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77,000 foreign banks to share tax info with IRS

By WTOP Staff

STEPHEN OHLEMACHER
Associated Press

WASHINGTON (AP) — It will soon get a lot harder to use overseas accounts to hide income and assets from the Internal Revenue Service.

More than 77,000 foreign banks, investment funds and other financial institutions have agreed to share information about U.S. account holders with the IRS as part of a crackdown on offshore tax evasion, the Treasury Department announced Monday.

The list includes 515 Russian financial institutions. Russian banks had to apply directly to the IRS because the U.S. broke off negotiations with the Russian government over an information-sharing agreement because of Russia’s actions in Ukraine.

Nearly 70 countries have agreed to share information from their banks as part of a U.S. law that targets Americans hiding assets overseas. Participating countries include the world’s financial giants, as well as many places where Americans have traditionally hid assets, including Switzerland, the Cayman Islands and the Bahamas.

Starting in March 2015, these financial institutions have agreed to supply the IRS with names, account numbers and balances for accounts controlled by U.S. taxpayers.

Under the law, foreign banks that don’t agree to share information with the IRS face steep penalties when doing business in the U.S. The law requires American banks to withhold 30 percent of certain payments to foreign banks that don’t participate in the program — a significant price for access to the world’s largest economy.

The 2010 law is known as FATCA, which stands for the Foreign Account Tax Compliance Act. It was designed to encourage — some say force — foreign financial institutions to share information about U.S. account holders with the IRS, making it more difficult for Americans to use overseas accounts to evade U.S. taxes.

“The strong international support for FATCA is clear, and this success will help us in our goal of stopping tax evasion and narrowing the tax gap,” said Robert Stack, deputy assistant treasury secretary for international tax affairs.

Under the law, U.S. banks that fail to withhold the tax would be liable for it themselves, a powerful incentive to comply. U.S. banks are scheduled to start withholding 30 percent of interest and dividend payments in July, though recent guidance from the Treasury Department gives U.S. banks some leeway on timing as they gear up their systems.

The withholding applies to stocks and bonds, including U.S. Treasurys. Some previously owned securities would be exempt from the withholding, but in general, previously owned stocks would not.

Private investors who use foreign financial institutions to facilitate trades also face the withholding penalty. Those private investors could later apply to the IRS for refunds, but the inconvenience would be enormous.

Treasury released the list of complying banks on Monday so American financial institutions will know it is OK to send them payments without withholding the tax. Treasury is expected to update the list next month, after another push to complete information-sharing agreements.

“I think having 77,000 on this first list is a pretty big success,” said Denise Hintzke of Deloitte Tax LLP. “It appears to me that people are taking it pretty seriously and intend to comply.”

Banks in many countries are prevented by local privacy laws from sharing account information with foreign governments. To get around these restrictions, the Treasury Department has been negotiating agreements in which foreign governments will collect the information from their banks and then share it with U.S. authorities.

Russia was negotiating one of these agreements when the U.S. broke off talks in March. Nevertheless, 515 Russian financial institutions applied to the IRS directly and have been accepted into the program. More could apply in the coming weeks.

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Online:

IRS list of complying foreign financial institutions: http://apps.irs.gov/app/fatcaFfiList/flu.jsf

Countries with information-sharing agreements: http://tinyurl.com/q6vg7nj

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Follow Stephen Ohlemacher on Twitter: http://twitter.com/stephenatap

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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