FATCA in Kuwait – Hello IRS

If you don’t know what FATCA is or never heard of it, then you probably don’t have to worry about it. But if your an American citizen working abroad or have your assets abroad then you are probably very aware of it and some are very worried of it.

FATCA – Foreign Account Tax Compliance Act

FATCA reflects a global trend to increase tax transparency and involves all U.S. persons (individuals, entities, or entities which are substantially directly or indirectly owned by U.S. person(s)) transacting with financial institutions around the globe.

Simply put the banks in Kuwait have effectively opened up details of any person who is holding a US Citizenship and in Kuwait I know the dual Citizenship is not legal but lots of people have it, so now Kuwaiti’s who have had no experience or interaction with the IRS are going to have to get their paperwork together and a very good tax lawyer to get a little creative to make sure they don’t suffer the wrath of the IRS.

When you think of the most powerful US Agency then you think NSA or CIA, they take care of the missions that we know nothing of, but contrary to what people think the most powerful US Government is the IRS. They have more powers to dig into people and in which way they need to get to money owed to the US Government.

And I have heard some Kuwiatis say they will toss the US Citizenship as solution not to pay their back taxes. But that isn’t a solution, if you relinquish the US Citizenship then the IRS will take that into consideration and they will go through your life with a fine tooth comb, aand you will have to pay 3 to 6 years worth of back taxes before you can get out of it. And on top of paying back so many years of taxes your name will be flagged at every US Embassy and Border Station, meaning it will be nearly impossible to get a US Visa and if you do you will be flagged for life as a suspicious character.

A guy who is just trying to enjoy life!

16 Comments

  1. Pingback: Do you hold an American Passport? Say hello to the IRS - 2:48AM - Everything Kuwait - 2:48AM – Everything Kuwait

  2. Dr John Hayes

    Your info is slightly skewed but generally on target. People in Kuwait can contact americantaxbureau.com for FATCA details and for filing a US tax return. It’s much easier than people think and not everyone will owe money — but failure to file is a Federal offense. ATB was established in Kuwait last spring and has already filed many tax returns on behalf of Kuwaiti/Americans.

    • Dr John, I just have the general information, what I am talking about is some situations where people think they step around it. Secondly a lot of people haven’t filed taxes for years so thats a whole different story, thats why I recommend to head to a tax lawyer right away in Kuwait!

      • Dr John Hayes

        I understand, Marzouq. Knowing what I’ve learned about the process, I would not tell folks to go to a tax attorney first. Why? It’s going to cost them more money, and perhaps needlessly. Kuwaiti/Americans are not the only folks never to have filed a tax return . . . many folks living in America have never filed, either. And these folks frequently go to Jackson Hewitt, or H&R Block, or Liberty Tax to get their returns filed . . . saves them a lot of money. If they need an attorney, one of those franchised offices will so advise them, but that’s rarely the case. In Kuwait, folks who need to file US tax returns can easily consult with American Tax Bureau at americantaxbureau.com. If their clients need legal counsel, they’ll tell them, but I doubt that this happens very often. In fact, there’s an excellent American business attorney in Kuwait who has been contacted by numerous Kuwaitis who must file US tax returns and he sends them to American Tax Bureau.

        • Anon

          Dr. John, are you affiliated with the American Tax Bureau? Or get a commission or something? An ordinary taxpayer who has filed income tax returns before can do their own tax returns and FBARs. The American Tax Bureau charges a lot, and you have to do all the digging and collect all the information for them anyway; the work they actually do is minimal. If you have a very complicated situation, then you should get a tax attorney.

          • Dr John Hayes

            Anon, I assisted ATB in the establishment of their business model in Kuwait — in the last 35 years I have done similar work for dozens of businesses that intend to franchise, as ATB has expressed the desire to do. I do not get a commission, but I do believe this type of service is of value, just as H&R Block, Liberty, and Jackson Hewitt are of value in the US market (and they produce a huge percentage of tax returns every year). I believe it’s true, as you say, that many “ordinary” tax filers can do their own returns and save money, but that’s not always the case. I would hesitate to tell someone they need a “tax attorney” because they have a “complicated return” — my return is complicated and I do not use an attorney, nor do I prepare my own return. Many people do not want to bother with filing their own taxes (for example, I think that would be a waste of my time) and many people do not trust their ability to file taxes, or to know all of the tax laws, especially with FATCA and other regulations — thus there’s a market for ATB as well as competitors. Tax prep companies historically get more money back for their clients than many of those clients can do on their own — that’s an important consideration. Tax prep companies like ATB usually review past reviews to see if they can, in fact, get the client money from previous years and often times they can. That’s a valuable service. As to the fee charged — that’s for the market to decide. For you, it’s too expensive; for others, it may be “perfect”. Some people prefer to cook their own meals at home because they think restaurants are too expensive. Having a choice is a wonderful thing. I am happy to have clarified my recent relationship with ATB as you’re not the only person to ask.

