And Russia will continue to laugh, as they know just how crooked the IRS is. As the US tries to punish Russia for its actions in Ukraine, the Treasury Department is deploying an economic weapon that could prove more costly than sanctions: the IRS. I bet Putin is trembling in his boots. This summer, the U.S. plans to start using a new law that will make it more expensive for Russian banks to do business in America.
All Russia has to do is find other countries to do business with.
“It’s a huge deal,” says Mark E. Matthews, a former IRS deputy commissioner. “It would throw enormous uncertainty into the Russian banking community.”
Dream on, no one is afraid of the IRS anymore, let alone, Russia.
Long before the Ukraine crisis, Congress approved the law in 2010 to curb tax evasion that relies on overseas accounts. Now, beginning in July, U.S. banks will be required to start withholding a 30 percent tax on certain payments to financial institutions in other countries — unless those foreign banks have agreements in place to share information about U.S. account holders with the IRS. The withholding applies mainly to investment income.
I’d tell Obummer to shove it.
Russia and dozens of other countries have been negotiating information-sharing agreements with the U.S. in an effort to spare their banks from such harsh penalties.
But after Russia annexed Crimea and was seen as stoking separatist movements in eastern Ukraine, the Treasury Department quietly suspended negotiations in March. With the July 1 deadline approaching, Russian banks are now concerned that the price of investing in the United States is about to go up.
The new law means that Russian banks that buy U.S. securities after July 1 will forfeit 30 percent of the interest and dividend payments. The withholding applies to stocks and bonds, including U.S. Treasuries. Some previously owned securities would be exempt from the withholding, but in general, previously owned stocks would not.
Private investors who use Russian financial institutions to facilitate trades also face the withholding penalty. Those private investors could later apply to the IRS for refunds, but the inconvenience would be enormous.
The withholding would expand in 2017, if there was still no information-sharing agreement. At that point, if investors sold stocks or bonds, U.S. banks would be required to withhold a 30 percent tax on the gross proceeds from those sales. The law would also snag big global banks with subsidiaries that don’t have agreements with the IRS to share information. At first the withholding could be limited to the subsidiaries. But eventually, if any part of a large global bank refused to comply with the information-sharing requirements, the entire bank would be penalized.
“That keeps an institution from deciding that it’s going to register its entity in Germany but not register the entity it has in Switzerland,” said Denise Hintzke of Deloitte Tax.
Ten to one says Putin already has a counter plan to the releasal of this information. Boy is Obummer ticked off that he’s been humiliated.
As a result, other countries most likely will be discouraged from doing business with the US.
More than 50 countries have reached agreements with the U.S. to share tax information about U.S. account holders. The list includes countries famous for bank secrecy, such as Switzerland and the Cayman Islands. That’s none of Obummer’s business, since everything about him, ie, his records are sealed.
The 2010 law is known as FATCA, which stands for the Foreign Account Tax Compliance Act. It was designed to encourage — some say force — foreign banks to share information about U.S. account holders with the IRS, making it more difficult for Americans to use overseas accounts to evade U.S. taxes.
Under the law, U.S. banks that fail to withhold the tax would be liable for it themselves, a powerful incentive to comply. On Friday, the Treasury Department issued guidance saying it will give U.S. banks a temporary reprieve. As long as U.S. banks make a good-faith effort to withhold the proper tax, they won’t be liable for mistakes until 2016.
I wonder, just how many members of congress have hidden accounts….does this mean these other countries have to give up the personal information on them?
The Treasury Department said Russian banks can still apply on their own to share information about U.S. account holders directly with the IRS. But those banks may risk violating local privacy laws by sharing such information with a foreign government.
Now how will Obummer handle it, if one gives up their citizenship? How does he figure the law applies then?
Russian banks face another hurdle: time. In June, the Treasury Department is scheduled to release a list of foreign banks that are exempt from withholding. If your bank isn’t on the list, U.S. banks are required to start withholding 30 percent of your payments in July.
So does this mean, if you aren’t an Obama team player, you might find your bank on the list?