What You Need To Know About FATCA Reporting
Despite the fact that the IRS appears to be mellowing their stance on offshore banks, in light of the revisions to the Offshore Voluntary Disclosure Act implemented in 2012, the United States is getting more serious than ever before about collecting the taxes due to them from its citizens, wherever they may live. With 7 million Americans, and counting, living abroad, this constitutes a sizable amount, that the IRS intends to collect. Every American citizen with an offshore bank account will be subject to FATCA reporting.
What Is FATCA Reporting?
The Foreign Account Tax Compliance Act, or FATCA, requires all US Citizens, living at home and abroad, to report assets held in offshore bank accounts to the IRS. This is known as FATCA reporting. In this instance, citizens are defined as anyone born on native US soil, green card holders, and anyone holding investment ties to American institutions, such as the IRS.
FATCA was created as part of the Hiring Incentives To Restore Employment, or HIRE, act that was passed in 2010. FATCA has been growing ever more serious, culminating in the IRS’ announcement, as of July 1, 2014, Foreign Financial Institutions, or FFIs, are required to report bank accounts held by American citizens to the Financial Crimes Enforcement Network (FINCEN), or to face a penalty of a 30% reduction of all American investments.
FATCA also requires American citizens living abroad to report overseas assets over $50,000 – slightly higher for overseas residents, which is $200,000 for an individual filer and $400,000 for joint filers, to report those holdings on the form 8398 with the IRS, to be filed along with the 1040.
Some Americans living abroad have reported being locked out of their overseas bank accounts, and some dual-citizens have been denied banking services showing that the IRS is serious about getting their money, and American citizens all over the world are feeling the effects.
Some Facts About FATCA Reporting
Tax laws are notoriously convoluted and confusing, at the best of times, let alone when it involves multiple nations and dual citizenship. Here’s some things you need to know about FATCA Reporting.
- FATCA was created in a controversy: FATCA was created, in 2010, in response in the aggravated financial meltdown that was The Great Recession. The US government took this opportunity to create an act that would greatly punish FFIs for non-compliance, with the threatened loss of American income.
- Full compliance: Rather than the furious uproar you would expect, over 80 nations have fallen in line to comply with the IRS’ new tax policy, including China and Russia! Even notorious tax havens like Switzerland are complying and striking deals with the Department Of Justice.
- On the lookout for TINS: Foreign Financial Institutions are required to report accounts held by American Tax Identification Numbers, or fall under their gaze themselves.
- FBARs are still required: FATCA doesn’t replace FBARs, which have been in place since the ‘70s. Americans with over $10,000 in offshore accounts need to file a FBAR by June 30.
- Don’t bother appealing: Despite the fact that Republicans filed a modest appeal when FATCA was implemented in 2010, but there’s been no serious effort to repeal FATCA. Some suggest that it will be like a modern version of the Olmstead Act, lasting for a time and then vanishing.
With more and more businesses relying on global commerce and international finances, to stay as streamlined and competitive as possible, FATCA stands to put a serious damper on American businesses abroad.
For more information about FATCA, and other intricacies of international finances, contact us today!