FATCA Compliance - Stay out of troubles
Foreign Account Tax Compliance (FATCA) requires individuals to report their financial accounts held overseas to the IRS and foreign financial institutions to report their American clients to the Service. The IRS is enlisting every foreign bank as its agent and most do comply.
U.S. citizens, residents, and some nonresident individuals who own certain foreign financial accounts or other specified foreign financial assets must report those assets to the IRS using Form 8938 and attach this form to their income tax return. Please note that this reporting requirement is separate from FinCEN Form 114, Report of Foreign Bank and Financial Accounts (“FBAR”).
Failure to file FATCA may result in a penalty of $10,000 (and a penalty up to $50,000 for continued failure after IRS notou ification). Further, underpayments of tax related to non-disclosed foreign financial assets is subject to an additional penalty of 40 percent.
There is also good news. Taxpayers with a total value of specified foreign financial assets below a certain threshold do not have to file FATCA. For example, if the total value of foreign assets is at or below $50,000 at the end of the tax year, there is no reporting requirement for the year, unless the total value was more than $75,000 at any time during the tax year. The threshold is higher for individuals who live outside the United States and / or are married. Lastly, taxpayers who do not have to file an income tax return for the tax year do not have to file Form 8938, regardless of the value of their specified foreign financial assets.
The taxpayers with foreign assets above the threshold who failed to timely submit Form 8938, have 3 ways to become compliant, including Oversees Voluntary Disclosure Program, OVDP (formerly known as OVDI).
If you are late with your FATCA or need IRS audit help, book your FREE consultation today with a Trusted Tax Advisor at http://capitalproalliance.com/helpstep1_expats_tax/