30%

Has anyone figured out how to keep the IRS from taking 30% of any money transfered here from the US starting Jan 1, 2013. See H.R. 2847 Title V Section 1474
Foreign Account Tax Compliance Act?

Here is some info and the answer is maybe LOL.

Z



The provisions are found in a jobs’ bill – H.R. 2847 (also known as the HIRE Act), which became law in March 2010. Title V of the law largely encompasses the Foreign Account Tax Compliance Act of 2009, or “FATCA”, also referred to as the “Offset Provisions” of the bill. On their face, these provisions appear intended to force US tax compliance with regard to foreign accounts and transactions between the US and individuals in countries that are considered to be tax havens (meaning the banks and financial institutions in those countries do not share account information with US authorities). Section 1474 refers to “withholdable payments” to Foreign Financial Institutions that don’t meet United States standards for information sharing. The law requires that any financial institution (US or foreign) remitting any foreign payment to a bank in such a country withhold 30 percent of the amount of such payment and remit that percentage to the Internal Revenue Service (IRS) as a tax.

A withholdable payment is defined as any payment of interest, dividends, rents, salaries, wages, premiums, annuities, compensation, enumerations, emoluments, and other fixed or determinable annual or periodical gains, profits and income, if such payment is from sources within the United States.

On its surface, the withholdable payment is designed to ensure that “pre-tax” monies are not sent abroad without applicable US federal taxes being paid. Looking a little deeper however, the law does two things that go beyond the responsibility of each tax payer to pay what they owe to the IRS.

First, under Section 1474 of the bill, the law makes banks, as a third party, responsible for the enforcement of government tax policy. The banks are liable for the customer’s tax obligation on transferred funds, if they don't withhold the required 30 percent to cover any possible tax liability. The banks essentially become the tax police, working for the government as hammers to bring about individual compliance.

Secondly, the same provision holds the banks harmless and indemnifies them if they improperly withhold the 30 percent tax and it is not due.

So, if banks are third-party tax enforcers on the one hand, and completely indemnified from improper tax withholding on the other, then it is clear what banks will do. It would be difficult in any case for banks to determine the difference between a pre-tax remittance versus a post-tax payment. They will be inclined to simply withhold 30 percent tax on all foreign payments to banks and countries that do not have what are considered “information sharing” agreements with the United States.

The net effect of this provision will be to greatly discourage any financial transactions between US banks and foreign banks not entering into information sharing agreements with the United States government. To wire transfer $100,000 to Panama, for example, to purchase a piece of real estate, one would have to agree to send $142,000 so that a net $100,000 would reach its destination. Who would be inclined or willing to pay 30 percent more in a global transaction in order to satisfy these requirements? Almost nobody.

International payments beginning January 1, 2013 will be subject to these new withholding requirements. The delay of over two years is designed to force foreign governments (especially those in tax havens) to enter into agreements with the United States, as Panama is in the process of doing now.

Secondly, the law will put extreme pressure on individual foreign banks to enter into private-sector agreements with the IRS to disclose all United States account holders, or risk having all US transactions moving to their individual bank being subject to 30 percent tax withholding.

In addition to those intended effects, I believe the new law will have two unintended consequences as well. First, both US and non-US persons fearing how the implementation of the new law will impact them after January 1, 2013, may be inclined to move asserts outside the United States before the effective date, meaning we could see significant capital flight from the US in the next 23 months.

Foreign financial institutions may drop US clients as one way to avoid being subject to the 30 percent withholding requirement, as well as avoiding the US regulatory compliance costs (again, probably an intended consequence of the law). These compliance costs to worldwide bankers have been estimated by the Swiss Banking Association to total nearly $40 billion dollars annually, while the measure is projected to generate only around $8 billion to the US Treasury in increased taxes.

Additionally, foreign financial institutions and many foreign, private sector interests may simply stop conducting their business in dollars. A dollar-denominated transaction will ultimately pass through a US Federal Reserve Bank and potentially subject the transaction to the risk of a US bank levying a 30 percent withholding tax on any payment.

