The federal government mandates that specific financial institutions submit reports regarding foreign-held assets to the IRS. FATCA—or the Foreign Account Tax Compliance Act—is the law that applies to these assets. A seasoned tax lawyer could assist an individual and an owner of a foreign business with fulfilling their FATCA obligations.
Every taxpayer that owns specified financial assets overseas over a specific value is required to report their holdings to the IRS each year. Let a Rockville FATCA lawyer ensure that you are within compliance.
There are numerous individuals and entities based in the United States that own financial assets abroad. Some taxpayers have them for the purposes of business investments, while others have them because they primarily live and work in foreign countries. In either case, it is typically necessary under FATCA to account for foreign-owned assets at the time that tax returns are due. In fact, this requirement is not limited to U.S. citizens. Lawful permanent residents currently living in the United States must also comply with this law as well, as do business and trusts.
There are different factors that impact whether or not it is necessary to report financial assets under FATCA. The primary issue is the value of those assets, as reporting might not be necessary for lower-value items or investments. A taxpayer’s marital status could also come into play. The minimum reporting level could increase or decrease based on a taxpayer’s marital status, as well as whether they live in the U.S. currently or not. Anyone with assets valued below $50,000 – and whose accounts never exceeded $75,000 at any point in the year – will not need to report, regardless of status.
When it comes time to report under FATCA, taxpayers must rely on something known as Form 8938. This document requires taxpayers to provide numerous pieces of information about their financial assets in other countries. This includes foreign bank accounts, mutual funds, and life insurance policies. It does not include foreign real estate.
One of the most complex aspects of FATCA is that it also applies to ownership in foreign-based companies. FATCA compliance as it relates to the ownership stakes in these companies is especially difficult without the guidance of a Rockville FATCA lawyer. It is critical that each individual who bears some responsibility for filing a FATCA form does so carefully, or risk incurring a penalty of $10,000 – and potentially higher if the non-compliance continues.
FATCA is not the only federal law that requires reporting assets held in foreign countries. Taxpayers that hold financial assets overseas also must comply with something known as Foreign Bank and Financial Accounts Reports, or FBAR. Despite some similarities, a Rockville FATCA attorney could advise on the important differences between these two forms.
The major difference between these requirements is that the reports must be submitted to different entities. FATCA is an IRS requirement, while FBAR must be filed with the U.S. Department of the Treasury. Despite some overlap in what is reported, both processes must be followed in order to comply with the IRS, as well as the Treasury Department.
While they both address a taxpayer’s foreign investments, filing only one of these forms does not mean that compliance with the other is unnecessary. Experienced legal counsel could help ensure these requirements are met so that there are no penalties imposed.
FATCA compliance can be challenging to figure out on your own. It is easy to misunderstand the rules and file unnecessarily, or to miss that you are obligated to file Form 8938. Any individual or business who is need of counsel about how to report their foreign financial assets should speak with a Rockville FATCA lawyer to determine how to proceed.
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.