Wednesday, September 5, 2012

Florida Banks Explain 2013 IRS Reporting Rule For Foreigners

The new rule, which goes into effect Jan. 1, 2013, requires banks to report information to the Internal Revenue Service on non-taxable interest paid on accounts held by non-resident foreign nationals. It applies to accounts that earn more than $10 in interest in a year.

Potentially such information could be shared with the account holders’ home countries, raising privacy concerns among some international account holders. Some fear their home governments might make politically motivated requests for their bank information or that data indicating their wealth will leak out, bankers said.

And those jitters have prompted some depositors to move their money to jurisdictions such as Panama or the Cayman Islands that have stronger privacy laws, said David Schwartz, executive director of FIBA. Anecdotally, he said, FIBA has heard that several million dollars have left Florida for other jurisdictions since the new regulation was passed in April.

“The U.S. banking system is still the safest and soundest place in the world to put your money,’’ said Schwartz. “There is no reason to panic. There is a process by which the information is collected but not automatically exchanged with home countries.’’

It is the IRS that will make the determination on whether to release the information — and only as a part of a tax evasion investigation or something of that nature, said Vega. 

Rev. Proc. 2012-24, 2012-20 I.R.B. 913,  published contemporaneously with the final regulations, provides a list of the countries whose residents will be subject to reporting under the final regulations. The revenue procedure specifically states that the listed countries are those with which the United States has in effect an income tax or other convention or bilateral agreement relating to the exchange of information pursuant to which the United States agrees to provide, as well as to receive, information, and under which the Competent Authority is the Secretary of Treasury or his delegate. 

Accordingly, bank deposit information reported pursuant to the final regulations will be exchanged only with foreign governments with which the United States has an agreement providing for the exchange of information and only when certain additional requirements are satisfied.
The IRS noted that, even when such an agreement exists, the IRS is not compelled to exchange information, including information collected pursuant to these regulations, if there is concern regarding the use of the information or other factors exist that would make exchange inappropriate. 

The revenue procedure also includes a second list identifying the countries with which the IRS has determined it is appropriate to have an automatic exchange relationship regarding interest subject to reporting under the final regulations. The IRS currently exchanges deposit interest information on an automatic basis with Canada.
Residents of countries not on the information sharing agreement list published in the revenue procedure are not subject to reporting under the final regulations. However, the IRS notes that banks can elect to report interest payments to all of their nonresident alien depositors as a way to address any potential burden associated with determining which depositors are subject to reporting. Thus, residents of non-sharing countries can become subject to reporting even though their country of residence is not listed in the revenue procedure.

According to Treasury and the IRS, the extension of the reporting requirement is considered appropriate because of the importance of cooperative information exchange for tax purposes. The information gathered, as a result of information exchange relationships with other jurisdictions, can be utilized by the United States to identify potential U.S. taxpayers that evade tax by hiding income and assets offshore.

If you have questions regarding this New Reporting Requirement, contact the Tax Lawyers at Marini & Associates, P.A. for a FREE Tax Consultation at or or Toll Free at 888-8TaxAid (888 882-9243).

Miami Herald

Rev. Proc. 2012-24,2012-20 I.R.B. 913,



  1. It is important to point out that the new rule applies only to individuals. Therefore, legal entities (e.g., partnerships, foundations, corporations) would be exempt from the new reporting obligations.

    Posted by Carlos Soto Raynal, TEP

  2. Other Reasons for Florida Bank's diminishing deposits?

    We read a newsletter from Foodman CPAs & Advisors ( where they indicate that there are high value accounts where clients have presented their banks with documentation that currently identifies them as U.S. Citizens and/or residents and yet, their banks, have erroneously classified and reported them as Foreign Resident accounts leading to inaccurate IRS reporting.

    Where these banks came clean and reported their non compliance in past reporting and account opening procedures, they would open themselves up to possible reviews and sanctions. Alternatively, they could quietly close these accounts and hope that a Regulatory Examination does not discover these non compliant accounts.

    The clients whose accounts have been closed, are possibly in tax non-compliance. They are U.S. taxpayers whose deposits have been inaccurately reported by their US Bank for a number of years. As U.S. citizens or residents they should quickly get back into compliance through amended returns or Voluntary Disclosure.

    They should not have FBAR issues since their unreport income is NOT from a Foreign Bank Account.

    If you are a US Taxpayer who is non compliant, contact the Tax Lawyers at Marini & Associates, P.A. for a FREE Tax Consultation at or or Toll Free at 888-8TaxAid (888 882-9243).