FATCA Lawyers (IRS Foreign Asset Reporting by FATCA Tax Lawyers) - Golding & Golding

FATCA Lawyers (IRS Foreign Asset Reporting by FATCA Tax Lawyers) – Golding & Golding

FATCA Lawyer – Foreign Asset Reporting, Certified Tax Specialist

FATCA is the Foreign Account Tax Compliance Act. FATCA is an IRS International Tax Law that is designed to reduce offshore tax evasion and tax fraud. FATCA requires U.S. Taxpayers to disclose unreported foreign bank accounts, foreign financial accounts, and foreign income to the IRS.

Our FATCA Lawyers represent clients in the disclosure and reporting of IRS & FATCA related Foreign Assets and accounts — and work to reduce, limit, and eliminate IRS and FATCA fines, penalties, and outstanding tax liabilities.

We Specialize in FATCA Offshore Disclosure

We are the only State Bar Board Certified Tax Law Firm with Lawyers that specialize exclusively in OVDP/Offshore Disclosure, including:

  • IRM Traditional Voluntary Disclosure
  • Streamlined Filing Compliance Procedures
  • Streamlined Domestic Offshore Procedures
  • Streamlined Foreign Offshore Procedures
  • Streamlined Voluntary Disclosure
  • Reasonable Cause
  • Fixing Quiet Disclosures
  • Fixing mistakes made by less experienced Attorneys

Sean M. Golding, JD, LL.M., EA (Board Certified Tax Law Specialist)

Our Managing Partner, Sean M. Golding, JD, LLM, EA  earned an LL.M. (Master’s in Tax Law) from the University of Denver and is also an Enrolled Agent (the highest credential awarded by the IRS, and authorizes him to represent clients nationwide.)

Mr. Golding and his team have successfully handled several hundred IRS Offshore/Voluntary Disclosure Procedure cases. Whether it is a simple or complex case, safely getting clients into compliance is our passion, and we take it very seriously.

He is frequently called upon to lecture and write on issues involving IRS Voluntary Disclosure.

Less than 1% of Tax Attorneys Nationwide are Board Certified Tax Law Specialists 

Out of more than 200,000 practicing attorneys in California, less than 400 attorneys have achieved this Certified Tax Law Specialist designation.

The exam is widely regarded as one of (if not) the hardest tax exam given in the United States for practicing Attorneys. 

Beware of Copycat Law Firms

Unlike other attorneys who call themselves specialists but are not “Board Certified,” handle 5-10 different areas of tax law, purchase multiple keyword specific domain names, and even practice outside of tax, we are absolutely dedicated to Offshore Voluntary Disclosure.

*Click here to learn the benefits of retaining a Board Certified Tax Law Specialist with advanced tax credentials.

FATCA Lawyer 

The majority of individuals believe FATCA (Foreign Account Tax Compliance Act) is a bad law. There are many different organizations that are trying to repeal the law, through grassroots campaigns, lobbying or court intervention.

Nevertheless, at the current time FATCA is on the books and enforceable. The rules and requirements of FATCA reporting for individuals with foreign accounts/assets is much different and less complex than the requirements for foreign financial institutions.

Typically, for FATCA compliance, the only form that is required to be filed by the Individual is a form 8938 (although additional forms may be necessary such as Form 720, or filing a form(s) 3520, 5471, or 8621 in lieu of Form 8938).

The following summary is a basic question and answer summary for individuals who may have a reporting requirement. At Golding & Golding, we focus our entire tax law practice on offshore voluntary disclosure, including common issues involving FATCA and FBAR Compliance.

This is by no means a comprehensive FAQ. It is designed to provide a basic starting point for individuals getting ready to file their returns or amend their returns:

Why Did I Receive a FATCA Letter?

The most common reason why your Foreign Financial Institution (FFI) sent you a FATCA Letter, is because the institution believes you may have a U.S. status that requires the FFI to send information about your accounts to the IRS, such as if you are a U.S. Citizen, Legal Permanent Resident, or Foreign National who meets the Substantial Presence Test.

Unlike a U.S. institution that provides you an annual 1099 form detailing your income, foreign institutions are not required to provide this information to Account Holders, and therefore the IRS in the dark regarding your foreign income. While you may see this is a good thing…the IRS doesn’t.

