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What is the Foreign Account Tax Compliance Act?

Foreign Account Tax Compliance Act
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Virginia La Torre Jeker, J.D.
The Foreign Account Tax Compliance Act (“FATCA “) is US tax legislation enacted in 2010. It has various parts and some parts are not yet effective but will become so in later years. The most talked about portion of FATCA (but certainly not the only portion!!) mandates that foreign banks and other financial institutions (e.g., brokers, investment companies, fund structures, trust companies, insurance companies) search for and report to the IRS data with regard to their US customers.

FATCA makes the hiding of foreign assets even more difficult. Full implementation is moving full steam ahead with the scheduled start date for reporting of . With FATCA, the US is essentially trying to implement a worldwide exchange of information about US persons. There is really no escape for the US person once FATCA is fully effective. People must get into compliance NOW.

In a nutshell, FATCA, is a time bomb ready to explode for any US person having undeclared foreign financial assets or accounts. On July 12, 2013, the IRS announced a general six month extension to the commencement of compliance with FATCA’s withholding and account due diligence rules. Pursuant to this announcement, foreign financial institutions must generally implement new account opening procedures on or before July 1, 2014. The deadlines for completing due diligence on preexisting obligations (generally an account outstanding on June 30, 2014) is generally by December 31, 2014 (but documentation of high-value individual accounts must be undertaken by June 30, 2014).

In time, those who are ‘hiding’ will be caught out. By then, it will be too late to enter the IRS Offshore Voluntary Disclosure Program (OVDP). If you are not in compliance and have unreported income or assets, you must act now. The best advice is to consult a US tax attorney and obtain a full understanding of the possible civil and/or criminal implications you are facing. Learn about the latest OVDP and other options that you can consider. With the attorney examine the possible penalties and risks under each option.

Increased enforcement efforts and powerful new weapons for the taxman embodied in FATCA mean hiding one’s head in the sand is simply no longer an option.

If you have unreported foreign accounts, we can help. A large part of our practice is devoted to assisting on such matters.

Virginia La Torre Jeker, J.D.

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