The Foreign Accounts Tax Compliance Act (FATCA) requires all citizens and permanent residents to report the funds they hold in foreign financial accounts and their interests in foreign businesses and partnerships. Failing to comply with FATCA requirements subjects a taxpayer to significant civil and potentially criminal penalties.

If you have any offshore holdings, consult a Bethesda FATCA lawyer to assess your tax liability and help ensure you comply with FATCA requirements. A local tax lawyer could also help taxpayers who have not disclosed offshore accounts and wish to make a voluntary disclosure and resolve any outstanding tax issues.

Understanding FATCA Requirements

FATCA requires U.S. citizens and permanent residents to report their holdings in offshore bank accounts, interests in foreign businesses, partnerships, and trusts, foreign insurance policies, and currency swaps. FATCA does not require reporting of foreign real estate holdings. Foreign banks, other financial institutions, and some other specified entities must report accounts owned by U.S. citizens to the U.S. Treasury Department.

Asset Reporting Thresholds

A taxpayer would report foreign financial holdings using Form 8938. However, not everyone who has foreign holdings must report them. Taxpayers must report their holdings if the total value exceeds a threshold amount that varies depending on where the taxpayer resides and whether they file individually or jointly.

A taxpayer living in the U.S. and filing individually must report if their foreign assets exceed $50,000 on the last day of the tax year or $75,000 on any day during the tax year. A married taxpayer living in the U.S. and filing separately is subject to the same reporting threshold as a single taxpayer. Married taxpayers filing jointly and living in the U.S. must report their foreign financial assets if their value exceeded $100,000 on the last day of the tax year or reached $150,000 at any time during the tax year.

Taxpayers living abroad and filing an individual return must report foreign financial assets if their value exceeded $200,000 at the end of the tax year or $300,000 during the tax year. Taxpayers living abroad and filing joint returns must report if their value exceeded $400,000 at the end of the tax year or $600,000 at any time during the tax year.

An individual or business should consult with a Bethesda lawyer if they are unsure whether they need to file under FATCA.

Distinguishing FATCA from FBAR

Taxpayers with foreign financial accounts are also subject to the Foreign Bank Account Reporting Act (FBAR), which requires U.S. taxpayers holding money in foreign bank accounts to report the asset to the IRS. Although FBAR (like FATCA) applies to foreign holdings, there are differences between the two laws and a taxpayer must take care to comply with both.

One of the differences in the laws is that the reporting thresholds are lower for FBAR. A taxpayer must report any foreign financial account that held more than $10,000 at any time during the tax year. In addition, the reporting thresholds for FBAR are the same whether the taxpayer files individually or jointly, and whether they reside in the U.S. or abroad.

If a taxpayer must make a FATCA report that discloses their financial accounts, it may be possible that they do not need to file an FBAR. A FATCA attorney in Bethesda could review a taxpayer’s financial portfolio and make sure they make the appropriate disclosures.

Addressing Past Noncompliance

FATCA requires that foreign financial institutions report American-owned accounts, and the IRS devotes resources to following up on those reports. When taxpayers fail to comply with reporting requirements, the IRS may initiate an audit or other enforcement activity.

The IRS Voluntary Disclosure program provides incentives for formerly non-compliant taxpayers to make the appropriate disclosures and pay what they owe. Although the IRS will impose penalties, they are less harsh than if the IRS discovers the non-compliance and proceeds civilly against the taxpayer. In addition, participation in the disclosure could reduce the chances of a criminal charge.

The decision whether to take advantage of Voluntary Disclosure is one that a Bethesda taxpayer should make in consultation with an experienced FATCA attorney.

Consult a Bethesda Attorney About FATCA Compliance

The federal government takes measures to prevent people and corporations from shielding assets overseas. Offshore institutions must report their accounts to the IRS, and if the taxpayer has not reported the account, enforcement action could follow.

When you have assets in a foreign financial account, speak with a Bethesda FATCA lawyer about whether you must report them and how to do so. Do not risk IRS enforcement – schedule a consultation today with a reliable tax lawyer.

Attorney John Pontius

Pontius Tax Law, PLLC is a tax law firm that strives to resolve sensitive tax problems through trust, dedication and value. The law firm was founded by John Pontius with offices in Washington, DC,  Rockville, MD, Bethesda, MD, Fairfax, VA, and Alexandria, VA. Mr. Pontius represents individual and business clients with sensitive and serious tax matters before the Internal Revenue Service and state taxing authorities. His client base is local, national, and international.

Over the course of his career, Mr. Pontius has represented businesses and individuals with complex tax issues in the following areas: FBAR examinations, offshore and domestic disclosures, FATCA, FIRPTA, tax planning, unfiled tax returns, release of tax liens and levies, trust fund recovery penalty, IRS and state audit examinations, as well as appeals, penalty abatement, U.S. Tax Court litigation, along with defense of tax fraud and evasion. If you require assistance from a tax lawyer, contact Mr. Pontius to discuss your situation.

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John helped us with a DC tax audit and succeeded in getting us a "no change" final decision. The issues were related to two flow-through entities and the use of carry-forward operating losses -- something that the DC auditors struggled to understand and with which they did not have any...
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Mr. Pontius is extremely professional and was able to take care of my tax returns which includes international bank accounts quickly and at a very reasonable price. Would definitely recommend.
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As an American citizen living in the Middle East my local banker informed me that I needed to file FBARs and report my worldwide income to the IRS. Through the recommendation of another attorney at an international law firm, I was introduced to John Pontius. Mr. Pontius efficiently and effectively...
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