What do I do with the FATCA Letter?

Typically, the Foreign Financial Institution will require you to complete the letter and submit it back to them, and/or otherwise take steps to self-certify your status to the Foreign Financial Institution and/or confirm that you are up-to-date with all of your tax and reporting requirements in the United States.

W-8 BEN vs. W-9

These are two very important forms, but as an individual you only complete one. If you are a U.S. person then you usually complete a form W-9. If you are a non-U.S. person, you complete form W-8. The reason it is included with the FATCA Letter, is to put the foreign financial Institution on notice of your status for submission to the IRS if necessary.

Should I Sign and Send it Back to the FFI?

This is a strategy question, which you should discuss in detail with your offshore disclosure lawyer. That is because, depending on what your current U.S. status is, and whether you have any intention of getting into compliance — by submitting the information back to the Foreign Financial Institution, it will start the clock ticking as to when they can actually submit the information to the IRS (which you have proactively signed, usually under penalty perjury).

This is different than the Foreign Financial Institution making is its own presumption of your status to the IRS, which depending on your specific facts and circumstances, may or may not be accurate.

What is FATCA Form 8938?

IRS form 8938 is a form developed to ensure individuals with Specified Foreign Financial Assets get into compliance by disclosing their foreign assets and information to the IRS. The form is “average” when it comes to complexity of IRS forms. It generally only requires an individual to identify, list, and report assets and accounts (under certain scenarios) to the IRS.

Please keep in mind that certain items that may need to be reported on other forms such as a FBAR may not need to be included on form 8938. Likewise, certain items that you did not have to report on the FBAR, will need to be reported on form 8938.

How do I File FATCA Form 8938?

The form is filed along with the tax return. Unlike other forms which may be due at the time a tax return is due, but submitted independently to a different location at the IRS, form 8938 is actually filed with your tax return (making it easier for the IRS to cross reference your foreign income with foreign assets)

Foreign Assets but No Foreign Income

Just because you do not have any foreign income does not mean you are excluded from having to file this form. But, if you are not required to otherwise file a US tax return for any number of reasons, then you are not required to independently file a form 8938, as you would file a form 3520 or 5471 independently, even if no tax return is due.

But, if you are required to filed a Tax Return and meet the threshold requirements for filing, you are required to report and disclose the foreign assets on this form — even if you have no foreign income.

Threshold Requirements and Asset Values

The threshold requirements as to whether you would have to file the form 8938 or not will vary based on whether you are considered a U.S. residents or not, and what your marital status is. For example, if you are a single person residing in the United States (or married filing separately), the baseline threshold requirement is $50,000 on the last day of the year, or if you have less than $50,000 on the last day of the year but more than $75,000 on any other day of the year, you are still required file.

Conversely, if you are married filing jointly and you reside overseas, than the threshold requirement is $400,000 on the last day of the year, or if you have less than $400,000 on the last day of the year, but had more than $600,000 on any given day of the year, you would still have to report the asset(s) on Form 8938.

What is Included vs. Excluded on IRS Form 8938

This question goes beyond this simple summary. It is important to understand that there are two major distinctions between the form 8938 and FBAR that we see often and which can be somewhat confusing:

Assets vs. Accounts

The form 8938 requires reporting of specified foreign assets. Therefore, for example if you own stock directly, you would include the stock ownership on form 8938 — even if it was not in a foreign account. On the other hand, if you are filing a FBAR, you would not include direct stock ownership on that form, and would only reported that the stock was included in an account.

Interest In the Asset

When it comes to the FBAR, a person has to file the form whether or not they have ownership of the money. For example, if they are a joint owner of the account  (with little financial investment in the account) and/or have signature authority, they still have to file and report the account.

With the FBAR, if the individual’s name is identified anywhere with the account, they typically have to file. Alternatively, with the FATCA Form 8938, a person must have an interest in the asset. Therefore, if a person just has signature authority or otherwise has no real interest in the asset, they may not have to file form.

**This is something you should discuss with your international tax lawyer before submitting to the IRS.

Extension of Time to File Form 8938

If you apply for an extension to file your tax return, then you also receive an extension to submit form 8938. That is because form 8938 accompanies your tax return and is not filed independently.

