In an effort to catch U.S. taxpayers who are hiding assets in unreported offshore accounts, the federal government passed the Foreign Account Tax Compliance Act (FATCA) in 2010, and it created new reporting requirements that you should be aware of as 2011 draws to a close.
FATCA requires that taxpayers with more than $100,000 worth of “specified foreign financial assets” must report those assets to the IRS on Form 8938. In addition, foreign banks must report to the IRS regarding accounts held by U.S. taxpayers, and those banks are subject to withholding on certain types of payments if they do not comply with the new reporting requirements.
U.S. citizens with bank accounts in other countries have long been required to file reports of those accounts; FATCA filing requirements are in addition to Foreign Bank Account Reporting (FBAR) requirements. The IRS has stepped up its enforcement of FBAR in recent years, particularly with Swiss banks, pressuring them to disclose information on their U.S. account holders.
Click here for more information on FATCA and Form 8938, or contact Barnes Dennig Senior Tax Accountant Lisa Gentile. The IRS is expected to release guidance by the end of the month. It is possible FATCA could be expanded to require U.S. businesses to file, but for now it only covers individuals.