Which Foreign Assets Disclose FATCA US Taxpayers

Which Foreign Assets Disclose FATCA US Taxpayers

Which Foreign Assets do US Taxpayers Disclose for FATCA Purposes?

What Foreign Assets do US Taxpayers Disclose to IRS for FATCA Purposes: FATCA is the Foreign Account Tax Compliance Act. Starting on the 2011 tax return, US Taxpayers are required to disclose certain specified foreign financial assets to the IRS on their US Tax Returns. Sometimes, Taxpayers may get (understandably) confused as to the difference between FATCA Assets and FBAR Reporting (Foreign Bank and Financial Accounts) — and whether both forms are required to report the same asset (usually they are both required). In general, the disclosure requirements for foreign financial assets under FATCA are more encompassing than the disclosure requirements for the FBAR. Let’s go through some of the basics of what foreign assets US taxpayers required to disclose under FATCA.

FATCA Disclosure is a US Tax Law

FATCA Is the Foreign Account Tax Compliance Act. The purpose behind the Act is to ensure US Persons with foreign accounts and assets properly report the information to the US government each year. More than 110 countries and over 300,000 Foreign Financial Institutions have agreed to comply with FATCA. Over the past few years, the US government has significantly increased enforcement of FATCA compliance.

Taxpayer Disclosure for FATCA On Form 8938

For US taxpayers, FATCA information is disclosed to the Internal Revenue Service on Form 8938. This FATCA form is required to be filed each year at the same time the US Taxpayer files their annual tax return. There are different threshold requirements for filing, depending on the marital status of the Taxpayer — and residence of the taxpayer. One of the most common questions we receive is understanding which foreign assets are disclosed for FATCA.

Which Foreign Assets does FATCA Disclosure Require?

 The IRS summarizes FATCA Asset Disclosure as follows:

      • If you are required to file Form 8938, you must report your financial accounts maintained by a foreign financial institution.  Examples of financial accounts include:

        • Savings, deposit, checking, and brokerage accounts held with a bank or broker-dealer.

      • And, to the extent held for investment and not held in a financial account, you must report stock or securities issued by someone who is not a U.S. person, any other interest in a foreign entity, and any financial instrument or contract held for investment with an issuer or counterpart that is not a U.S. person.  Examples of these assets that must be reported if not held in an account include:

        • Stock or securities issued by a foreign corporation;

        • A note, bond or debenture issued by a foreign person;

        • An interest rate swap, currency swap, basis swap, interest rate cap, interest rate floor, commodity swap, equity swap, equity index swap, credit default swap or similar agreement with a foreign counterpart;

        • An option or other derivative instrument with respect to any of these examples or with respect to any currency or commodity that is entered into with a foreign counterpart or issuer;

        • A partnership interest in a foreign partnership;

        • An interest in a foreign retirement plan or deferred compensation plan;

        • An interest in a foreign estate;

        • Any interest in a foreign-issued insurance contract or annuity with a cash-surrender value.

        • The examples listed above do not comprise an exclusive list of assets required to be reported.

How do You Get Caught for Noncompliance with FATCA Disclosure?

When the Foreign Financial Institution reports account holder information to the IRS, and then the Internal Revenue Service discovers that the information was not also provided by the Taxpayer on their tax return — there is a mismatch in the IRS computers. This can lead to an audit or examination. The number of soft letters and examinations for issues involving FATCA has increased significantly over the past few years — so it is important for non-compliant taxpayers to get into FATCA compliance.

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Golding & Golding specializes exclusively in IRS offshore and domestic voluntary disclosure and tax amnesty.

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