Already Filed a FBAR

We mentioned the FBAR numerous times in this article, because oftentimes if a person has to file one form, they have to file the other. Still, it should be noted that the forms are independent of each other, and many individuals may only have to file one form, but not the other.

Also, if you already filed a FBAR, you may still have to file form 8938.

Foreign Real Estate

Tax rules regarding Foreign real estate are more complex than they need to be. With that said, it is relatively simple when it comes to FATCA Reporting. If you own foreign real estate directly and it does not generate any income, then there is no reporting for FATCA. Likewise, if you own foreign real estate directly – even if it is used to generate income – it does not need to be filed on form 8938.

However, if you do own foreign real estate in a business entity such as a Sociedad Anonima, then the business entity must be reported. Depending on the facts and circumstances of the ownership, it may be reported on form 8938, or it may be required to be reported on a much more comprehensive form such as a 5471 (Foreign Corporations) or 8865 (foreign partnership).

*Penalty Note: if you own foreign real estate that generates income, it is not included on form 8938. But, if you knowingly do not report your offshore assets and decide to enter the traditional OVDP program, the value of the foreign rental property is calculated into the penalty computation.

Duplicate Filing of Form 5471, 8865, or 8621

In any year that you have the file a form 8938 for a particular asset, you do not have the file a form 5471, 8621, or 8865 the same asset, in the same year. Be careful: it is important to note that if you have to file a form 5471 for example for Asset “X” you may still need to file a form 8938 for Asset “Y.”

In addition, many times a person will have to file a form 5471 or 8865 in the year they acquired the asset or business ownership, but not have the file that form in subsequent years – and instead would file form 8938.

Typical Example: Michelle inherited 18% of a foreign partnership in year 1. In year one, she would file a form 8865 . In year two, she did not acquire any additional ownership. Since it is a foreign partnership, and not a controlled foreign partnership, in subsequent years (unless other circumstances apply) Michelle should be able to get by with filing a form 8938 instead of the more detailed 8865.

Form 8938 Penalties

As provided by the IRS: Beginning with the 2011 tax year, a penalty for failing to file Form 8938 reporting the taxpayer’s interest in certain foreign financial assets, including financial accounts, certain foreign securities, and interests in foreign entities, as required by IRC § 6038D. The penalty for failing to file each one of these information returns is $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return.

We Specialize in Safely Disclosing Foreign Money

We have successfully handled a diverse range of IRS Voluntary Disclosure and International Tax Investigation/Examination cases involving FBAR, FATCA, and high-stakes matters for clients around the globe (In over 65 countries!)

Whether it is a simple or complex case, safely getting clients into compliance is our passion, and we take it very seriously.

Examples of areas of tax we handle

Who Decides to Disclose Unreported Money?

What Types of Clients Do we Represent?

We represent Attorneys, CPAs, Doctors, Investors, Engineers, Business Owners, Entrepreneurs, Professors, Athletes, Actors, Entry-Level staff, Students, Former/Current IRS Agents and more.

You are not alone, and you are not the only one to find himself or herself in this situation.

IRS Penalty List

The following is a list of potential IRS penalties for unreported and undisclosed foreign accounts and assets:

Failure to File

If you do not file by the deadline, you might face a failure-to-file penalty. If you do not pay by the due date, you could face a failure-to-pay penalty. The failure-to-file penalty is generally more than the failure-to-pay penalty.

The penalty for filing late is usually 5 percent of the unpaid taxes for each month or part of a month that a return is late. This penalty will not exceed 25 percent of your unpaid taxes. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.

Failure to Pay

f you do not pay your taxes by the due date, you will generally have to pay a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid. This penalty can be as much as 25 percent of your unpaid taxes. If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty.

However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax. You will not have to pay a failure-to-file or failure-to-pay penalty if you can show that you failed to file or pay on time because of reasonable cause and not because of willful neglect.

Civil Tax Fraud

If any part of any underpayment of tax required to be shown on a return is due to fraud, there shall be added to the tax an amount equal to 75 percent of the portion of the underpayment which is attributable to fraud.

A Penalty for failing to file FBARs

The civil penalty for willfully failing to file an FBAR can be as high as the greater of $100,000 or 50 percent of the total balance of the foreign financial account per violation. See 31 U.S.C. § 5321(a)(5). Non-willful violations that the IRS determines were not due to reasonable cause are subject to a $10,000 penalty per violation.

