Awards & Recognition
The Foreign Account Tax Compliance Act (FATCA) significantly advances the U.S. government’s efforts to combat tax evasion by U.S. persons holding accounts and other financial assets offshore. Under FATCA, certain U.S. taxpayers with financial assets outside the United States must report these assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. There are severe penalties for failing to report these financial assets. This requirement is in addition to the long-standing obligation to report foreign financial accounts on FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR).
How Do Foreign Financial Institutions Comply with FATCA?
FATCA mandates that certain foreign financial institutions report directly to the IRS information about financial accounts held by U.S. taxpayers or by foreign entities in which U.S. taxpayers have a substantial ownership interest. These reporting institutions include banks and other financial entities such as investment firms, brokers, and certain insurance companies. Additionally, some non-financial foreign entities must report information about their U.S. owners.
If you set up a new account with a foreign financial institution, you may be asked for information about your citizenship. FATCA provides special, lessened reporting requirements for certain financial institutions that do not solicit business outside their country of organization and primarily serve local residents. However, to qualify for this favorable treatment, these institutions cannot discriminate against U.S. citizens who reside in the country where the institution is organized by refusing to open or maintain accounts for them.
How Does FATCA Affect International Financial Agreements?
The IRS and DOJ have worked to implement international governmental agreements (IGAs) as part of FATCA with more than 100 nations, facilitating the sharing of financial account information. Additional enforcement efforts, like the Swiss Bank program and John Doe Summonses, have provided U.S. regulators with significant foreign account data to identify and pursue U.S. citizens, tax residents, and other covered individuals.
- U.S. taxpayers must report foreign accounts held in various financial institutions, such as banks, mutual funds, private pensions, and certain insurers offering cash-value products if the total exceeds specific thresholds;
- FATCA mandates these foreign institutions to disclose details of U.S. customers’ accounts to the American government, incentivizing compliance through withholding taxes on U.S. income for non-compliant entities;
FATCA Reporting Requirements
Who Needs to Report?
- Individuals: U.S. taxpayers who hold foreign financial assets with an aggregate value exceeding specific thresholds.
- Exceptions: If you do not have to file a U.S. income tax return for the year, you do not need to file Form 8938, regardless of the value of your specified foreign financial assets. If you report interests in foreign entities and certain foreign gifts on other forms, you may list these forms on Form 8938 without repeating the details.
In addition to Form 8938, you may need to file FinCEN Form 114 (FBAR). Our Oakland FinCEN Form 114 Attorneys & CPAs specialize in guiding taxpayers through the intricacies of FinCEN Form 114, a mandatory IRS form for reporting offshore bank accounts. Our award-winning team, with a long track record of excellence in international tax representation, ensures compliance, safeguards your legal rights, and strategizes to minimize IRS tax penalties. To arrange a reduced-rate consultation, contact the Tax Law Office of David W. Klasing online, or call our Oakland tax office at (510) 764-1020.
Reporting Thresholds
Taxpayers Living Abroad
You must file Form 8938 if you meet the following conditions:
- Married Filing Jointly: The total value of your specified foreign financial assets is more than $400,000 on the last day of the tax year or more than $600,000 at any time.
- Not Married Filing Jointly: The total value of your specified foreign financial assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time.
You are considered to live abroad if you are a U.S. citizen whose tax home is in a foreign country and you have been present in a foreign country or countries for at least 330 days out of a consecutive 12-month period.
Taxpayers Living in the United States
You must file Form 8938 if you meet the following conditions:
- Unmarried: The total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.
- Married Filing Jointly: The total value of your specified foreign financial assets is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year.
- Married Filing Separately: The total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.
When applying these thresholds, include one-half the value of any specified foreign financial asset jointly owned with your spouse to calculate the value of your specified foreign financial assets. However, report the entire value on Form 8938 if you are required to file it.
