FATCA Letter from Bank: A FATCA letter can be a scary experience. When a customer receives a FATCA letter from banks overseas, it tends to cause major fear and concern. This is especially true ever since the IRS began taking an aggressive enforcement position on matters involving foreign accounts compliance. FATCA is the Foreign Account Tax Compliance Act. More than 110 countries and over 300,000 foreign financial institutions (FFIs) have begun reporting U.S. account holder information to the Internal Revenue Service.
In 2011, U.S. taxpayers started requiring taxpayers to file a form 8938 in order to comply with FATCA. The failure to properly comply with a FATCA letter from the bank may result in significant offshore fines and penalties. A FATCA violation can also lead to FBAR penalties, which are pretty rough.
If you received a FATCA Letter, you should consider your options immediately.
FATCA Letter from Bank
Received a FATCA Letter From the Bank (usually) precedes Bank reporting to the IRS. When an FFI agrees to FATCA compliance, it requires the foreign bank to report U.S. account holder information to the IRS. Some banks may already be aware of an account holder’s U.S. status and will send the information to the IRS without first notifying the customer.
In other situations, the foreign bank may be aware that an account holder might be a U.S. person, and wants confirmation directly from the client.
Therefore, the foreign bank sends a FATCA Letter.
There is another law on the foreign books called CRS – Common Reporting Standard. The law is similar to FATCA but it is not identical. While the United States has not agreed to the terms of CRS, many foreign countries have agreed to both CRS and FATCA. Therefore, many foreign banks report both FATCA and CRS — and sometimes on the same form.
In addition, we have many clients who are considered citizens or foreign residents of several countries, and may have both a FATCA and CRS requirement.
What does a Foreign Bank FATCA letter Require?
The FATCA letter requires the customer to formally disclose their U.S. status to the bank. The letter may come with both a W-8 and W-9 form, as well as a self-certification letter.
Example of a FATCA Letter with Sample Response
An example of a FATCA Letter is a letter 2-3 pages, which requires the customer to:
- Identify if they are a U.S. Person
- Identify their U.S. Social Security Number
- Identify their U.S. Address
- Complete a W-9 or W-8 BEN
Who is a U.S. Person?
A U.S person is more than just a US citizen. Generally, when it comes to individuals there are three (3) different types of U.S. persons.
- U.S. Citizen
- Legal Permanent Resident
- Foreign National who meets the substantial presence test.
The W-8 BEN is completed by non-US residents. By submitting this form to the foreign bank, the customer is informing the bank that they are not a US person.
*It is important that you do not misrepresent information on this form, as it can lead to intense scrutiny.
By submitting a W-9 to the foreign financial institution, you are letting the bank know that you are U.S. person. As a result, the foreign bank will report the account information to the IRS.
FATCA & Offshore Penalties
If the IRS receives notice that a U.S. person has foreign accounts, and realize the individual is not in compliance with U.S. offshore reporting requirements, It may result in significant fines and penalties. Once a person is audited or penalized by the IRS, they are disqualified or ineligible from submitting to any of the voluntary disclosure programs.
*The most common penalty and the one that carries the most financial distress is the FBAR Penalty.
A FATCA Letter Starts the Clock
For some people, if the foreign bank already knows of of their U.S. person status, they already under the clock. For others, the foreign bank may not be aware of the U.S. status, and once the account holder completes and returns the FATCA Letter (or misses the time to respond), the clock starts ticking for them.
If you receive one of these letters, it is very important to contact an experienced tax law specialist to assist you with understanding your options and different strategies for IRS offshore compliance.
We Specialize in Streamlined & Offshore Voluntary Disclosure
We specialize exclusively in international tax, and specifically IRS offshore disclosure.
We have successfully represented clients in more than 1,000 streamlined and voluntary offshore disclosure submissions nationwide and in over 70-different countries. We have represented thousands of individuals and businesses with international tax problems.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.
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Less than 1% of Tax Attorneys Nationwide Are Certified Specialists
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Recent Case Highlights
- We represented a client in an 8-figure disclosure that spanned 7 countries.
- We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
- We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
- We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
- We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.
How to Hire Experienced Offshore Counsel?
Generally, experienced attorneys in this field will have the following credentials/experience:
- Board Certified Tax Law Specialist credential
- Master’s of Tax Law (LL.M.)
- Dually Licensed as an EA (Enrolled Agent) or CPA
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
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No matter where in the world you reside, our international tax team can get you IRS offshore compliant.
We specialize in FBAR and FATCA. Contact our firm today for assistance with getting compliant.
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