A Penalty for failing to file Form 8938

The penalty for failing to file each one of these information returns is $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return.

A Penalty for failing to file Form 3520

The penalty for failing to file each one of these information returns, or for filing an incomplete return, is the greater of $10,000 or 35 percent of the gross reportable amount, except for returns reporting gifts, where the penalty is five percent of the gift per month, up to a maximum penalty of 25 percent of the gift.

A Penalty for failing to file Form 3520-A

The penalty for failing to file each one of these information returns or for filing an incomplete return, is the greater of $10,000 or 5 percent of the gross value of trust assets determined to be owned by the United States person.

A Penalty for failing to file Form 5471

The penalty for failing to file each one of these information returns is $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return.

A Penalty for failing to file Form 5472

The penalty for failing to file each one of these information returns, or to keep certain records regarding reportable transactions, is $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency.

A Penalty for failing to file Form 926

The penalty for failing to file each one of these information returns is ten percent of the value of the property transferred, up to a maximum of $100,000 per return, with no limit if the failure to report the transfer was intentional.

A Penalty for failing to file Form 8865

Penalties include $10,000 for failure to file each return, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return, and ten percent of the value of any transferred property that is not reported, subject to a $100,000 limit.

Fraud penalties imposed under IRC §§ 6651(f) or 6663

Where an underpayment of tax, or a failure to file a tax return, is due to fraud, the taxpayer is liable for penalties that, although calculated differently, essentially amount to 75 percent of the unpaid tax.

A Penalty for failing to file a tax return imposed under IRC § 6651(a)(1)

Generally, taxpayers are required to file income tax returns. If a taxpayer fails to do so, a penalty of 5 percent of the balance due, plus an additional 5 percent for each month or fraction thereof during which the failure continues may be imposed. The penalty shall not exceed 25 percent.

A Penalty for failing to pay the amount of tax shown on the return under IRC § 6651(a)(2)

If a taxpayer fails to pay the amount of tax shown on the return, he or she may be liable for a penalty of .5 percent of the amount of tax shown on the return, plus an additional .5 percent for each additional month or fraction thereof that the amount remains unpaid, not exceeding 25 percent.

An Accuracy-Related Penalty on underpayments imposed under IRC § 6662

Depending upon which component of the accuracy-related penalty is applicable, a taxpayer may be liable for a 20 percent or 40 percent penalty

Possible Criminal Charges related to tax matters include tax evasion (IRC § 7201)

Filing a false return (IRC § 7206(1)) and failure to file an income tax return (IRC § 7203). Willfully failing to file an FBAR and willfully filing a false FBAR are both violations that are subject to criminal penalties under 31 U.S.C. § 5322.  Additional possible criminal charges include conspiracy to defraud the government with respect to claims (18 U.S.C. § 286) and conspiracy to commit offense or to defraud the United States (18 U.S.C. § 371).

A person convicted of tax evasion

Filing a false return subjects a person to a prison term of up to three years and a fine of up to $250,000. A person who fails to file a tax return is subject to a prison term of up to one year and a fine of up to $100,000. Failing to file an FBAR subjects a person to a prison term of up to ten years and criminal penalties of up to $500,000.  A person convicted of conspiracy to defraud the government with respect to claims is subject to a prison term of up to not more than 10 years or a fine of up to $250,000.  A person convicted of conspiracy to commit offense or to defraud the United States is subject to a prison term of not more than five years and a fine of up to $250,000.

What Should You Do?

Everyone makes mistakes. If at some point that you should have been reporting your foreign income, accounts, assets or investments the prudent and least costly (but most effective) method for getting compliance is through one of the approved IRS offshore voluntary disclosure program.

Be Careful of the IRS

With the introduction and enforcement of FATCA for both Civil and Criminal Penalties, renewed interest in the IRS issuing FBAR Penalties, crackdown on Cryptocurrency (and IRS joining J5), the termination of OVDP, and recent foreign bank settlements with the IRS…there are not many places left to hide.

4 Types of IRS Voluntary Disclosure Programs

There are typically four types of IRS Voluntary Disclosure programs, and they include:

Contact Us Today; Let us Help You.