Foreign Account Tax Compliance Act (FATCA)
If you have foreign financial assets, then you may have additional tax filing requirements due to the Foreign Account Tax Compliance Act (FATCA). The law punishes foreign financial institutions (FFIs) for failure to turn over to the IRS, information on its U.S. account holders. Under FATCA foreign financial institutions failing to comply will be subject to 30% withholding of certain payments it receives.
FATCA requires that you file Form 8938 if you have foreign financial assets exceeding the reporting threshold. The reporting threshold is determined by your filing status and whether you reside in the U.S. or abroad.
Essentially foreign financial assets are:
- Financial accounts maintained by a foreign financial institution, like bank and brokerage accounts.
- The following foreign financial assets if they are not held in an account at a financial institution:
- Stock or securities issued by someone that is not a U.S. person, like a foreign corporation.
- Any interest in a foreign entity, like a partnership or trust.
- Any financial instrument or contract that has an issuer or counterparty that is not a U.S. person, like an annuity or life insurance contract.
What is and what is not a foreign financial asset can be confusing. As with most IRS disclosures involving foreign income or assets, failure to comply can result in harsh civil and criminal penalties. This is where professionals, like those at Esquire Group come in.
Esquire Group will alleviate any confusion you may have by helping you determine your filing requirements. We will answer your questions and analyze the impact FATCA may have on your holdings overseas and make sure you are in compliance.