Tuesday, July 15, 2014

Fatcats and FATCA



FATCA is the Foreign Account Tax Compliance Act, and is now fully in effect

Basically, the US Government has bullied foreign banks into reporting American citizens who keep accounts of more than $50,000. (Some banks have simply responded by closing bank accounts owned by Americans.) 

US Citizens individually with more than $50,000 in a foreign bank account are required to report it, with prison and fines a possible outcome if you don't.

Even RUSSIAN banks are reportedly complying with this.

So what's the reaction to this, here in the world of TEFL?

It has raised a few eyebrows, but only a few.

Most of the English teachers in the world won’t be affected by it – most English teachers are lucky to have even $1000 in the bank.

(I suppose you could do the old trick of having many bank accounts with less sthan $50,000 in them, if you really needed to.)

Now here at this place, we actually make pretty significant salaries, but I’ve just had my employers – actually a contracting company, rather than the actual state-owned company – send all my money back to my American bank account. (They gave me my first two paychecks in cash, and since I spend very little money here I just spent that for food and such and I use credit cards when I travel.)

I have to say though, America has a comparatively very generous foreign earned income exclusion – about $98,000 this year, I think – so you don’t really have to pay taxes on foreign earned income unless you make more than that. So there’s no reason not to send the bulk of it back to America anyway. It’s not like your money is any safer in a bank in Europe – look at Iceland or Cyprus or the LIBOR bullshit in Britain. Russia recently had a spate of bank failures, too. American banks are as safe as anywhere (which is to say, not particularly.)

There have been record numbers of Americans giving up their citizenships, recently -- the people who are giving up their citizenships are mostly people married to foreigners who make a lot of money, like more than $100,000 a year kind of money. 

As an English teacher, it’s basically not that great an idea to give up your American passport, which is one of the only things that makes you employable. Having a British or American passport at this job, for example, gets you a better salary, no matter how awful your accent is. 

As for my colleagues here, some of them just ignore the foreign bank account problem; nobody I know has had an issue with it yet. Some guys just spend all their money, buying foreign property or whatever (which has its own tax issues);  some put their money in their wife’s name in another country. (Fine if you trust your wife I guess.)


There would be various ways around the law,  I suppose – you can always incorporate and make a shell company that has offices in Dubai or whatever. Even cheap hotels in Dubai have brochures about companies that will help you do that. 

So again, get the stupid idea out of your head that you're somehow going to be OFF THE GRID as an English teacher, although of course you will likely be so poor no one will care about you, it's true. 









6 comments:

Anonymous said...

I think you're a bit mistaken on the numbers. If you have the aggregate sum of 10,000 dollars in foreign bank accounts, you are required to inform the US government about every single one of them. (FBAR)

That means even 9,000 dollars in one and 1,001 in another one and you are supposed to register both.

brian said...

The reporting requirements for bank accounts have been in effect for a long time, under the FBAR form . FATCA applies primarily to banks, who are scared shitless they'll be docked 30% of all their US-based payments. Essentially, the FATCA rules require the banks to report you at any time, so the idea of a number Swiss account is gone forever for Americans.

Anonymous said...

Take your check and cash it - buy physical gold - coins or bullion. Find a place to hide it; a safety deposit box should suffice, but there are plenty of options for this. Safe, highly liquid, reasonably profitable for ST or LT holdings. Problem solved.

The smartest Colombian drug dealers did this (and art), and many still have their holdings. The dumber ones (most) bought property, securities, cars, boats, airplanes, etc. Its hard for the tax authorities to chase down assets that have no record of ownership - even in these insane days.

englishteacherx said...

I originally thought it was $10,000 also but the links provided to an article in Forbes and the IRS website all say $50,000.

englishteacherx said...

http://www.irs.gov/Businesses/Corporations/FATCA-Information-for-Individuals

Bob said...

Anonymous is correct. File the FBAR, due June 30th, for accounts totaling $10,000+ USD. File the FATCA with your annual income tax return for accounts totaling $50,000+ USD. Apparently if you file the FATCA you're supposed to file the FBAR as well.

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Report-of-Foreign-Bank-and-Financial-Accounts-FBAR

http://www.irs.gov/Businesses/Comparison-of-Form-8938-and-FBAR-Requirements