One method for foreigners to ensure that this would not happen would be to designate the contract in a currency other than US dollars. So if a German businessman for example contracts with his Japanese counterpart to do a deal to sell equipment in China, the best way to ensure that the transaction would not be subject to US withholding tax would be to designate the contract in Euros, Yen, Won or any other currency than dollars. Those currencies would not pass through a US Federal Reserve Bank and therefore not become subject to the backup tax regime. Russia and China announced at the end of last year that they would no longer be doing trade transactions in US dollars but rather in their own currencies. The two countries indicated that there was too much risk in utilizing the dollar for their trade.

As more global transactions (especially oil, gold and other commodities) are done in non-dollar currencies, the global demand for the US dollar will decrease and it will no longer be the world’s reserve currency. As demand decreases, the value of the dollar will surely fall as well. So while exchange and private capital controls may well have been envisioned in the HIRE Act, additional unintended consequences of immediate capital flight and long term devaluing of our currency through simple supply-and-demand manipulations were probably less well-considered.

It is unlikely that a new Congress in January 2011 or even a new President in January 2013 will undo the effects of this damaging legislation. For individuals, there exists just under two years to plan for the new law and take steps to avoid the consequences, both intended and unintended.

Or change your name to Mitt Romney....

Don't confuse withdrawling your money with a distribution
of money from your IRA for example. They are trying to tax
non taxed income like IRA/401K before it leaves the country.
Now one solution for the banks since they are being held
responsable is to make everybody withhold. This is a nice
safe thing and they can make money off your money on
the float. Such a nice thing stuffed into a jobs bill. I
predict time will tell what this all means regarding all us.

Z

They withdraw 10 % on my husband IRA distribution and 30% from my distribution because I am an alien....

Is a check written in USD, and converted to pesos considered a transfer? I have several friends that live on SS, they write checks in USD, and deposit into their Multiva Account......how might they be affected?

Thank You in advance.

brigitte wrote:They withdraw 10 % on my husband IRA distribution and 30% from my distribution because I am an alien....

Just to clarfify; since approximately two years ago, our U.S. bank (PNC Bank in Pennsylvania through Chrales Schwab) has been withholding 30% of all IRA distributions made by my wife who is a French citizen residing in Mexico and 10% of IRA distributions I make as a U.S.citizen residing in Mexico. As a result, we need to calculate the net amount of dollars we wish to immediately distribute and distribute an incremental amount for income tax withholding purposes. Most of the monies withheld will, of course, be refunded to us as an income tax refund after we file our tax returns the following year. We always get a substantial refund since they started doing this as our tax rate on our annual income, which is derived solely from IRA withdrawals and social security benefits, is well under 30%. So far, the SSA has not started withholding the monthly social security benefits from either of us even though we have long informed them we have resided in Mexcio for over a decade and have no address in the U.S. even though we do have a joint U.S. bank checking acount used to deposit all IRA distributions and social security benefits.

For years, we instructed our investment house not to withhold any funds from our IRA distributions and they did not. However, sometime in 2009 or 2010 the IRS started requiring our bank to make these withholdings from all distributions. Maybe it´s just as well that they now require these funds be withheld at the time of any distributions since, we were paying penalties for failure to make quarterly voluntary payments to the IRS for estimated income tax liability during any given year - a difficult calculation to make since our distributions have historically been sporadic and have varied significantly from year to year.

Since the IRS only requires a 10% withholding from my IRA accounts at distribution at present and 30% from my wife´s acccounts, we try to distribute only from my accounts during the first part of each tax year and from my wife´s accounts during the latter part of the year. We don´t mind the bank withholding portions of our IRA distributions per se, it´s the fact that they refuse to pay a market rate of interest on funds withheld that irks us. Despite the fact that we are being screwed to the wall on an involuntary investment with the IRS, we do like getting that nice sum of money in a refund every spring and the amount of the refund can be quite significant. If they now start withholding 30% of my IRA distributions as well, we´ll be getting a hell of a refund annually. That´s life. Can´t fight city hall.

[quote="Zedinmexico"]Don't confuse withdrawling your money with a distribution
of money from your IRA for example. They are trying to tax
non taxed income like IRA/401K before it leaves the country.
Now one solution for the banks since they are being held
responsable is to make everybody withhold. This is a nice
safe thing and they can make money off your money on
the float. Such a nice thing stuffed into a jobs bill. I
predict time will tell what this all means regarding all us.Z[/quote]

Further clarification regarding Zed´s quoted comment shown here and my posting immediately preceding this one.

