What You Need to Know About the Foreign Account Tax Compliance Act

WHAT IS IT?

The Foreign Account Tax Compliance Act (FATCA), according to the IRS, will target tax non-compliance by U.S. taxpayers with foreign accounts or even just signature authority in a foreign account. It does so by focusing on reporting requirements for U.S. taxpayers with foreign financial accounts and offshore assets.

WHAT THIS MEANS IF YOU'RE AN INDIVIDUAL:

If you're an individual with foreign accounts and assets above certain thresholds, you must report them on Form 8938 and include this form with the filing of your income tax return. This doesn't replace your Financial Bank and Financial Account Reporting ("FBAR") requirements, it just adds to it. Just a refresher, FBAR's are due by June 30th of the year following the calendar year being reported. They also must be filed online through FinCEN and not with your income tax return. The deadline is not extended if you are granted an extension of time to file your income tax return.

WHY YOU SHOULDN'T IGNORE IT:

There has been lackluster effort at best to repeal FATCA, and more than 80 nations including Russia and China have agreed to comply with U.S. reporting requirements. With compliance this widespread, it means there's a good chance the IRS is going to know about your foreign accounts and the penalties are steep for not reporting. Fines up to $500,000 and up to 10 years of prison for FBAR penalties. Willful FBAR violations can reach the greater of $100,000 or 50% of the account per violation per year.

For more information, call George Wilmoth at 423-756-7771