International Tax Issues – FBAR, OVDP, FATCA & More

Foreign Account Tax Compliance Act

The Foreign Account Tax Compliance Act (FATCA) is a federal law that puts reporting requirements in place for U.S. businesses and individuals and certain foreign entities with foreign assets. It was put into effect by President Obama in 2010 as part of the HIRE Act. It covers the loopholes of the Qualified Intermediary Program (QI) which did not require financial institutions to report information regarding foreign accounts to the IRS. 

FACTA reporting closes the loopholes, including the biggest one of all which allows a foreign financial institution to refrain from reporting information on U.S. accounts that contained no U.S. source income. It requires a foreign institution to disclose account information on all U.S. owned foreign accounts regardless of whether the income is from foreign or domestic sources. U.S taxpayers must also disclose all foreign income to avoid penalties. 

This article will review what you need to know about the FATCA so you can stay on the right side of the law. 

Do I Need to Meet the FATCA Filing Requirement? 

According to the IRS, FATCA regulations apply to any U.S. citizen or resident and a limited number of nonresidents who own certain foreign accounts. However, FATCA reporting requirement may vary according to marital status, the country of residence and other factors. 

Certain businesses with foreign assets must also be compliant with the Foreign Account Tax Compliance Act. The value of the business’s assets are taken into account in determining its FATCA requirements. 

What is FATCA Withholding?

Withholding tax refers to taxes withheld from a paycheck to be paid directly to the government. FATCA requires that business entities that do not comply with FATCA reporting guidelines will be subject to withholding tax. 

Filing a form W8 will be helpful to businesses and individuals that hold foreign accounts. It verifies their country of residence and certifies that they qualify for a lower FATCA tax withholding rate. 

Do Financial Institutions Report on Me?

Yes, in addition to institutions and individuals being required to report information about their foreign assets, a foreign financial institution (FFI) must also report information on accounts held by U.S. taxpayers to the IRS. This helps ensure FATCA compliance. 

What is a Global Intermediary Identification Number?

A Global Intermediary Identification Number (GIIN) is a number that is assigned to a foreign financial institution, a branch of the institution, a reporting non-financial foreign entity (NFFE), a sponsored entity and a sponsored subsidiary branch by the IRS after FATCA registration approval. It identifies the entity to tax administrators for FATCA reporting purposes. 

Do I Need an Attorney to Assist Me with IRS FATCA Reporting?

The Foreign Account Tax Compliance Act can get complicated. It’s essential to partner with a reliable attorney to determine FATCA reporting obligations. A legal expert will also help you if any complications arise. 

Frost Law has extensive experience helping clients with a variety of legal issues including tax controversy. They will ensure that you remain compliant with the Foreign Account Tax Compliance Act, and they will see to it that you pay exactly what you should be paying, no more and no less. Contact them to make sure you stay on the right side of the law.

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