  3. Bader

    Dont think it will be a problem for Kuwaitis with dual citizenship. unless they opened their account with thier American Passport then the bank would not forward their information to IRS.

    • Dr John Hayes

      Well that’s an interesting point. Who or what is your source? Based on the research and writing that I’ve done on this topic, how you opened your bank account has nothing to do with FATCA. The US Government knows its citizens and the government doesn’t care how its citizens open their bank accounts, or where, or even if they have bank accounts. The US Government only cares, in this case, that American citizens file a tax return every year, and pay any taxes due. The USA knows who its citizens are, so it’s only a matter of asking if So-and-So has an account at the bank. The pressure here is on the banks — they face huge penalties if they do not comply with FATCA. Any bank that does business with the USA, as many Kuwait banks do, is paying very close attention to FATCA. In Kuwait, the easiest thing for people to do is visit American Tax Bureau, Mazaya Tower, Sharq.

      • wiam

        Hi my son is 2 years old only and he is an amircan passport holder any tax For him in that case ?

        • Dr John Hayes

          wiam, does your son earn more than $96,000 a year? If so, yes, he probably has to pay some taxes, but he probably won’t mind. People who are below a certain age (and off hand I don’t know the age, but American Tax Bureau would know) do not have to file returns . . . however, your son probably needs to have a Social Security Number — banks are asking for this information when it comes time to open an account. Again, I would rely on AmericanTaxBureau.com in Kuwait to answer questions.

      • Bader

        Its a thought and you do have a point. My only remark is how is the Banks in Kuwait forwarding the information? If it is based on nationality then this is where Kuwaitis with dual status will have a way out.

        • Dr John Hayes

          Don’t know the answer for sure, Bader. But I doubt it’s based on nationality because the USA is very aware that thousands of Kuwaitis hold US Passports or Green Cards. And they know who THEY are so they can ask for them by name. Also, keep in mind that the IRS audits Americans. The IRS knows who is and who isn’t (among the Kuwaitis) a US citizen and they will not discriminate when it comes to auditing . . . so if a Kuwaiti gets notice about an audit, uh oh, hope the taxes are paid up because the penalties then will be severe. There is an amnesty period, but if the IRS makes the first move the damage is done. I’ve had Kuwaitis tell me, ‘Well I’ll just give up my citizenship.’ Go ahead, but that doesn’t change anything — the IRS has the right to look back 10 years (if my source is correct) and if money is owed and the individual has investments in the USA, those investments can be seized. There’s no easy way out of this — well, yes there is — file the tax return! Seek amnesty if that’s going to be helpful, but then file the tax return. The IRS is also a business of sorts and is not against cutting deals, though I doubt anyone would officially say that’s true. But deals do exist.

          • Honestly Dr John I’m enjoying your comments into this, it is very true we have no clue how they are forwarding information. I have said this to people before who have dual citizenship the IRS is the powerful arm of the US Government and not to be messed with, and I have seen this first hand when a friend of mine was audited, they go through your life with a fine tooth comb. And even giving up the citizenship there are also strings attached to that, it’s not an easy matter and people don’t think about the long term consequences like not being able to enter the United States.

    • Anon

      As of now, banks are only asking your citizenship. Normally, if you say Kuwaiti, they just accept that. But periodically, they have you come in to review your information, and in the future, they might ask specifically, “Do you have US citizenship?” And they might do that when you open an account, too. They’re starting to do it do people who have Western names…

      As for what Dr. John says below about them knowing who all the citizens are, that’s not necessarily true. For example, there are children of American citizens living here that they know nothing about, but who are legally considered US citizens (as long as their American parent meets certain conditions as to how many years lived in the US, etc.). I never got my own children US citizenship, and the US government wouldn’t have known they existed until I tried to get them a visa for the US and the guy at the Embassy realized I was a US citizen; then he said that they were also citizens, although I had never even wanted to get them citizenship – which is illegal for them as Kuwaiti citizens.

      And even if they had some master list of all the people born in the US, all children of American citizens who are eligible, etc… they don’t know where those people are living or even if they’re still alive. They are not going to have every bank check each person against this master list.

      BUT, having said that, I wouldn’t take that chance; if you’re considered to be a US citizen, you should get in compliance with the tax laws soon.

  4. Man, I am so glad I didn’t opt for US citizenship. This most certainly has to be the killer downside of holding US nationality; the beast of double taxation apart from you know, the obvious- being caught in a hostage situation in the Mideast.

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