Bala Note: Evidence of these preposterous estimates is the relatively insignificant collections the IRS has seen from mutliple amnesty programs.] Nonetheless, in a rare instance of official sanity in July, the IRS announced that the original January 1, 2013 effective date for FATCA had been dropped. Under the new IRS schedule, offshore private banks, which face the most onerous IRS requirements under FATCA, will not have to provide details on U.S. clients with accounts with more than $50,000 until 2014. Lower value accounts at private banks do not need to be reported until the end of 2014. Certain other accounts do not have to be reported until 2015. [Bala Note: Don't take this as gospel; regulations could prescribe otherwise at any time.] No doubt what brought about this delay was the firestorm of anti-FATCA American public opinion and a chorus of protests, not only from the international financial and banking industry but also from foreign governments. Canadian treasury officials have attacked FATCA calling it unworkable, far too costly and an unprecedented U.S. intrusion on their national sovereignty. Typical of these foreign complaints was a prediction that if FATCA were imposed on The Bahamas that offshore financial center would drop most of its American clients. [Bala Note: Again, I doubt these complaints bother the U.S. one iota.]

Delay is not the answer to this colossal FACTA mess. Complete repeal is. Much hinges on the outcome of the 2012 U.S. elections, not least of which is the freedom of Americans to do business where they choose. [Bala Note: Don't count on it. Shutting down legitimate foreign investment and impeding capital flow out of the U.S. is something Dems and Republicans will always agree on.]