The Foreign Account Tax Compliance Act, or “FATCA” as it is known, passed in March 2010, “targets tax non-compliance by U.S. taxpayers with foreign accounts.” The FATCA is concerned with reporting by U.S. taxpayers with offshore financial accounts and assets, as well as reporting by foreign financial institutions regarding accounts held by U.S. taxpayers.
For example, if a taxpayer living in the U.S. has more than $50,000 of foreign financial assets at the end of the tax year then the taxpayer must file a Form 8939 for that tax year. Even if a taxpayer has less than $50,000 at the end of the tax year, the taxpayer must still report foreign assets if the total value was more than $75,000 at any time during the tax year. The financial threshold for taxpayers living outside the United States is higher.
Failure to follow the FATCA guidelines can result in significant tax penalties. As such, any taxpayer with questions regarding compliance with the FATCA should reach out to a California tax attorney for guidance.
Taxpayers are Feeling Effects of FATCA
The United States-the only country that taxes its citizens regardless of where they live-wants to make sure it collects as much taxes as possible, whether those assets are located within U.S. borders or around the globe. And now, taxpayers and foreign banks are feeling the effects.
As a result of new treaties with the United States, foreign banks are providing confidential information to the U.S. Treasury for foreign accounts held by U.S. citizens or immigrants with a U.S. work permit or green card. If a foreign bank does not provide the requested information then the U.S. Treasury can threaten a 30% tax withholding on the bank’s earnings in the United States. This is all in an effort to uncover assets that may be hiding abroad. Richard Harvey, a tax law professor at Villanova University believes that over a 10-year period, the FATCA could result in $20 to $30 billion in tax payments.
The U.S.’s efforts to collect money abroad have led some citizens to renounce their citizenship. In 2013, about 3,000 people renounced their citizenship and about another 1,600 renounced their citizenship in the first half of 2014.
Contact a California Tax Attorney
If you have any questions regarding compliance with the Foreign Account Tax Compliance Act, a California tax attorney can help you understand the law and how to comply with its provisions. At Janathan L. Allen, APC, our California tax attorneys have extensive experience advising individuals and businesses on a variety of international tax matters, including compliance with the FATCA. Our tax attorneys will work with you to ensure that you understand your tax liability, that you develop a prudent asset and tax management plan, and that you minimize your tax liability and legal liability.
Our firm is based in San Diego, California. We have several offices located throughout Southern California where one of our tax attorneys can help answer your questions. Contact one of our California tax attorneys today. We offer a free initial consultation and case evaluation.