We are subject to Federal income tax withholding on IRA distributions at 10% for me as a U.S. citizen and 30% for my wife as a French citizen since we live full time in Mexico and have no U.S. address despite the fact that our IRA accounts are held by a U.S. investment house and commercial bank so the issue is not whether your bank or investment account is domiciled in the U.S. or overseas but the simple fact that you, the recipient of IRA distributions (and social security benefits) live overseas with no U.S. address.This is a new requirement started sometime in 2009 or 2010 and before that the decision as to whether or not to designate any withholding was up to us on a purely voluntary basis.

The IRS does not care that my wife worked as an executive in the U.S. for over 30 years and has always faithfully paid substantial U.S. income taxes to the IRS every year like clockwork from 1971 through 2011 - 40 years - because she still might try to reneg on her obligations to pay income taxes on her IRA withdrawals and flee to Venezuela, Havana or some such place. Also, what the hell, they now get to use 30% of her IRA distributions for months at a time and multiply that windfall for the U.S. Government by millions of taxpayers so penalized with no just compensation for the free use of their money for months on end.

Our only income is Soc. Sec. which is deposited directly into our checking account at a US credit union. We withdraw the funds through ATMs here. Does anyone know if our withdrawals are subject to this tax?

[quote="barbicheesecake"]Our only income is Soc. Sec. which is deposited directly into our checking account at a US credit union. We withdraw the funds through ATMs here. Does anyone know if our withdrawals are subject to this tax?[/quote]

We speak here of a 30% withholding requirement, not a tax, per se. If you are a foreigner (that is, with non-resident alien status) in the U.S. and living in another qualifying country such as Mexico but entitled to social security benefits you have earned because you worked in the U.S., you may be subject to the 30% withholding from your monthly social security benefit deposited to your U.S. account if the SSA notices you live full time overseas with no U.S. address. However, we have never been subjected to withholding applied against social security benefit payments we have been colllecting for years. Remember that this is not a tax but a withholding requirement and any funds they may withhold from your benefits in the future (if they do) will be refunded you when you file your FIT Return the following years. For now, silence is golden as long as you do not lie on the annual SSA questionnaire they send you if you reside overseas.

We have other income in addition to social security benefits but if you don´t you may not pay any tax or very little tax on social security benefits so 30% withholding would be punitive and might cause a hardship for seniors living solely on social security. This punitive withholding seems illogical if ever applied but who said the SSA or IRS were run by logic?

Thanks for the clarification. This year was the first year that we didn´t need to file taxes because of our low income.

barbicheesecake wrote:Thanks for the clarification. This year was the first year that we didn´t need to file taxes because of our low income.

I think you need to file your taxes regardless of your income. If your income is low, you will pay no tax, but there are major penalties for failure to file. I'm assuming you are talking about USA IRS.

If you want to transfer large sums, the easiest thing to do is to set up a US corporation. Move the money to that checking account, then wire the money anywhere you want. Corporations are not subject to that, just individuals.

I'm not sure, but I would think a trip to a US bank for a certified check which you stick in your pocket and bring back would work OK also.

I think that there's a lower limit which is not taxed but I would have to look it up.

If I were really sneaky and had a Laredo address, I might pay my VISA bill and add an extra $100,000 as a "mistake". They will cut you a check for the overpayment and mail it to you. It takes 60 days or so but better than 30%.

If you are married, go set up 3 accounts (yourself, her, joint) and get 3 ATM cards good for $1000 a day. Find an ATM attached to a bank, withdraw the max every day and walk into the bank and make a daily deposit. $90K in 30 days.

jackak10 wrote:

barbicheesecake wrote:Thanks for the clarification. This year was the first year that we didn´t need to file taxes because of our low income.

I think you need to file your taxes regardless of your income. If your income is low, you will pay no tax, but there are major penalties for failure to file. I'm assuming you are talking about USA IRS.

No there is a low end limit under that you don't have to file.
9500 single
12,500 head of household.

Now other reasons to file even if you are under check form
501 I think it is called.

Z