FATCA: Foreign & International Business Tax Reporting ChallengesBy James Blake on
Tax filing in 2012 will be different for many taxpayers this year. The Foreign Account Tax Compliance Act (FATCA) was designed to fight tax evasion by requiring U.S. citizens, residents, and even nonresident taxpayers to report financial assets that are held in offshore accounts. Unfortunately, this is an additional burden on top of existing FBAR filing requirements (Report of Foreign Bank and Financial Accounts). Because noncompliance with FATCA can result in severe penalties, you should consult an international business attorney to determine whether you are subject to the new tax reporting requirement.
What Foreign Financial Assets to Report
In general, individuals with foreign financial assets exceeding $50,000 (or $75,000 in value at any time in the year), must report information about those assets on Form 8938 with your annual tax return. Taxpayers living abroad have different thresholds. The foreign financial assets and accounts that must be reported include:
• Accounts in foreign financial institutions, including banks, mutual funds, hedge funds, private equity;
• Stock or securities issued by a non-US company, or any other interest or ownership in a foreign company, trust, or estate; and
• Any contract, note, bond, debenture, options, swaps, derivatives, or other financial instrument with a non-U.S. issuer or counterparty.
Penalties for Failure to Report Financial Assets
If you violate FATCA tax law and do not report foreign assets on Form 8938, you’ll have a penalty of $10,000, plus an additional penalty up to $50,000 for continued failure to report after notification. Further, you will suffer an additional penalty of 40% for underpayments of taxes on non-disclosed foreign financial assets.
If you own, operate, or possess an interest in an offshore business, estate, or foreign trust, make sure to get reliable advice from a international business lawyer. Our law firm regularly advises owners and investors in various aspects of international businesses law, and we will be happy to consult you.
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