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Who Needs to Comply with FATCA and Why?
Do you have foreign bank accounts, non-U.S. income, or other offshore assets? For example, do you have a checking account in another country or foreign mutual funds? Has the combined value of your foreign assets ever exceeded $50,000? If so, you could be subject to a tax law that you may have never heard of: the Foreign Account Tax Compliance Act (FATCA). Though designed to target high-level tax evaders, FATCA has also had the unfortunate effect of impacting dual citizens, recent immigrants, international students, military servicemembers stationed overseas, and frequent business travelers.
If you have financial accounts abroad, make sure you are reporting the assets correctly – and avoiding costly penalties – by working with an experienced international tax attorney serving San Jose, like David W. Klasing. A former public auditor with more than a decade of legal experience, Mr. Klasing is an award-winning, dually-certified attorney-CPA with a focus on international tax representation. Providing FATCA tax services for U.S. citizens, residents, non-residents, business entities, trusts, and U.S. expats, Mr. Klasing and his highly skilled team of tax attorneys, CPAs, and EAs is dedicated to helping international taxpayers achieve tax compliance, avoid or mitigate IRS penalties, and plan successfully for the future.
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What is FATCA?
FATCA is the Foreign Account Tax Compliance Act, a federal tax law enacted by Congress in 2010 as part of the broader HIRE Act. FATCA is aimed at both taxpayers and banking institutions, addressing a single issue – offshore tax evasion – in two ways:
- First, FATCA requires “foreign financial institutions” (FFIs) – including Asian, African, South American, Australian, and European banks – to report their U.S. customers to the Department of Justice. FFIs that fail to comply are heavily fined.
- Additionally, FATCA requires taxpayers to report their own offshore accounts and assets. FATCA requirements are explained in greater detail below.
Who Needs to Comply with FATCA?
Millions of Americans living and working around the world could be impacted by FATCA. Unless you are exempt from FATCA reporting, you must comply with the Foreign Account Tax Compliance Act if the following statements apply to you:
- You are a U.S. citizen, resident, or non-resident alien (depending on the situation). U.S. business entities are also covered.
- You have foreign assets, income, or bank accounts surpassing the following thresholds:
- Unmarried or married filing separately; living inside the U.S.
- $50,000 (on final day of tax year)
- $75,000 (on any day of tax year)
- Unmarried or married filing separately; living outside the U.S.
- $200,000 (on final day of tax year)
- $300,000 (on any day of tax year)
- Married filing jointly; living inside the U.S.
- $100,000 (on final day of tax year)
- $150,000 (on any day of tax year)
- Married filing jointly; living outside the U.S.
- $400,000 (on final day of tax year)
- $600,000 (on any day of tax year)
Do I Have to Report Foreign Property to the IRS on Form 8938?
If you are subject to FATCA, you must file with the IRS Form 8938 (Statement of Specified Foreign Financial Assets), which requires you to report various foreign assets exceeding the thresholds described in the preceding section. But what types of assets must be reported? For example, do you need to report foreign property or real estate on Form 8938?
In general, FATCA does not require you to report foreign real estate you hold directly. You also do not need to report directly held foreign currency or personal property (such as jewelry or personal vehicles), nor do you need to report bank accounts with U.S. branches of FFIs. You are, however, required by FATCA to report the following assets:
- Foreign bank accounts
- Foreign hedge funds
- Foreign mutual funds
- Foreign partnership interests
- Foreign private equity funds
- Foreign stocks and securities
Note that this list is not exhaustive. For a comprehensive discussion about the reporting requirements that affect you, you should talk to an experienced FATCA attorney as soon as possible.
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), also known as 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 in addition. 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 San Jose, CA
At the Tax Law Office of David W. Klasing, we are seasoned FATCA tax attorneys with extensive experience in this complex, high-stakes area of tax law. With the first FATCA prosecutions beginning to move through the courts, now is the time to review your records and ensure that you are compliant. Contact our tax office online right away to arrange a reduced rate consultation or call the Tax Law Office of David W. Klasing at (805) 617-4566 to speak with a tax attorney today. Please note that all meetings at our San Jose tax office must be arranged in advance.
Note: If you have concerns about the privacy of our initial or subsequent communication and are unable to easily travel to our Irvine / Orange County Main Office, consider scheduling a GoToMeeting to safely and securely establish an initial or maintain an existing attorney-client relationship. With end-to-end encryption, strong passwords, and top-rated reliability, no one is messing with your meeting. To schedule a reduced rate initial consultation via GoToMeeting follow this link. Call our office and request a GoToMeeting if you are an existing client. We are generally happy to travel to any of our appointment-only satellite offices for a subsequent meeting in appropriate circumstances once a relationship is established via a signed engagement letter and the payment of an initial retainer or where enough retainer is available where a current client to cover the reasonable travel time and time required for the meeting.
Will it cost me more to hire the Tax Law Offices of David W. Klasing, whose main office and the vast majority of the firm’s staff is located in Irvine California, but an appointment-only Satellite office is close to my location, as opposed to a local company? Absolutely not! See our policies that address this issue here!
