FATCA Lawyers | Are My Foreign Accounts in Jeopardy – International Tax Compliance
One the most common themes in today’s tax world’s international tax compliance, and at the forefront of international tax compliance is FATCA.
FATCA is the Foreign Account Tax Compliance Act and it is an act designed to ensure US taxpayers remain compliance with US foreign account reporting rules and regulations.
International Tax Evasion
One of the main purposes behind FATCA is to combat against international tax evasion and tax fraud. In other words, when a US person has foreign accounts, they are required to report their annual interest income or other dividend/passive income on their US tax return.
In addition, if the US person meets the minimum threshold requirements under FBAR (Report of Foreign Bank and Financial Account) rules and regulations, they also required to disclose information regarding therefore accounts, such as the bank account or foreign financial account number, address of the institution, and maximum balance – if available.
In years past, when a person failed to comply with U.S. international account reporting requirements, it was very difficult for the IRS to discover the foreign accounts and foreign income. Under FATCA, several foreign countries and thousands of Foreign Financial Institutions are actively and voluntarily reporting US taxpayer account information and passive income information to the IRS.
Many US taxpayers with foreign accounts will not even realize they have a reporting requirement until they receive a “FATCA Letter” from their foreign bank informing them that they must show the foreign bank proof they have complied with FATCA. The FATCA letter usually has very strict reporting requirements and timelines, and therefore if you have received a FATCA Letter you should act quickly to ensure compliance.
If the IRS contacts you before you have a chance to voluntarily comply with international tax reporting requirements and regulations, the penalties can be staggeringly high.
Following is a summary of FATCA for your review: