FATCA...Does it affect You? You may have heard that sweeping changes in tax reporting are set to take effect on July 1, 2014, as a result of the Foreign Account Tax Compliance Act (FATCA). In fact, the changes will only affect individuals with assets held in accounts outside of the United States. What is FATCA? Also known as Title V of House Resolution 2847, FATCA requires foreign financial institutions (FFIs) and other foreign entities to report assets held by U.S. taxpayers. The Act is intended to reduce potential tax abuse by U.S. citizens through offshore accounts. FFIs will be required to report the following information to the IRS regarding any accounts owned by a U.S. person or entity: • The name, address, and taxpayer identification number (TIN) of each U.S. citizen account holder (or, in the case of an entity, the name, address, and TIN of each substantial U.S. owner) • The account number • The account balance or value at year-end (to be confirmed by regulations) • Gross dividends, interest, and other income paid or credited to the account FFIs or other non-financial foreign entities (NFFEs) that do not meet the requirements of the Act will face a withholding tax of 30 percent on certain payments they receive. How will FATCA affect you? Although FATCA will have the greatest impact on FFIs and NFFEs, some account holders may be subject to a 30-percent withholding tax on certain income if they: • Fail to comply with requests for information necessary to determine if the account in question is a U.S. account • Fail to provide the name, address, and TIN of each U.S. account holder or owner • Fail to waive any foreign law that could prevent an FFI from reporting necessary information Additionally, some account holders may be required to file Form 8938 to notify the IRS of certain foreign financial assets within certain limits ($50,000–$75,000 for single filers). This requirement is in addition to the reporting requirements already in place under FinCEN Form 114, Report of Foreign Bank and Financial Accounts. Questions? You’ll find more information on FATCA reporting requirements for individuals on the IRS website, along with an explanation of the types of assets subject to reporting. (Note that a domestic mutual fund investing in foreign stocks or securities does not have to report under the new legislation.) As the rules for foreign account holders grow more complex, we recommend working with a tax professional to ensure that you remain in compliance.
Posted on: Thu, 19 Jun 2014 19:05:37 +0000
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