FATCA News

 

 

Foreign Account Tax Compliance Act (FATCA)

The Foreign Account Tax Compliance Act (FATCA) was introduced in 2010, and is intended to increase reporting and compliance of foreign financial assets by U.S. citizens.

The Act contains new rules in two major areas:

Reporting Obligations by U.S. Individuals and Entities:

Starting with the 2011 tax year, U.S. taxpayers who meet the following thresholds must file new form 8938 (Statement of Specified Foreign Financial Assets) for each financial asset not otherwise reported on forms 3520/3520A, 8621 or 8638:

 

 

Value of Foreign Financial Assets at End of Year

Value of Foreign Financial Assets any time

in the Year
While Living in the United States:
    
a)  Single
$50,000
$100,000
b) Married Filing Jointly
$100,000
$200,000
c) Married filing separately
$50,000
$100,000
While Living Abroad:    
d)  Not filing joint return
$200,000
$400,000
e)  Filing joint return
$400,000
$600,000

 

The filing of a separate form 8938 for each account does not relieve you of filing form TDF 90.22.1 each year separately by June 15.

Reporting By Foreign Financial Institutions to the IRS:

By June 30, 2013, foreign financial institutions will be obligated to enter into an agreement with IRS to report certain information to IRS regarding U.S. taxpayers (including individuals and entities in which U.S. persons have a substantial interest.

The agreement will obligate the foreign financial institutions to:

  1. Comply with IRS mandated identification procedures for account holders;
  2. To report account activity directly to IRS annually;
  3. To withhold and pay to IRS 30% of U.S. source income and gross proceeds from the sale of securities which give rise to U.S. source income, if these payments are made to:
    1. Non participating foreign financial institutions;
    2. Individual account holders who fail to provide sufficient identification, regardless of whether they are U. S. citizens; and
    3. Foreign entities who fail to provide sufficient information about the identity of U.S. owners.

More information can be obtained in IRS Notice 2011-53.