Experienced · Local · Affordable
The Foreign Account Tax Compliance Act is the latest in a series of laws and regulations designed to combat tax evasion by U.S. persons holding financial assets offshore. As applicable to individual taxpayers, FATCA requires that certain U.S. taxpayers holding $50,000 or more in offshore accounts must report those assets to the IRS on Form 8938, in addition to existing FBAR obligations.
The true significance of FATCA for the individual taxpayer is that it creates a worldwide financial reporting system designed to discover foreign accounts held by U.S. taxpayers by requiring foreign financial institutions (FFIs) to report to the IRS information about financial accounts over $50,000 held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. Non-compliant FFI’s can be frozen out of U.S. Markets.
To date more than 100 countries have either signed or agreed in principle to Intergovernmental Agreements (IGA’s) that provide for such reporting by their financial institutions. Not only is banking secrecy (such as that once offered by Swiss banks) a thing of the past, but U.S. taxpayers with undisclosed foreign accounts can no longer rely with any comfort on not being found out because the very banks in which they have made their deposits are now reporting U.S. taxpayers’ holdings directly to the IRS. The need to make voluntary disclosures, while such programs continue to be available – before foreign bank reports reach the IRS and result in investigations and potential prosecutions – has reached acute levels.
In other words, if you own a foreign account of the requisite value in a country which has agreed to report the financial holdings of U.S. citizens and other U.S. persons, and you have not been filing annual FBARs, you are well advised to seek entry into the Offshore Voluntary Disclosure Program (OVDP) (while its still exists) before the reporting of your foreign accounts results in IRS collection activity and/or potential criminal investigation.
Philadelphia, Pennsylvania tax attorney Joseph R. Viola has extensive experience representing taxpayers seeking to participate in the OVDP and requiring other advice regarding FBAR, FATCA and other legal issues relating to foreign bank accounts and assets. We welcome you to contact us for an assessment of your situation.