Uncle Sam Wants You … to Report Your Dominican Republic Income

Are you a United States citizen or resident enjoying life under the sun in the Dominican Republic? Or do you still live in the United States but own a second home here in the Dominican Republic that you use as a vacation home or as a rental property?

Either way, you are still subject to United States taxes. All United States citizens or residents are liable for income tax regardless of their place of residence, and all United States citizens or residents must file income tax even if they live abroad.

For example, if you own rental property in Punta Cana and deposit your income in a Dominican Republic bank, you need to report the existence of that account to the IRS.

The IRS is making it more difficult for expats and others to hide income from the Government under legislation called FATCA.

FATCA stands for Foreign Account Tax Compliance Act. It came into effect in 2010.

Essentially, it allows the IRS to pursue foreign bank account holders and forces foreign banks to report to the US Government. You would think that banks outside the United States would be well outside the jurisdiction of the IRS, but under intergovernmental agreements, they are subject to severe penalties if they do not divulge information about their U.S. clients.

In other words, the era of bank secrecy is coming to an end. Hiding money from Uncle Sam is now harder than ever. No international bank wants a reputation as a shady financial institution, and no country wishes to be known as an uncooperative tax haven.

The Dominican Republic and the U.S. signed an IGA on June 30, 2014.

The IRS provides tax forms which allow a foreign bank account holder to make a declaration of their status either as a U.S. person (Form W-9) or as a non-U.S. person (Form W-8BEN).

And you really should file the form: there have been several cases of foreign banks freezing or closing accounts if the forms have not been filed. The banks have concluded it is easier to lose a client than to do battle with the IRS.

If you hold a bank account in the Dominican Republic, you will need to provide the bank with a copy of either form W-9 or form W-8BEN. In addition, you may be required to provide information about your resident status and your current or former address in the United States.

Talk to your tax adviser or accountant to find out what else is required of you, or visit the IRS website for further information on FATCA.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s