THE Foreign Account Tax Compliance Act (FATCA) requires foreign financial Institutions and other non-financial foreign entities to report on the foreign assets held by their U.S. account holders or be subject to withholding on certain payments.
1. Form 8938 Statement of Specified Foreign Financial Assets: U.S. taxpayers holding financial assets outside the United States must report those assets to the IRS on Form 8938. There is penalty for not reporting financial assets. This is in addition to FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR) (formerly TD F 90-22.1), in addition to Form 8938.
2. FATCA and foreign financial institutions: FATCA may require foreign financial institutions to report directly to the IRS information about financial accounts held by U.S. taxpayers or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. These institutions include banks, investment entities, brokers, and certain insurance companies and certain non-financial foreign entities may have to report of their U.S. owners.
3. Outside of US new account set up: Foreign financial institution may ask you for information about your citizenship.
4. Service Account Holders: If you are mainly maintaining a service account, FATCA provides special reporting requirements of U.S. account holders of some financial institutions that do not solicit business outside their country of organization.
5. Threshold: The threshold varies depending on your filing status or if you live abroad.
6. Outside of US: You are live abroad if you are a U.S. citizen whose tax home is in a foreign country and you have been present in a foreign country or countries for at least 330 days out of a consecutive 12-month period.
7. Single or married filing separate: You must submit a Form 8938 if you have more than $200,000 of specified foreign financial assets at the end of the year and you live abroad; or more than $50,000, if you live in the United States.
8. Married filing joint income tax return or live abroad: You must submit a Form 8938 if you have more than $400,000 of specified foreign financial assets at the end of the year and you live abroad; or more than $100,000, if you live in the United States.
9. Exception: 1) If you are not required to file a U.S. income tax return for certain year then you do not have to file Form 8938. 2) If you report interests in foreign entities and certain foreign gifts, you may just list the submitted forms on Form 8938 without the details.
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Disclaimer: Any accounting, business or tax advice contained in this communication is neither intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties.
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Al-os & Associates Accountancy Corporation provides accounting and tax services to individuals, corporations, LLCs and business entities. The Firm has a niche in defending taxpayers audited by the IRS and other governmental agencies.
