Roseville FATCA Compliance Lawyers
The economic crash of 2007 and the ensuing Great Recession resulted in exacerbating the short-run economic pain the nation was experiencing while simultaneously calling into question the sustainability of long-run obligations. In short, the economic turmoil created by these events made government and business leaders rethink their approach to many aspects of running the country. One of the areas most impacted by the economic difficulties are the obligations and duties of a taxpayer.
During and following the economic difficulties, Congressional leaders began to lament the existence of a tax gap. That is, the tax gap is the difference between projected tax revenues and the revenues that are actually collected. Since government revenue shortfalls were particularly severe during the nadir of the downturn, Congressional leaders scrambled to find ways to raise more revenues.
The result of these efforts is the Foreign Account Tax Compliance Act, also known as FATCA. FATCA has been called many things, but most commonly it is referred to as America’s global banking law. Since its passage the law has been continually strengthened through the U.S. government’s creation of enforcement programs and initiatives. Furthermore, the vast array of international account data gleaned through the Swiss Bank program, international tax agreements, and other measures means that IRS agents and government prosecutors have an array of information with which to work. Taxpayers who have yet to make required FATCA disclosure should do so as soon as practicable to avoid facing significant fines and penalties.
When Are Taxpayers Required to File FATCA?
The obligation to file FATCA and disclose covered foreign accounts and assets arises when a taxpayer holds assets in excess of the reporting threshold. Unlike the reporting threshold for FBAR which is $10,000 for all taxpayers, the amount of assets one can hold under FATCA before making a report varies based on one’s tax filing status and country of residence. Taxpayers who are married and file jointly while living in a foreign nation can hold the greatest amount of assets before they are required to make a disclosure. By contrast, a sole filer who lives in the United States can hold the least assets before he or she is obligated to make a FATCA filing. A taxpayer who files his or her income tax as a sole filer in the United States can only hold up to $50,000 in aggregate assets on the final day of the tax period or $100,000 at any time before he or she must make a disclosure. Married taxpayers living in a foreign nation can hold up to $400,000 on the last day of the tax period or up to $600,000 at any time before they must file.
How Does One Satisfy the FATCA Obligation?
The FATCA obligation can be satisfied by filing IRS Form 8938 by the annual FATCA due date when the aggregate value of accounts and assets exceeds the filing threshold. The FATCA obligation is in addition to any other tax or disclosure duties including one’s income tax obligation and FBAR duties. Covered financial accounts that must be disclosed in a FATCA filing may include:
- Foreign stocks
- Foreign securities
- Contracts with foreign individuals
- Foreign non-account investment assets
- Foreign financial accounts
- Interests in foreign entities
However, other accounts are exempted from being reported on IRS Form 8938 because they are not considered foreign assets or because reporting them would be duplicative of other filings. These accounts include:
- Financial accounts maintained by U.S. payors
- If the interest is unknown and there is no reason to know, an individual’s beneficial interest in a foreign trust or estate.
- Foreign interest in a governmental social safety net program
- Corporate interests already reported on IRS Form 5471
- Canadian retirement savings plans as disclosed on IRS Form 8891
- Certain passive retirement investments as reported on IRS Form 8621
Understanding which accounts are covered under FATCA and which accounts are exempt can be difficult to understand for tax laypeople. The experienced tax lawyers of the NewPoint Law Group, LLP, can provide on-point guidance to satisfy all tax and disclosure duties.
Rely on Our FATCA Experience in Roseville
Whether you live at home or are an expatriate living abroad, all U.S. persons must satisfy their tax and FATCA disclosure duties. Taxpayers that fail to do so can face significant penalties that can consume the majority of the undisclosed funds. To schedule a free, confidential FATCA and offshore disclosure consultation call our experienced team at 800-358-0305 or contact us online today.