Enacted under the Hiring Incentives to Restore Employment Act (“HIRE”), the Foreign Account Tax Compliance Act (“FATCA”) became effective March 18, 2010. This new regulation made several changes to reporting requirements for foreign financial assets, as well as increased penalties for underreporting and failure to file. The goal of FATCA is to identify U.S. taxpayers who hold financial assets in non-U.S. financial institutions and other offshore entities, so U.S. taxpayers cannot avoid their U.S. tax obligations.
In addition to increased reporting for U.S. taxpayers, FATCA also expands the reporting requirements for Foreign Financial Institutions (“FFI”). In an effort to identify U.S. taxpayers holding financial assets in offshore entities and verify tax compliance, FFI’s must document, withhold tax from and report certain payments made to certain other foreign entities. Unfortunately, tax withheld is done so at a flat rate and does not take into account reduced treaty rates available.
Now more than ever, US taxpayers with offshore assets need to be diligent to ensure tax compliance. Moskowitz, LLP is here to help you assess and fulfill your tax reporting obligations, as well as evaluate tax treaties which may affect you, and advise you on how to legally minimize your U.S. tax obligations, reduce potential criminal tax implications, and any potential consequences.
When people come to us with a FATCA or voluntary disclosure problem, the first thing we recommend is that they hire an attorney. First, anything done not covered by attorney-client privilege leaves the client at risk because all previously un-reported foreign assets or income tax matters border on potential criminal prosecution or the criminal investigation may open up for discovery other tax and related crimes. Further, there are hefty civil tax penalties involved in this area of international tax law. Therefore, a tax attorney will have the knowledge and licensed ability to best serve the client.
For more detailed information regarding FATCA see:
Understanding How FATCA Impacts You, How FATCA will find FBAR violators/hold outs
To see how FATCA impacts U.S. individuals holding real property outside the U.S. see: