US Taxes for Expats in Switzerland
Switzerland has long been known as a tax haven, making it highly attractive to many US persons and business owners. However, the financial policies which have made Switzerland famous among the “Big Seven” have been undergoing dramatic changes during the previous decade, and particularly during the past few years. Even prominent Swiss banks have been subject to closures following US tax probes into allegations of aiding and abetting tax evasion, and through the IRS’ aggressive implementation of FATCA, or the Foreign Account Tax Compliance Act, numerous US persons have found themselves confronted with civil penalties, criminal investigations, and prison time.
With Switzerland’s financial landscape changing so rapidly, it has become more important than ever for US expatriates to be vigilant, diligent, and timely in their full compliance with US tax laws. CPA Ted Kleinman has over 20 years of experience helping expatriates resolve their tax matters abroad, and specializes in handling matters of international tax law. Whether you are concerned about unfiled taxes, need help with FATCA or FBAR, or simply have questions about how to reduce your liabilities and maximize your deductions, the knowledgeable tax professionals at US Tax Help are here to assist.
To arrange for a private consultation, call CPA Ted Kleinman today at (800) 810-9312.
FATCA Compliance: Filing Requirements for Individual Taxpayers
FATCA is a relatively recent development, having only been introduced in March of 2010. But while just a few short years have passed since FATCA was enacted, in that brief time its provisions have significantly bolstered the tax reporting requirements for overseas US persons. Essentially, FATCA requires that certain US taxpayers must report foreign financial accounts and other offshore assets, with the IRS summarizing FATCA’s ultimate goal as “[targeting] tax non-compliance by US taxpayers with foreign accounts.” So who needs to file?
Generally speaking, FATCA applies to any US taxpayer whose foreign financial assets — including assets held in Switzerland — have an aggregate value exceeding the threshold of $50,000. However, marital status and place of residence can also affect FATCA reporting requirements. More specifically, you must also comply with FATCA if (1) your assets exceed $200,000 in value, (2) you are single or filing separately from your spouse, and (3) and you reside abroad. If you are married and filing a joint return, you must file if the total value of your assets exceeded either:
- $400,000 on the final day of the tax year.
- $600,000 at any point during the tax year.
If you think you may meet any of the above FATCA requirements, it is highly advisable that you consult with an experienced CPA for assistance with an accurate and timely filing of Form 8938, which must be submitted to the IRS with your annual income tax return. Be warned that if your filing is inaccurate, or you simply fail to file, you may face exorbitant financial penalties for noncompliance. In the event of criminal prosecution, you could even be incarcerated.
Do You Need to File an FBAR for a Swiss Bank Account?
While FATCA and FBAR (Report of Foreign Bank and Financial Accounts) are both oriented toward minimizing tax evasion and the concealment of assets, it is important to note that FATCA is not synonymous with and should not be confused with the separate filing of FBAR. As an American expat in Switzerland, you must file an FBAR if you meet the following criteria:
- You are a US person with either signature authority over or financial interest in one or more financial accounts outside the US (including Switzerland).
- The aggregate value of your assets exceeds $10,000, or exceeded $10,000 at any point during the year to be reported. Note that this $10,000 threshold is much lower and therefore easier to meet than FATCA’s more stringent thresholds.
In addition to individual taxpayers, such as US residents and citizens, FBAR requirements also extend to limited liability companies, partnerships, and corporations, as well as estates and trusts originating in the United States. While there are many FBAR exceptions, it is always prudent to confirm your status and obligations with an experienced tax professional in order to avoid preventable noncompliance pitfalls.
Should US Expats to Switzerland Enter the IRS Offshore Voluntary Disclosure Program (OVDP)?
For certain expats, participation in the IRS’ Offshore Voluntary Disclosure Program (OVDP) may offer a helpful avenue toward resolution. To quote the IRS, “This program offers people with unreported taxable income from offshore financial accounts or other foreign assets an opportunity to fulfill their tax and information reporting obligations, including the FBAR.” OVDP can therefore help some US taxpayers avoid criminal prosecution. However, OVDP is not without its hazards. For one, the IRS retains the right to terminate the program at its discretion. Additionally, the program is not available to individuals who are already being investigated by the IRS.
If you are concerned about tax compliance issues, or if you simply have questions about an unclear tax law, it is critical to speak with an internationally-focused CPA before it is too late to take effective action. If you are a US expatriate working or residing in Switzerland, call CPA Ted Kleinman right away at (800) 810-9312 to discuss your tax matter confidentially.