A Tax Law Attorney Can Help You with FATCA Compliance
The Foreign Account Tax Compliance Act (FATCA) is one of the efforts the U.S. government has put in place to combat offshore tax evasion.
FATCA requires foreign institutions and global banks to identify any U.S. clients with more than $50,000 USD in their account. Otherwise, these institutions would suffer a 30% withholding penalty on certain payments. The main purpose of the legislation is to increase transparency for the IRS with respect to U.S. persons that may be earning income through non-U.S. institutions.
Are you and your organization, FATCA compliant?
A FATCA attorney focuses his or her practice on the Foreign Account Tax Compliance Act (FATCA) and the compliance requirements for foreign corporations and individuals with an interest in or control over certain foreign accounts. Failure to comply can lead to severe civil penalties and in some cases criminal prosecution. If you are in any way uncertain about your responsibilities it is essential for you to contact an experienced tax attorney.
In 2013, the IRS released its final requirements for the FATCA, which was enacted in 2010, and it imposes a 30% withholding tax on payments to certain foreign financial institutions (FFI) that fail to enter into an agreement with the IRS to disclose the identities of U.S. accountholders with the foreign institution. Along with the final requirements the IRS included a timeline for the implementation of FATCA.
- Payments made on or after January 2017, will be subject to withholding on gross proceeds from the disposition of property that can produce a U.S. source interest or dividends.
- The deadline for withholding agents (including participating and registered deemed compliant FFIs) to implement verification procedures under FATCA is January 1, 2014.
- The deadline for withholding agents and FFIs to verify the identity of account holders and payees is June 30, 2014 for prima facie FFIs and December 31, 2015 for other account holders and payees. Accordingly, FATCA withholding will not be required to be imposed by withholding agents on such accounts prior to July 1, 2014 and January 1, 2016, respectively.
- The deadline for an FFI to file FATCA information reports with the IRS with respect to the 2013 and 2014 calendar years was extended to March 31, 2015.
FATCA is a very complex act that requires guidance from an experienced tax attorney. It expands the IRS’s reach overseas and will require detailed reporting on accounts worth more than $50,000. It also allows the IRS to reach into these accounts and take as much as 30% of whatever is held in the account and subjects foreign governments to a fine for non-compliance.
A top priority for the U.S. government in its fight against offshore tax evasion since 2014 is a move toward global transparency. One major step in that direction is the implementation of the Foreign Account Tax Compliance Act (“FACTA”).
Coming Clean to the IRS
Enacted in 2010, FACTA requires foreign financial institutions to come clean to the IRS about their U.S. owned accounts or face, in some cases, a 30% withholding tax on certain U.S.-source payments that are made to them.
In accomplishing this, the Treasure Department is engaged in negotiating dozens of Intergovernmental Agreements (“IGA”s) that would allow financial institutions to report the information to their own governments, who would then pass the information along to the United States. As of Jan. 23, 2014, 20 IGAs had been signed and 13 more had been agreed to in substance.
FACTA and the Taxpayer
With an increase in transparency and information, however, comes an increase in burden upon the taxpayer. In particular, U.S.-based multinationals with complex structures will find compliance with the new regulations very time-consuming. Further, foreign financial institutional will face significant challenges in early FATCA compliance. These challenges will be heightened in jurisdictions that are currently negotiating IGAs but haven’t yet finalized the agreements.
FACTA compliance is a cumbersome, ever-changing process and should not be handled by the taxpayer without the assistance of competent tax counsel.
We Can Help you Become Compliant with FACTA Requirements
The Law Office of Anthony N. Verni can help you make sure that you follow FATCA compliance, timely and accurately. Our focus is on working with you to interpret the regulations, establish a structured path for compliance, and find the best solution for you based on efficiency and transparency.