Today, an interesting article from Forbes.com came across my screen as I was doing my usual surfing. Bank Error In Your Favor. This struck me for a moment, "Hey, I wouldn't mind having someone inject $50,000.00 in my bank account. However when one looks at it, it's not the happy rosy situation for Americans abroad who are afflicted by FATCA and its reporting requirements. Even a simple mistake can have catastrophic repercussions.
FATCA requires people to report their bank accounts to the Department of Treasury if at any point during any calendar year, the account goes over $10,000.00. So take for example the hypothetical dual border baby who came up to Canada, made a life for herself or himself in Canada, grew up married, had kids, the whole nine yards, all while thinking she was a card carrying citizen of Canada, not knowing that she had the plague that was United States Citizenship like a noose around her neck? So while those of you who are 100% fully Canadian would cheer uproariously to find $50,000 in your bank account; the unknown dual is having a heart-attack, because her operating account just got punched up over ten thousand, all through a simple "bank error".
What happens to her? Well, for one, the IRS pitbulls get a sniff at her. "Oh...you got money over $10,000 in your account, they say. Doesn't matter. Your account was over the limit for 2-3 days. It was technically YOUR money for that time, so you owe Uncle Sam. the taxes on it...as well, since you failed to report it, we're going to ding you with $100,000.00 fine for failure to report it on an FBAR. Considering the fact that it is wilful since you knew that money was there, took steps to figure out where it came from, we'll just classify it as willful, won't we?"
So poor Ms. "I Didn't Know I Was American" gets to undergo FATCA(T) scrutiny just because the bank made a stupid error. Seems rather unfair doesn't it? Unfortunately the IRS and US Department of Treasury doesn't think so.
Will this happen to someone? I'm absolutely sure of it. And when the ramifications of that simple "mistake" on the part of the bank comes out, the American expat ends up losing damned near all their finances thanks to a mistake made on the part of the bank. In that sort of instance, I think the bank should be held liable for the damage done to the person's finances. But unfortunately the courts may not see it that way.
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