Under FATCA (Foreign Account Tax Compliance Act), U.S. persons who maintain foreign accounts, foreign investments and certain specified foreign assets are required to report this information to the United States.

Many individuals get caught out-of-compliance by the IRS — often times it is because they were unaware of any requirement to file, or be in compliance.

It is not as if the United States gives anyone a “heads up” and identifies each U.S. person that was abroad or in the United States with foreign assets and provide them information regarding proper foreign and offshore reporting requirements; rather, if you are not in compliance — the IRS will simply penalize you.

One way we are finding that our clients are getting into FATCA trouble is by transferring money from a foreign country into the United States.

Foreign Transfer Example

David resides in Tokyo, Japan. He is a US green card holder but citizen of Japan. He has children who are attending college in the United States, and decided that instead of having them rent apartments, he would transfer money to them so that they can purchase a small home to live in.

David authorizes his Japanese bank the transfer $500,000 to a bank account in the United States. The problem is the Japanese bank is aware that David is a green card holder. Why? Because when David was residing in the United States more than 15 years ago, he provided the bank with a US address to receive mail.

Therefore, when it comes time for FATCA reporting, the bank transfers David’s information to the United States government in accordance with the Intergovernmental Agreement (IGA) between Japan in the United States.

Thereafter, David finds himself under audit by the IRS, and possibly subject to extremely high fines and penalties for failing to report his accounts, investments at specified assets under FATCA Form 8938 and FBAR Reporting Rules (Report of Foreign Bank and Financial Accounts)

In order to avoid these potential fines and penalties, David could have entered the IRS Offshore Voluntary Disclosure and possibly avoided all penalties, as well as receive Foreign Tax Credit for all taxes he already paid in Japan.

IRS Voluntary Disclosure

If the IRS discovers that you are out of compliance, you may become subject to extensive fines and penalties – ranging from a warning letter all the way up to tax liens, tax levies, seizures, and criminal investigations. To combat this, you can take the proactive approach and submit to Voluntary Disclosure.

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure

We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.

Each case is led by a Board-Certified Tax Law Specialist with 20 years of experience, and the entire matter (tax and legal) is handled by our team, in-house.

*Please beware of copycat tax and law firms misleading the public about their credentials and experience.

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