If you meet the criteria above, you are likely subject to FATCA and should discuss your tax situation with an experienced tax attorney or CPA as soon as possible. Failure to file Form 8938 may result in a penalty of up to $10,000 per violation, plus an additional maximum penalty of $50,000 for continued noncompliance, making strict and timely adherence to FATCA imperative.
Our dual-licensed Oakland FATCA Tax Attorneys & CPAs are here to make compliance more straightforward and less financially burdensome. We can help you correct past mistakes by evaluating potential disclosure options while designing a strategy to help you comply more successfully going forward. Depending on the circumstances, it may be appropriate to file an amended return, file a delinquent FBAR, file a delinquent Form 8938, utilize the new IRS voluntary disclosure procedures, make a streamlined disclosure or domestic streamlined disclosure, or pursue other options. To discuss these options, contact the Tax Law Office of David W. Klasing online here, or call our Oakland tax office at (510) 764-1020.
How is the IRS Enforcing FATCA Regulations?
In recent years, the government has sought John Doe Summonses against banks and other financial institutions to elicit large swathes of financial information on taxpayers. These tools allow the government to penetrate the previously clandestine walls of these institutions against classes of potential offenders, even if they don’t have a particular violation in mind when they institute the investigation. The legality of the courts’ criteria to grant these summonses is highly debated. Still, as of now, this is a recognized and valid weapon in the war chest of the IRS that they are happy to deploy at will to uncover tax evasion schemes.
If you are a foreign national in the United States or a U.S. citizen living at home or abroad and you hold significant foreign assets over $10,000, you likely have foreign disclosure obligations. Even mere mistakes can be punished harshly, so obtaining experience in international tax planning and FBAR compliance services is essential. At the Tax Law Offices of David W. Klasing, we are committed to helping you remain compliant with U.S. and international tax laws. We will apply our understanding of international tax treaties to help you maintain your citizenship with minimal tax burdens.
Is FATCA the Same as FBAR?
No. FATCA refers to a federal law requiring disclosure of offshore assets, the Foreign Account Tax Compliance Act. The FBAR (Foreign Bank Account Report), or FinCEN Form 114, is an electronic tax form filed by certain taxpayers with offshore income and assets. If you are required to file Form 8938, you are likely required to file an FBAR. Filing FinCEN Form 114 does not exempt you from the FBAR filing requirement, which is separately enforced.
International FATCA Tax Compliance Lawyers and CPAs in Oakland, CA
If you’re engaged in international business or managing foreign assets, navigating the complex landscape of global taxation is crucial to success. Chances that you may face off against the IRS whether or not your returns are in order are high. At the Tax Law Offices of David W. Klasing, our dual-licensed Domestic and International Tax Attorneys in Oakland, CA, are poised to protect your interests. Call today to learn more at (888) 564-1409 or schedule a reduced rate initial consultation online here.
If you have failed to file a tax return for one or more years or have taken a position on a tax return regarding taxable offshore income that could not be supported upon an IRS or state tax authority audit, eggshell audit, reverse eggshell audit, or criminal tax investigation, it is in your best interest to contact an experienced tax defense attorney to determine your best route back into federal or state tax compliance without facing criminal prosecution. Our association with Marc Schwartz, a dually licensed International Tax Attorney and CPA, greatly enhances our ability to address the often complex federal offshore tax planning, compliance, and controversial implications surrounding engaging in international business and the associated mandatory information reporting.
As long as a taxpayer in Oakland who has willfully committed tax avoidance (potentially including non-filed foreign information returns coupled with affirmative evasion of U.S. income tax on offshore income) self-reports the federal tax noncompliance through a domestic or offshore voluntary disclosure with the help of our Oakland Foreign Account & Offshore Taxable Income Tax Compliance Attorney before the IRS has started an audit or criminal tax investigation/prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously often receive a break on the civil penalties that would otherwise apply.
Our Oakland office is conveniently located at:
505 14th St,
Oakland, CA 94612
(510) 764-1020
