Since its enactment in 2010 as part of the Hiring Incentives to Restore Employment (HIRE) Act, the Foreign Account Tax Compliance Act (FATCA) has imposed reporting requirements on individuals, institutions, and foreign governments that obligate the disclosure of ownership of assets held in non-U.S banking and financial establishments. By forcing U.S. taxpayers to report their foreign financial assets that exceed certain minimum thresholds, FATCA has sought to reduce tax evasion by persons and entities that shield assets in offshore accounts.

In view of an ever-shifting tax landscape, Maryland residents may be justifiably confused about understanding how FATCA works in Rockville and elsewhere in the state. Our FATCA attorney has the knowledge and skill to reduce that confusion and verify your compliance with FATCA requirements.

FATCA Requirements for Individuals

U.S. taxpayers, including citizens and green card holders, must report their foreign asset holdings on Form 8938 on or before April 15 each year in conjunction with their annual tax returns. It is beneficial for people in Rockville who need to file this form to have a thorough understanding of how FATCA works and applies to their foreign assets. The key obligations are:

  • For individual filers who live in the U.S., all foreign assets with a value greater than $50,000 must be reported; that threshold value is $100,000 for married taxpayers who file jointly.
  • These values are, respectively, $200,000 and $400,000 for taxpayers who reside outside of the U.S.
  • Reportable assets include securities, investments, debt instruments, cash, and other financial holdings
  • Taxpayers who fail to report or underreport their foreign assets may be subject to significant fines and penalties.

You should contact an experienced attorney for confirmation of your compliance with their Form 8938 reporting obligations.

FATCA Requirements for Institutions

Rockville taxpayers who open accounts with foreign financial institutions (FFIs) may be asked to complete a “Know Your Client” form that enables the FFI to comply with its institutional FATCA obligations.

Specifically, FFIs that accept deposits from U.S. taxpayers must register with the IRS and provide reports of U.S. clients’ deposits in their institutions. An FFI’s failure to comply with this obligation can lead to a 30% withholding tax on payments that the institution receives from domestic sources.

This institutional reporting requirement is not invalidated by privacy laws that might otherwise shield information in foreign countries. The U.S. has signed Inter-Governmental Agreements (IGAs) to circumvent those laws. Accordingly, U.S. taxpayers cannot avoid reporting obligations with an expectation that a foreign country’s privacy rules will protect them.

FATCA Reporting Exceptions

Rockville lawyers who have a high-level understanding of how FATCA works might identify certain exceptions to foreign asset reporting requirements. The primary exemptions are for:

  • Trusts that file reports on Form 3520
  • Foreign corporate entities that can file Form 5471
  • Passive foreign investment entities that file Form 8621
  • Foreign partnerships that submit Form 8865
  • Properly-registered Canadian retirement plans that make reports on Form 8891.

Your best strategy is to work with Pontius Tax Law to determine if you can take advantage of these exceptions.

Contact Us in Rockville to Gain a Better Understanding of How FATCA Works

Please call our tax attorney to schedule a personal and confidential consultation regarding your obligations under FATCA. Our goal is to resolve your tax issues through trust, dedication, and value with clear explanations of your filing obligations and options.