ITIN NEWS BLOG

News & Tips from an ITIN Acceptance Agent

FATCA - what is it?


The Foreign Account Tax Compliance Act (FATCA) is a U.S. Federal Law passed in 2010 to enforce the requirement for United States persons including those living outside the U.S. to file yearly reports on their non-U.S. financial accounts to the Financial Crimes Enforcement Network (FINCEN).

In simple terms it's America's global tax law (now in full swing since 2014). It is enforcing reporting back to the IRS of all known U.S. persons and their bank account balances from any bank in the world. So far reaching is the law that both Russia and China have signed up too.

The law is aimed at Foreign Financial Institutions (FFIs) and other financial intermediaries to prevent tax evasion by U.S. citizens and residents through the use of offshore accounts.

FATCA itself was born out of the rule (controversial as it is) that the U.S. taxes its citizens and residents on their worldwide income REGARDLESS of where they LIVE. As a result of FATCA almost every financial institution is complying with the law to identify any American with a bank account with that institution and ultimately reporting them and their cash balances to the IRS.

Why are FFI's complying? The reason is they don't want to be cut out of the lucrative U.S. financial markets, which is basically what will happen if they don't. As a result almost everyone is complying.

Oh, and the fines for hiding information about U.S. citizens and residents are astronomical (case in point: Credit Suisse was fined billions).

What is reported to the IRS? FFIs must report the account numbers, balances, account names, addresses and U.S. Tax Identification Numbers (TINs) directly to the IRS. If they choose not to report they have to withhold 30% tax and report and pay this to the U.S. Why would these financial institutions want the extra paperwork, headache and additional compliance of tax reporting? As a result, they effectively shook hands with the IRS on handing over any and all U.S. person related information.

What does this mean for me? Well if you haven't filed a tax return since leaving the U.S. then expect a letter to arrive asking for back tax returns and potential penalties.

But I file in my country of residence? Yes but there is also a requirement to continually file in the U.S. This includes both U.S. tax and information reporting forms.

An example of an information form is the Foreign Bank Account Report or FBAR where U.S. persons with bank balances exceeding $10,000 in aggregate must report these accounts to the IRS on FinCen form 114 (Report of Foreign Bank and Financial Accounts) by June 30th each year or risk stiff penalties and fines for non-compliance.

As of June 1st 2013, the FBAR can only be e-filed.

What does FATCA achieve? In simplified terms it lets the IRS know who has and hasn't filed their U.S. tax returns. It also created form 8938, which needs to be filed and attached to the annual income tax return (1040). This form needs to be filed by U.S. taxpayers who have an interest in foreign financial assets including financial accounts, certain foreign securities, and interests in foreign entities with an aggregate value exceeding $50,000.

What if I have a joint account with my spouse / partner but have no beneficial interest? The FBAR requirement also applies in this case where no beneficial interest exists but you still have signature authority (much like a business bank account).

I haven't lived in the U.S. for 30 years and I haven't reported my income or bank balances to the IRS - does FATCA apply to me? If you are a U.S. citizen / resident or green card holder then yes it does. FATCA is imposed on Foreign Financial Institutions and it is their responsibility to correctly identify and then report that information to the IRS. Ultimately handing over to them that you have been non-compliant in your U.S. tax filings.

How will the bank know I am a U.S. person? All banks are sending documentation asking questions relating to your citizenship and also requesting any U.S. person to fill out a form W-9 once identified. If you refuse to sign the form, they can freeze or close your bank account.

What do I do now? Feel free to get in touch and we can discuss the various options for filing and catching up with your U.S. tax filing requirements.

This includes voluntary disclosure (filing returns before the IRS approaches you), the IRS streamlined filing compliance procedure (for those who qualify) which could result in no penalties being assessed for those honest taxpayers who were non-wilful and did not genuinely know about any filing requirement. The Offshore Voluntary Disclosure Program (OVDP) is also there for those who don't know if their actions were non-wilful. This program requires many more tax returns to be filed and has penalties assessable.

Contact Us:

www.justbreve.com

info@justbreve.com

Don't live in the U.K? No problem, we can assist by phone, email and Skype. Please feel free to get in touch.

#FATCA #FBAR #FinCen114 #DoIneedtofileaUStaxreturn

We Visit You:

 

West & Central London
Heathrow | Greater London
 

We also serve the rest of the United Kingdom (UK) & International (subject to travel costs) including:

Call Just Breve:

T: 0208 1444 632

M: 07725 587696

Our Address: 

The Bower, Ground Floor, Four Roundwood Avenue, Stockley Park, Hayes, Middlesex, UB11 1AF, UK  (by appointment)

  • LinkedIn
  • Facebook - White Circle

We Accept

American Express
China Union Pay
Diners Club
Discover
JCB
Maestro
MasterCard
PayPal
V pay

Visa

Visa Electron

Apple Pay

Android Pay

We accept payment in:

GBP, USD and Euro

SKYPE Video calls:

 

If you are based at a distance or cannot visit us at the office, Skype video calls are available.

Per our license requirements, your ID documents will need to be mailed in before the call. These will be returned securely.

Privacy Policy

Cookie Policy

We are United Kingdom Acceptance Agents. View us on IRS.gov »

© Just Breve™ (All Rights Reserved)