Oakland Foreign Account and Offshore Taxable Income Generating Investment, Business or Account Tax Compliance Attorney + CPA
The United States government requires certain taxpayers to report and pay taxes not only upon domestic income, but additionally, non-U.S. income that exceeds certain thresholds set by federal law. This requirement means that taxpayers who have foreign assets, such as offshore bank accounts, business or investment are obligated to report such assets to the IRS for foreign information and income tax purposes. Some of these requirements are established by a federal law known as FATCA, or the Foreign Account Tax Compliance Act. Failure to comply with FATCA can trigger severe IRS penalties, particularly if the noncompliance was willful rather than negligent or accidental.
The Tax Law Office of David W. Klasing is an award-winning boutique Oakland Tax Law Firm with a strong focus on international tax law, an area in which our staff of Tax Attorneys and CPAs have earned a reputation for providing superior international tax representation, planning and compliance. With decades of experience helping U.S. citizens, residents, and non-residents resolve complex offshore and domestic tax issues, we dedicate ourselves to delivering strategic, effective, and cost-efficient support that mitigates penalties, lowers tax liabilities, and facilitates sustained FATCA , foreign information and income tax compliance.
What is the Foreign Account Tax Compliance Act (FATCA)?
The Foreign Account Tax Compliance Act, better known simply as “FATCA,” was passed by Congress in 2010 in an effort to reduce tax losses caused by offshore tax evasion, or the practice of concealing income overseas. FATCA is a two-pronged law that applies to both “foreign financial institutions” (FFIs), such as foreign banks, and individual U.S. taxpayers, who are generally required to report worldwide income to the federal government. FFIs and taxpayers who fail to comply with FATCA can be penalized on a civil basis, or even criminally prosecuted – a first in FATCA history.
Because banks can be fined for FATCA noncompliance, there is a powerful incentive to cooperate with the United States government. As such, U.S. taxpayers should not rely on foreign banks to protect their privacy where the IRS is concerned. If you use a foreign bank, or have taxable income generating assets, business or investment overseas, including offshore Bitcoin, FATCA may affect you directly. If you have already received a FATCA letter from your bank, it is urgent that you contact an international tax law attorney for assistance right away.
FATCA Countries 2019
The continued success of FATCA depends upon the willingness of governments to work with one another on detecting offenders and enforcing compliance. Accordingly, the United States has entered intergovernmental agreements (IGAs) with nations all over the world – among them, numerous locations that are well-known as tax havens for companies. Countries that have entered IGAs with the United States as of 2019 include, but are not limited to, the following:
Who is Subject to IRS FATCA Reporting Requirements?
Thousands of taxpayers are subject to FATCA requirements, yet unfortunately, many fail to realize their foreign information and income tax reporting obligations – until they have already received an alarming notice from the IRS. Because FATCA is both broad in scope and relatively little-known among most taxpayers, numerous Californians and expats alike have been affected or have imminent exposure. You may be subject to federal FATCA regulations if you meet the following IRS foreign account reporting criteria:
- You meet the IRS’ definition of a “specified individual,” which means you are a U.S. citizen or, depending on the situation, a resident or non-resident alien. This can include dual citizens who live outside the United States.
- You have an interest in offshore financial assets. This typically involves a taxpayer who has a non-U.S. bank account. However, FATCA also covers foreign stocks and securities, along with FFI investment accounts. FATCA generally excludes foreign real estate, foreign currency, and tangible assets like vehicles or jewelry for foreign information reporting purposes. Note: An asset not being reportable for FACTA does not mean it also is not reportable for income tax purposes.
- The value of your foreign assets meets or exceeds the pertinent FATCA thresholds.
Filing Form 8938
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. If FATCA applies to you, you are required to file with the IRS Form 8938 (Statement of Specified Foreign Financial Assets). 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.
Related FBAR Requirements
If you are subject to FATCA, you are likely also affected by a law called the Bank Secrecy Act (BSA). Similar to the Foreign Account Tax Compliance Act, the BSA requires certain taxpayers to report offshore assets, which is accomplished by filing an FBAR (Foreign Bank Account Report). Despite this overlap, there are also several significant differences between FATCA and FBAR filing requirements, including the following:
- At $10,000, the reporting threshold for FBAR is lower – and therefore, more easily triggered – than the thresholds for FATCA.
- To fulfill FATCA requirements, taxpayers file Form 8938. To comply with the FBAR requirement under the BSA, taxpayers file an electronic form called FinCEN Form 114 – otherwise known as the Foreign Bank Account Report, or FBAR.
- Different groups of taxpayers are impacted by the laws. The requirement to file Form 8938 applies to “specified individuals,” which, to reiterate, may include U.S. citizens, residents, and non-residents. By comparison, the FBAR requirement applies to “U.S. persons,” which includes citizens and residents, but excludes non-residents.
On a related and critical note, filing an FBAR does not relieve the taxpayer of his or her duty to file Form 8938, or vice versa. If you are subject to both requirements, you must file both forms. They are separate tax requirements governed by similar, but distinct, laws.
Oakland Tax Lawyers and CPAs for FATCA Compliance Help
If you maintain a checking account, savings account, or business account with a bank located outside the United States, you may need to report foreign income under FATCA or FBAR disclosure laws. These laws can also affect taxpayers who have foreign cryptocurrency wallets, foreign stocks, or who own or do business with foreign companies.
Fortunately, the proficient FATCA and FBAR tax attorneys at the Tax Law Office of David W. Klasing are here to make compliance simpler and less financially burdensome. By evaluating potential disclosure options, we can help you correct past mistakes, 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.
For a reduced-rate consultation concerning an undisclosed foreign account, omitted foreign information reporting or unreported foreign taxable income issue, contact the Tax Law Office of David W. Klasing online, or call our Oakland tax attorneys at (510) 764-1020. Alternately, you can reach our main office at (800) 681-1295. Please note that meetings at our Oakland tax office are by appointment only.
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Will it cost me more to hire the Tax Law Offices of David W. Klasing, who’s 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: