Foreign financial institutions that provide financial accounts to U.S. taxpayers or foreign entities that have a substantial ownership interest by a U.S. taxpayer are generally required to report information to the IRS. In some cases, this requires completion of an FFI agreement.
The Internal Revenue Service (IRS) recently posted a reminder that foreign financial institutions are expected to renew their Foreign Accounts Tax Compliance Act (FATCA) Foreign Financial Institution (FFI) agreements by today, July 31, 2017.
What types of entities are required to complete the renewal? Institutions that are required to renew FFI agreements generally include those who are not covered by an FATCA Intergovernmental Agreement (IGA) or those under Model 2 IGA.
What happens if a foreign institution does not renew the agreement? A failure to properly complete the renewal process with the IRS could result in the loss of the institutions’ FFI status. The termination of this status is retroactive and would go into effect as of January 1, 2017.
What does this mean for taxpayers with foreign interests? Whether holding an account at a foreign financial institution or other form of foreign interest, this looming deadline serves as a reminder of the increased efforts by the IRS to come down on those who are not in compliance with tax reporting requirements. If you have a foreign interest, it is wise to review your holdings and past reportings to make sure you are in full compliance with applicable tax laws. Penalties for a failure to comply with tax laws are harsh and can include large monetary fines as well as potential imprisonment.
As such, it is wise to seek legal counsel to ensure you are in compliance or to offer counsel to help bring everything into compliance if needed.