The question of whether legendary songstress Tina Turner actually relinquished her U.S. citizenship because of the Foreign Account Tax Compliance Act seems a little silly. It's much more likely that the change was motivated by personal reasons. She has lived in Switzerland since 1995, when her longtime romantic partner, a German record executive, was transferred there. They married on the banks of Lake Zurich in July and now live in a suburb of Zurich.
Turner hasn't publicly revealed why she made the change, and Swiss tax rates are quite high. If there's one thing she and others in her position won't miss about America, however, it's undoubtedly the process of making mandatory FATCA filings and filing FBARs on their overseas accounts.
FBAR -- the Report of Foreign Bank and Financial Accounts -- is an annual report required by the Bank Secrecy Act for U.S. citizens and entities with certain financial interests abroad, such as bank accounts, brokerage accounts and mutual funds. FATCA requires a similar annual IRS filing, Form 8938, in addition to the FBAR -- and it also compels foreign financial institutions to disclose such accounts to the IRS as a cross-check.
Failure to file FBAR or FACTA disclosures can result in substantial fines, penalties, and punitive interest on underpaid taxes. Violations can also result in criminal prosecution, and many consider both the civil and criminal penalties far out of proportion with the perceived offense.
Many U.S. taxpayers have chosen not to comply with FATCA or file FBARs for a variety of reasons. When discovered they face harsh fines and possible imprisonment. I have represented many clients in this position and all regretted not complying with the law.
The IRS has renewed its 2011 Offshore Voluntary Disclosure Program, or OVDP, with no fixed closure date. The program gives those who still have unreported taxable income in offshore accounts a method to resolve their noncompliance with lower civil penalties and no criminal prosecution.
Entering the Offshore Voluntary Disclosure Program requires pre-clearance by the IRS Criminal Investigation Lead Development Center, however, so it's important to obtain experienced legal counsel before taking advantage of the program. Those who have come to me to enter the OVDP have all successfully completed the OVDP.
If you have undisclosed offshore accounts with income that could be taxable by the U.S., you should know that you cannot take advantage of the OVDP if the IRS receives notification of your offshore account records through FATCA before you apply. The IRS could also end the program, without notice, at any time.
Source: Forbes, "Tina Turner Gives Up U.S. Citizenship---Big FATCA Wheel Keep On Turnin'," Robert W. Wood, Nov. 13, 2013