Foreign Account Tax Compliance Act (FATCA) was passed as part of the 2011 Jobs Bill and meant to make it harder for U.S. citizens to avoid paying taxes on hidden offshore bank accounts.
The IRS website states:
Under FATCA, U.S. taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS. This reporting will be made on Form 8938, which taxpayers attach to their federal income tax return, starting this tax filing season.
In addition, FATCA will require foreign financial institutions to report directly to the IRS information about financial accounts held by U.S. taxpayers, or held by foreign entities in which U.S. taxpayers hold a substantial ownership interest.
Foreign financial institutions are claiming the new law, which goes into affect in 2013, will put undue burdens on their institutions. They say complying with the new reporting rules will be both expensive and time consuming.
Trying to address the financial institutions concerns, the IRS has extended the deadline for registration until June 30, 2013 and is working to provide more detailed guidelines. In a recent speech, Douglas H. Shulman, Commissioner of Internal Revenue, said:
“I have also directly engaged executives from banks and financial institutions around the globe, as have my colleagues at the Treasury Department and IRS. We have listened to their major concerns that generally fall into two categories. First, is the conflict between FATCA and other countries’ laws. Second, is the difficulty in implementing and administering the withholding requirements for passthru payments and the potential burden they place on foreign financial institutions.”
“We have taken these conversations very seriously and you can expect new proposed regulations from us soon after the new year that take into account the implementation concerns we have heard. One goal of these regulations is to address these concerns and provide a way forward to allow responsible corporate citizens to work through these tricky issues in a practical fashion.”
We will continue to follow and report on issues related to FATCA.
Forbes article “German Banks Block American Customers, Citing U.S. Tax Act” (December 14, 2011)
IRS FATCA website