IRS Enters Reporting Agreement With More Foreign Nations

  • Robert S. Thomas,
  •   Taxation
  •   Comments Off on IRS Enters Reporting Agreement With More Foreign Nations

Many American taxpayers diversify their investment portfolios by investing and holding their money overseas. There is nothing inherently wrong with this and makes sound financial sense. However, the IRS sees this money as hidden, lost tax revenue. Traditionally, the IRS has been unable to access this money as it relied on taxpayers self-reporting their foreign holdings. This changed in 2010, when congress passed the Foreign Account Tax Compliance Act (FATCA).

What is the FATCA?

The FATCA requires people living in the United States, and U.S. citizens living abroad, to report their foreign financial accounts. In addition, it requires Foreign Financial Institutions (FFI’s) to identify and report the accounts and assets of U.S. taxpayers to the IRS, in a similar manner that domestic institutions must. It enforces these provisions of foreign institutions by imposing a thirty percent penalty on any transactions involving the U.S. dollar.

Since its inception, the FATCA has been controversial, with critics complaining that it violates privacy and 4th Amendment rights; however, it has been effective. It is estimated that the IRS has collected more than $10 billion in taxes and penalties. Further, the efforts have resulted in criminal and civil charges against taxpayers and non-compliant foreign institutions. While there is talk from the Republicans in congress to repeal the FATCA, these efforts have yet to come to fruition.

The United States Continues to Reach New Agreements

So far, 100 countries have reached agreements to comply with the FATCA. After all, the risk of the 30% penalty and expensive lawsuits are more than many institutions are willing to assume. In addition, the U.S. has continued to reach agreements with countries. Since the beginning of this year, this includes Israel, Greece, Ukraine, Turmekistan, Trinidad, and Montenegro.

The IRS keeps an updated list of participating FFI’s. If you have assets in a foreign institution and want to know if they are a reporting entity, the IRS has created a searchable database to assist you. If you have foreign assets in an FFI, you need to comply with the law. If you have any questions or need tax advice regarding foreign assets, you should contact a tax attorney.

A Tax Attorney Can Help You

If you are uncertain whether the FATCA applies to your foreign holdings, contact my office. Reporting foreign assets is a new and confusing process, and it is easy to make mistakes. Unfortunately, FATCA compliance is something that the IRS takes incredibly seriously, so it is critical to get it right. Let me help you. I have been a tax attorney for over two decades and have a Master of Law Degree (LLM) in Taxation, and a license to practice in the United States Tax Court. Call The Law Offices of Robert S. Thomas at 847-392-5893 for a consultation or visit our website today.

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