Working Abroad - U.S Tax compliance drives expats to despair of U.S.

American expatriates who are employed overseas are expected to file tax returns with the Internal Revenue Service (IRS), even if they do not owe any taxes in the United States, or face penalties.
Starting in January 2013, the Foreign Account Tax Compliance Act (FATCA) will require banks across the globe to disclose details of accounts containing at least $50,000 belonging to U.S. clients, or be subject to a withholding tax.
The legislation seeks to prevent the evasion of more than $8 billion in taxes over the next 10 years. Some individuals involved with the initiative believe it will generate much more, but will catch unawares many U.S. citizens. It may also put at-risk individuals who knew they were bypassing the filing rules yet could not afford professional help for filling out these forms, which generally costs about $2,000 per form, says American Citizens Abroad.
Meanwhile, a voluntary disclosure initiative launched in February will charge citizens penalties of a fourth of the money in their bank account. In early June, however, the IRS reduced the penalty rate for failing to file to 5 percent of assets for some U.S. citizens living overseas, although the provision may not be applicable to Americans living in the United Kingdom and Hong Kong with offshore income.
Many Americans are worried that banks will abandon U.S. clients to reduce their FATCA compliance costs.

(Financial Times 12/06/11)

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