FATCA Repeal News & Update (2018) – Will the U.S. Repeal FATCA?
- 1 TL; DR
- 2 What is the Purpose of FATCA?
- 3 How Many Countries have Entered into FATCA Agreement?
- 4 How is FATCA Enforcement Supposed to Work?
- 5 Does the U.S. Reciprocate?
- 6 Isn’t FATCA the same as FBAR?
- 7 Isn’t FATCA the same as CRS?
- 8 Will the IRS Repeal FATCA?
- 9 Why Would the U.S. Not Repeal FATCA?
- 10 Out of FATCA Compliance?
- 11 Golding & Golding, A PLC
FATCA Repeal News & Update (2018) – Will the U.S. Repeal FATCA?
FATCA is still active law.
FATCA the Foreign Account Tax Compliance Act. FATCA was written into law in 2010 with the enforcement beginning in 2014 (with tax return reporting commencing in 2011 on form 8938).
More than 110 countries and 300,000 Foreign Financial Institutions have agreed to report to the U.S. in accordance with FATCA Compliance.
Common questions we receive about FATCA include:
- Why do I have to report my foreign assets?
- Why did my bank send me a FATCA Letter?
- Am I subject to FATCA?
- How will the IRS find me?
- How does the bank know I am a US person?
- Will the U.S Repeal FATCA?
For purposes of this article, we will focus on final question which is:
“Is there is any hope that the US government will repeal FATCA?“
At the current time, it does not appear that the US government is going to repeal FATCA. In fact, with the U.S. recently joining the global enforcement group initiative J5 (which is designed to crack down on crypto currency crime), it appears international tax enforcement will remain a key priority.
Overall, the United States continues moving toward Global cooperation in order to try to track down and recover tax money it is due for income that was not properly reported.
For a comprehensive example of how Foreign Residents/Expats get reported under FATCA, Click Here: “Learn How to Protect Your Accounts & Assets from FATCA”
What is the Purpose of FATCA?
The purpose of FATCA is to combat offshore tax crime and facilitate global reporting. In other words, FATCA is designed to make sure that US persons with foreign income, accounts, assets, and investments outside of United States stay in compliance by properly reporting information to the US government. The U.S. keeps tabs by requiring U.S. Persons filing a U.S. Tax Return to include a Form 8938 in each year the taxpayer meets the threshold reporting requirement.
Form 8938 requires a taxpayer to detail information about their foreign assets, and income generated from the assets.
How Many Countries have Entered into FATCA Agreement?
At this time, there is roughly 114 different countries that have entered into bilateral IGA “agreements” with United States for the reciprocal enforcement of FATCA.
How is FATCA Enforcement Supposed to Work?
In a perfect world, each country that entered into a FATCA agreement with United States would report U.S. Account Holder information to the U.S. government, so that the US government can identify and take action against taxpayers with unreported “Specified Foreign Financial Assets.”
Does the U.S. Reciprocate?
Since the IGAs are bilateral, the United States is supposed to reciprocate.
For example, individuals from Portugal, Taiwan, and/or Italy who have U.S accounts may have a reporting requirement to their own government about their U.S. account — that they may not have reported to the foreign tax authorities.
Thus, in accordance with FATCA, the IRS is supposed to report that information to the foreign government, so that the foreign government can enforce its own laws against the person.
With that said, the IRS is understaffed and under-budget. And, presumably with the little resources that the IRS has, it is probably not directing those resources towards providing reciprocal disclosures to foreign countries.
Isn’t FATCA the same as FBAR?
No. FBAR (Report of Foreign Bank and Financial Account, FinCEN 114) is a form that has been around since the 1970s. FBAR is used to report “Foreign Accounts to the IRS.”
FATCA has many different components to it, depending on whether the person at issue is an individual, foreign institution, or withholding agent.
Isn’t FATCA the same as CRS?
No. CRS is the Common Reporting Standard. CRS is a different initiative of which the United States is not currently a participant.
Nevertheless, if you happen to have your money in multiple jurisdictions and those jurisdictions have agreed to comply with CRS, then you may have to comply with both FATCA and CRS (some Foreign Financial Institutions place clients on notice by sending them a joint “CRS/FATCA Letter.”
Will the IRS Repeal FATCA?
While people across the globe (especially U.S. Expats and Accidental American) are trying to repeal FATCA, it does not appear likely at this time that the US government is going to do so.
Even though FATCA does not work the way it was planned to do (with many different types of foreign residents and Accidental Americans getting blindsided by new requirements, resulting in many foreign institutions refusing to do business with any US persons), the government does not seem to be repealing FATCA anytime soon.
Why Would the U.S. Not Repeal FATCA?
Essentially, the US government was able to convince 114 different countries to enter into an agreement with United States for the foreign country to do the IRS’ bidding. In other words, if the IRS is receiving account holder information from more than 114 different countries, why would they want to repeal FATCA?
As to Accidental Americans and U.S. Expats abroad, the IRS and U.S. Government seems to have taken the position that they are just collateral damage.
FATCA is helping the U.S. government facilitate the recovery of billions of dollars of penalties, taxes and interest. As such, the repeal of FATCA at a time that the IRS has also created multiple international tax enforcement groups and/or has entered into agreements with other countries on other related matters such as cryptocurrency and offshore evasion does not appears to be a major priority.
Out of FATCA Compliance?
If you are out of FATCA compliance and ihave not properly reported or disclosed your foreign Financial Asset information to the US tax authorities, there are various options you may have to safely get into compliance.
Depending on the facts and circumstances of your situation, you may be able to reduce, limit or even avoid any penalties on the undisclosed assets.
Golding & Golding, A PLC
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Sean holds a Master's in Tax Law from one of the top Tax LL.M. programs in the country at the University of Denver. He has also earned the prestigious IRS Enrolled Agent credential. Mr. Golding's articles have been referenced in such publications as the Washington Post, Forbes, Nolo, and various Law Journals nationwide.