How FATCA will affect individual U.S. taxpayers November 26, 2014 Share Subscribe RFP Compensation and Benefits Bulletin The Foreign Account Tax Compliance Act (FATCA), originally enacted in 2010 as part of the Hiring Incentives to Restore Employment (HIRE) Act, has created a lot of confusion for individual U.S. taxpayers. In essence, the FATCA regulations, finalized in 2013, require that U.S. taxpayers with foreign holdings report those holdings to the IRS. With FATCA, the IRS has gone a step further, requiring that foreign financial institutions report to the IRS information about their U.S. account holders. This development makes it more important than ever that taxpayers self-report foreign holdings in their tax filings. To make it easier for foreign countries to comply with FATCA, the U.S. Department of the Treasury introduced a model Intergovernmental Agreement (IGA), to be used between the United States and other countries. IGAs allow all foreign-country entities that have U.S. account holders to report this information directly to the IRS. In essence, this means that taxpayers with foreign holdings where an IGA is present will be obligated to confirm what a financial institution has already reported. Many taxpayers have been notified by their respective foreign financial institutions that their information will be reported directly to the IRS. As of Nov. 5, 2014, 45 countries have signed a version of the IGA, and another 56 countries are working on agreements. For an up-to-date list of the IGAs that are in effect, visit FATCA information on Treasury's website. These regulations apply to anyone who is a U.S. citizen, Green Card holder/legal permanent resident, or tax resident whose foreign assets or holdings are over the thresholds that are set each year. There are two main forms that taxpayers subject to the regulations may have to complete: the Foreign Bank Account Reporting Form (FinCen Form 114a) and the Statement of Foreign Financial Assets (Form 8938). FinCen Form 114a is required if the taxpayer has an aggregate equivalent of $10,000 in non-U.S. bank and financial accounts at any point during the year. This form, due on June 30 of each year, is independent from a tax return and is e-filed directly with Treasury. The Statement of Foreign Financial Assets is attached to the taxpayer’s individual return and is due when the taxpayer’s return is due (including any extensions). Generally, a taxpayer is required to file this form if foreign assets exceed $50,000 USD, but there are multiple exceptions that increase this threshold substantially. Foreign financial assets include foreign stock, foreign retirement plans and pensions, foreign partnership holdings and many other financial assets. The government is serious about enforcing these rules and imposing penalties for noncompliance. Make sure you assess your personal filing responsibilities, and communicate with your tax preparer if there is uncertainty about which forms, and what, to include. Contact Katrina Haynes T +1 404 704 0109 E firstname.lastname@example.org Tax professional standards statement This document supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the subject of this document, we encourage you to contact us or an independent tax adviser to discuss the potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this document may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this document is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.