I recently spent a week on a FATCA exploratory journey visiting with bankers, CPA’s, attorneys and American ex patriots in Panama. Despite the bad press America has been getting all over the world today for a variety of reasons, Panama is one place on the planet where surprisingly, Americans are made to feel welcome almost everywhere you go. We first invaded that country in 1856 to protect an American railway company from local nationalists. Between 1903, when we stole the country from Columbia to build the Panama Canal, through 1989 when we went in to dislodge CIA bad boy Manuel Noriega, you would need more than two hands to count all the other times our government has “intervened” militarily or secretly in Panamanian affairs. Nevertheless, they still love us down there and Americans have been moving there in droves to escape the hassles of life in the States.
I was invited by Lee Zeltzer, an American expat and kindred spirit, to speak at the Tuesday Community Meeting in Boquete, to give an update on FATCA. Boquete is an idyllic spot-- a community about an hour’s flight from Panama City in the cool mountainous region of Chiriquí, where a large number of American expats have made their home. I had prepared a detailed talk on the elements of FATCA and the new requirements of form 8938. The room was packed with close to 200 people and fifty people were turned away for lack of space. Needless to say, FATCA and U.S. taxes are a hot button issue for everyone.
Despite my lecture preparations, everyone wanted to get right down to questions. To no one’s surprise, the concerns of American expatriates in Panama parallel the concerns of American expatriates all over the world: why do we have to file FBARs if the very same information requested has to be reported on new form 8938? If my home in Panama is in the name of a Panamanian trust, do I have to fill out forms 3520 or 3520A? What if I don’t want my local Boquete bank to pass on my social security number to the IRS? Are my social security checks from the U.S. subject to FATCA withholding? How does the IRS “audit” American taxpayers who live abroad? What if I haven’t filed for years? What if I want to simply start filing now? Is there anything I have to do about all the years in which I did not file? Is renouncing my U.S. citizenship a good way to escape all of the problems people seem to be having with FBARs and U.S. tax compliance generally? How safe is it enter the IRS’s voluntary disclosure program? What is my maximum exposure? What does it mean to opt out of a voluntary disclosure? Can we trust the IRS to be fair if we come forward now and seek to be compliant? Can the IRS seize my Panamanian bank accounts? If all my savings is in gold bars, do I have to worry about FBARs or form 8938? Why is it that the IRS can never seem to be able to take a joke?
I made a lot of new friends in Boquete and my visit there seemed to confirm what I suspected all along; for American expatriates living in Panama and anywhere else in the world, being an American is kind of like the Eagles song, Hotel California. “Good night said the watchman. We are programed to receive. You can check out any time you like but you can never leave!”In my next post I will share some observations after meeting with a number of Panamanian bankers.