Golding & Golding – Offshore Disclosure & FATCA Compliance

There has been a recent surge of Foreign Banks and Foreign Financial Institutions that are actively reporting U.S. Account Holders to the IRS and U.S. Government in accordance with FATCA (Foreign Account Tax Compliance Act) reporting Rules and Regulations. Brazil is a reporting country, and therefore if you are subject to U.S. Tax and maintain a foreign account in Brazil, it is important that you remain in Tax Compliance.

Golding & Golding represents clients worldwide with FATCA Letter compliance issues (aka “When a person received a letter from their Foreign Bank asking them to Certify their U.S. Status”). We have worked with numerous banks in over 40 countries.

FATCA Alert 

It should be noted that several Brazilian financial institutions are actively reporting U.S. Taxpayers in accordance with FATCA (Foreign Account Tax Compliance Act) Rules and Regulations.

Common Banks and Foreign Financial Institutions overseas with U.S. Account Holders include:

  • Banco Bradesco Financiamentos
  • Caixa Econômica Federa
  • HSBC
  • Banco J Safra S/A
  • Banco Itaú
  • Banco do Estado do Rio Grande do Sul S/A
  • Banco PanAmericano S/A
  • Banco Santander
  • Banco do Brasil
  • Citibank

If you have a Foreign Bank Account(s) in a foreign country (or are listed as a signatory on an account), chances you are may have received a FATCA Letter stating that the Bank will be reporting your information to the IRS.

Ever since more than 100 countries have agreed to comply with FATCA, Foreign Banks and Foreign Financial Institutions worldwide have began actively reporting U.S. Taxpayers – with the initial contact being by either email and/or “FATCA Letter.”


What is FATCA?

FATCA is the Foreign Account Tax Compliance Act, and it is an international tax law with a global impact on U.S. Taxpayers worldwide – no matter where they live. FATCA is being enforced by the IRS, several foreign countries, and thousands of FFIs (Foreign Financial Institutions). The purpose of FATCA is to ensure that US taxpayers comply with all aspects of IRS tax law by reporting their foreign accounts and reporting their foreign interest income and other passive investments, even if the amounts are relatively small.

*If you have a large account (over $50K) and minimal income, it will not reduce the chances of disclosure, since disclosure is typically based on the account balances, not the income.

Over the past years, the IRS has become aware that hundreds of thousands if not millions of US taxpayers maintain foreign accounts overseas that have gone unreported. Many of these US taxpayers have never reported their foreign accounts because for as far back as anyone can remember, it was impossible for the IRS to track foreign accounts. In fact, it was common practice for CPAs to recommend to their clients to avoid disclosure. After realizing how much money the IRS loses annually in penalties and tax revenue – FATCA was born.

Even before the implementation of FATCA, the IRS has been recovering Billions of dollars of revenue annually through OVDP (Offshore Voluntary Disclosure Program)


What is a FATCA Letter?

A FATCA Letter is a warning. The letter will come from a foreign financial institution such as a bank, brokerage, or investment house when it is unsure of the intended recipient of the letter is a U.S. Taxpayer. In other words, the FFI will evaluate its client base to determine which portion of the clients are either US taxpayers, live in the United States, or maintain a foreign address in the United States. For these unlucky taxpayers, the foreign financial institution will send out a FATCA letter.

The main purpose of the letter is to investigate the customer in order to ascertain whether the bank client has complied with IRS FATCA laws. Namely, has the taxpayer filed the necessary paperwork with both the Internal Revenue Service and Department of Treasury sufficient to show full compliance with FATCA, including FBAR (Report of Foreign Bank and Financial Accounts, 8938 (Statement of Specified Foreign Financial Assets), Schedule B (Interest and Ordinary Dividends) and more.


Who has to Comply with FATCA?

Specifically, US taxpayers are required to comply with FATCA by properly disclosing and reporting their foreign accounts and foreign income in their Tax Return filings and FBAR reporting requirements of foreign and offshore accounts. In order to ensure the taxpayer has complied, the foreign financial institution issues a FATCA Letter, which will usually be accompanied by two forms – a W-9 and a W-8 BEN. Only US taxpayers are required to complete a W-9 and return the completed W-9 form to the foreign financial institution.

Once the US taxpayer returns the W-9 to the foreign financial institution, then the foreign financial institution will identify the individual taxpayer as a US taxpayer. Next, the foreign financial institution will forward the US Taxpayer’s information to the Internal Revenue Service for their records during a FATCA information exchange.

Alternatively, if the individual who maintains the foreign bank account is a foreign person who may be residing in the United States but not actually subject to US tax (tourist or student for example) then they are not required to complete a W-9. Rather, they will complete W-8 BEN which signifies that they are not US taxpayers, and therefore the foreign financial institution will not report that information to the Internal Revenue Service.

Before you try to “pull one over on the IRS”, if you submit a W-8 BEN when you are actually W-9 then that is tax fraud and/or tax evasion and the Internal Revenue Service and Department of Justice have made it known that they will seek full enforcement and criminal prosecution of individuals seeking to avoid penalties and other voluntary disclosure programs by lying about their US tax status.


Is it True Some Foreign Financial Institutions are Reporting “Everybody”

Yes. In order to comply with FATCA, many countries are finding it easier to “over-report” rather than to “under-report.” In other words, if you are a foreign national but either have a US address or other proof on file that you currently or previously resided in the United States, then some of these foreign financial institutions are reporting you as well – and you are now caught in the FATCA Matrix. Why? For many foreign financial institutions, it is simply easier and more cost-effective than trying to sift through each client’s record to determine if they are actually a US Taxpayer or just someone who resides or previously resided in the United States.


Why are foreign Countries Complying with FATCA?

One important thing to keep in mind is that several of the countries and/or foreign financial institutions who have agreed to enter into agreements with the United States are doing so because they want to stay in the good graces of the United States. Moreover, the countries sign a “reciprocity agreement” so that the United States will also exchange information of Foreign Taxpayers who have accounts in the United States. Moreover, implementing FATCA for many of these countries and institutions has been a very costly endeavor; thus, they are doing whatever they can to make their lives easier complying with the Internal Revenue Service and Department of Treasury.

Golding & Golding, A PLC

We have successfully represented clients in more than 1,000 streamlined and voluntary disclosure submissions nationwide and in over 70-different countries.

We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.