The Skinny On The Foreign Account Tax Compliance Act (FATCA) How Is It Impacting You?
It’s what Swiss bank executives yelled out when they received fines for aiding American citizens in hiding assets from the IRS, fines that have netted a billion dollars . It’s what Bank executives all over the world now utter when they feel bogged down at work as a result of the Foreign Account Tax Compliance Act – “F… FATCA”.
It’s what US taxpayers around the world are thinking when they receive a tax bill for yet another form to consider when filing their tax returns – “F… FATCA”.
That’s right, even the “F” word has evolved. It’s bigger, badder and a whole lot meaner. It’s the Foreign Account Tax Compliance Act.
FATCA stands for Foreign Account Tax Compliance Act, as you already knew. You already knew this because it’s all over the news, because your tax preparation bill was higher, because opening a bank account took one more form – and a couple more uncomfortable personal finance questions, or maybe because you were denied opening a bank account at a foreign bank.
It is surprising the length the U.S. government has gone to in order to collect income taxes and catch tax evaders. This, one could argue, is the sole raison d’etre for this document. A minion manual for the modern day banker. Bank staff around the world have succumbed to the U.S. tantrum; countless man-hours, hundreds of thousands in tax preparation fees, unnecessary countless insomnia hours, just to be able to cross reference foreign account information held by U.S. citizens.
Besides highlighting our world’s inequality, and showcasing the dollar’s muscle, it also tells us a lot about the concern the United States has about dollars fleeing American soil. We could speculate about the cost of implementing these Foreign Account Tax Compliance Act tantrums , or ironically talk about the possible efficiency, but there’s already PLENTY on that.
We could also speculate about the possibility of future asset based taxation like other counties in the world. But we’d better get working on the requirements as we get up to speed. And that means: File your foreign financial asset related disclosures.
That’s really all it means for the average taxpayer. File your FBAR (the “FinCen Form 114”), and the corresponding forms for foreign legal entities, foreign corporations on the Form 5471, foreign partnerships on the Form 8865, foreign trusts on a Form 3520, and specified foreign financial assets and foreign accounts on the Form 8938.
FATCA is indeed the new “F” word, but it’s really just a new set of tools for the U.S. The underlying game is the same, and it’s only getting more and more challenging for anyone not wanting to play it with other countries around the world jumping on the U.S. bandwagon and enacting their own version of legislation similar to FACTA.
You can find information available on the IRS website but unless you work at a foreign financial institution you may not need to know and understand that much! You should perhaps read more about FBAR and the Form 8938.
To learn more, please read our article on IRS Form 8938.