FATCA, or the Foreign Account Tax Compliance Act, is a U.S. tax law that requires foreign financial institutions (FFIs) to report certain information about their U.S. clients. If you are a U.S. person with an international account, you are required to report this information to the IRS. This article will explain what FATCA Reporting is and what you need to do if you have an international financial account.
What is FATCA?
The Foreign Account Tax Compliance Act (FATCA) is a tax law that requires certain foreign financial institutions (FFIs) to report information about their U.S. account holders to the IRS.
There are a few key points you need to know about FATCA if you are an FFI:
- You must comply with FATCA if you have any U.S. account holders who are not exempt from reporting under the law.
- You must provide information about each U.S. account holder to your FFI customer service department or to the IRS as required by the law, unless you can prove that the account is exempt from reporting under one of several exceptions available to you.
- If you fail to comply with FATCA, you may be subject to penalties, including criminal prosecution and possible fines of up to 50% of your annual global income from U.S.-related transactions for each non-compliant year after the first year that you violate the law.
What are the Reporting Requirements?
FATCA is a foreign account tax compliance initiative administered by the IRS. It requires financial institutions to identify and report accounts that contain at least $10,000 in assets or income. FATCA also requires these institutions to file reports on those accounts with the IRS.
The following are the reporting requirements:
– Financial institutions must report account details, including name, TIN, account balance and types of transactions, to the IRS on an annual basis.
– The first filing deadline is March 15 of each year. After that date, financial institutions have until June 15 to file reports.
– Financial institutions must send copies of all FATCA filings to their customers who are required to report their foreign accounts under Internal Revenue Code Section 6039D.
How do I comply with FATCA Reporting Requirements?
FATCA is a Foreign Account Tax Compliance Act that requires financial institutions (including banks, investment firms, and other foreign financial institutions) to report certain information about their U.S. account holders to the IRS.
Foreign financial institutions must provide the following information to their U.S. customers:
- Name and TIN of each customer (if available)
- Date of birth for each customer
- Address of each customer (if available)
- Account number and type of account (checking, savings, etc.)
The deadline for FATCA reporting is January 31st of every year. Financial institutions must send out FATCA forms to their customers by this date if they have any accounts with them that are subject to FATCA reporting requirements. If a customer does not file a return or if there are any discrepancies on their tax return, then the bank may need to contact them in order to get additional information about their account.
Conclusion
FATCA is a controversial law that has been in place for over a year now. While there are some who support it and see it as a way to crack down on tax evasion, others believe that the law is intrusive and unfair. Regardless of your stance on FATCA, it’s important to understand what its reporting requirements are so that you can stay compliant. In this article, we have provided an overview of FATCA and outlined the steps you need to take if you want to begin complying with its reporting requirements. Armed with this knowledge, you can start preparing your company for FATCA’s arrival and ensure that your financial data is protected from potential audits.
