Do you need to comply with FATCA?

The Foreign Account Tax Compliance Act (FATCA) requires certain United States taxpayers to report foreign assets to the Internal Revenue Service (IRS). This is in addition to other requirements, such as filing the Report of Foreign Bank and Financial Accounts (FBAR) form.

So how do you know if you must comply with FATCA requirements? Ask these three questions to help find the answer:

 

  • Are you a qualifying person? Individuals that are citizens of the United States, resident aliens, nonresident aliens that elect for treatment as a resident alien for purposes of filing joint income tax returns and nonresident aliens that are bona fide residents of the American Samoa or Puerto Rico qualify.
  • Do you have a qualifying asset? A foreign financial account or investment may qualify.
  • Is the asset of the right value? This refers to foreign assets valued at $50,000 or more. In some cases, this threshold is higher. One example is married taxpayers that qualify to file a joint return. In that case, the threshold doubles. Assets include financial accounts, stocks, securities and the like.

If you answered yes to ALL of these questions, you likely need to comply with FATCA. A failure to comply with FATCA can come with serious penalties. This can include a $10,000 fee as well as an additional $50,000 fine if the asset is not in compliance after notification by the IRS.

There are a number of exceptions to reporting requirements. These can include certain interests in foreign trusts, corporations or retirement savings plans. Determining whether or not a foreign asset must be reported under FATCA is a complicated matter. An attorney can help. Contact an experienced international tax attorney to review the asset in question and provide counsel on how to come into compliance with tax laws. 

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