We have talked about the Foreign Account Tax Compliance Act (FATCA) many times on this blog. The rule is the United States’ way of taxing its citizens and permanent residents for all the income they make around the world, regardless of where it’s kept. FATCA compels foreign banking institutions to report account holdings and income of American citizens that have money in overseas accounts to the Internal Revenue Service.
This law isn’t just being accepted in a few countries. More than 80 nations have complied with FATCA, including Russia and China. FATCA’s reach is essentially unending, with most, if not all, major countries falling in line with the rules FATCA sets forth. As a result, your money is unlikely to escape the grasp of the IRS, no matter where you keep it.
One of the key problems with FATCA — beyond the incredible reach that is has — is the law creates a lot of confusion for Americans who have to report their income to the IRS. For example, FATCA’s rules actually only add on to the infamous FBAR (Foreign Bank and Financial Accounts report), which will still have to be filed by taxpayers. That means you will essentially be creating duplicate reports come tax time: one for FATCA and one FBAR.
Beyond this duplicative effort, the rules themselves are confusing. Tax rules always are, but especially when it comes to foreign accounts and income crossing international borders. If you run into issues surrounding your taxes, FATCA and/or FBAR, then you need legal representation to ensure that your tax case is handled properly.
Source: Forbes, “10 Facts About FATCA, America’s Manifest Destiny Law Changing Banking Worldwide,” Robert W. Wood, Aug. 19, 2014
