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FATCA Reporting


The Foreign Account Tax Compliance Act (FATCA) forms an essential part of the U.S. efforts to combat tax evasion by U.S. persons holding accounts and other financial assets offshore. You should first know that if you are not required to file a tax return, you do not need to file Form 8938.

Under FATCA, certain U.S. taxpayers holding financial assets outside the United States must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. The requirement to file and report under FATCA is in addition to the FBAR filing on FinCEN Form 114. The FBAR is filed with the US treasury while FATCA-Form 8938 is filed with the IRS. This is why Form 8938 is due at the time of your normal tax filing including extensions. However, filing Form 8938 does not exempt you from the requirement to file FBAR. If you are required to file Form 8938, your assets will most likely fall under the FBAR filing requirements, especially if the majority of your assets are financial accounts.

FATCA will also require certain foreign financial institutions to report directly to the IRS information about financial accounts held by U.S. taxpayers or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. The reporting institutions will include banks as well as other financial institutions, such as investment entities, brokers, and certain insurance companies. Some non-financial foreign entities will also have to report certain of their U.S. owners.

There are serious penalties for not reporting these financial assets. If you must file Form 8938 and do not do so, you may be subject to penalties:

  • A $10,000 failure to file penalty,
  • An additional penalty of up to $50,000 for continued failure to file after IRS notification, and
  • A 40 percent penalty on an understatement of tax attributable to non-disclosed assets.

If you make a showing that any failure to disclose is due to reasonable cause and not due to willful neglect, no penalty will be imposed for failure to file Form 8938, however. Reasonable cause is determined on a case-by-case basis, considering all relevant facts and circumstances on your case.

For these reasons, it is imminent, that the requisites and each part of the FATCA Reporting on Form 8938 are met correctly. When takin into consideration what expert to hire for these service, keep in mind that in these matters even the most minor mistake can become costly and turn into serious consequences for the taxpayer. Many firms and companies offer automatic filings with operating systems that don't necessarily take into account your specific personal circumstances.

Hiring an licensed lawyer who specializes in expat tax law is one of the best investments you can make to ensure that you are legally compliant with all the pertinent U.S. laws and requisites, and most importantly, only licensed attorneys can protect your conversations and documentation under Confidentiality, because they are protected by the Attorney-Client Privilege. As a licensed Attorney, Alexandra Sabalier, Esq. is well-versed in the procedural and substantive tax rules and laws necessary to successfully represent clients involved in IRS tax filing procedures, and FATCA compliance.

So don't wait any longer and start your process today with a Legal Consultation to discuss your case, and study your options to become FATCA Compliant.

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