RECEIVED A FATCA LETTER FROM THE BANK?
If you do not respond to your bank, you are at risk of having your foreign accounts frozen or even closed.
In addition, there are severe penalties and fines associated with not being in compliance with FATCA and IRS filing requirements.
FATCA Letters Should Not Be Ignored - You Must Take Action.
FATCA BANK LETTERS
WHAT IS FATCA?
FATCA stands for The Foreign Account Tax Compliance ACT. FATCA was enacted to allow the IRS to gain information about U.S. citizens and residents who have financial assets in non-US banks and institutions. Foreign financial institutions are required to report directly to the IRS the name, address and account numbers of all clients deemed to be U.S. persons. The foreign banks must also report the highest daily account value, as well as inflow and outflows from the account over the course of the year.
FIRST STEP IN RESPONDING TO FATCA LETTER
FATCA letters will be slightly different based upon the financial institution, and the country from which it's coming from. All letters will should include two forms, Form W-8 and form W-9. Your bank is requesting that one of these forms be filled out and returned. Form W-9 should be completed if you are a US taxpayer. Form W-8 should be completed and returned if you are not a US taxpayer. It is a federal crime if you falsify the information on these forms, so don't even consider doing so. If you do not return either form, your personal information will still be forwarded to the Internal Revenue Service. In addition, your accounts will likely be closed or frozen.
WHAT TO DO AFTER RESPONDING TO BANK
If you have not been reporting your foreign financial assets to the IRS, now is the time to do so. Penalties are much less severe if you voluntarily come forward, as opposed to waiting for the IRS to catch up with you. Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In the majority of cases, taxpayers need to complete and attach Schedule B to their tax returns. Part III of Schedule B asks about the existence of foreign accounts, like bank and securities accounts. In most cases, it requires U.S. citizens to report the country in which each account is located. In addition, certain taxpayers may also have to complete and attach to their return Form 8938 - Statement of Special Foreign Financial Assets. Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on this form if the aggregate value of those assets exceeds certain dollar amounts. Lastly, FBAR filing may be required. FBAR stands for Report of Foreign Bank and Financial Accounts. FBAR refers to Form 114, which must be filed with the Financial Crimes Enforcement Network (FinCEN) if certain financial account balance thresholds are exceeded. FinCEN is a bureau of the United States Treasury Department. The penalties for not filing Form 114 are quite severe. The failure to timely file the FBAR can be subject to civil penalties and possibly criminal charges. The statutory civil penalties may be $10,000 per year for a non-willful failure but a willful failure to file could, by statute, be subject to civil penalties equivalent to the greater of $100,000 or 50% of the balance in an unreported foreign account, per year, for up to six tax years. Non-willful penalties might be avoided if there is “reasonable cause” for the failure to timely file the FBAR.
FATCA LETTER HELP
The reporting requirements for foreign income and assets can be quite complex. The information contained in this article is not exhaustive, and is not a substitute for competent legal advice. If you have a question concerning your offshore holdings, please contact us. The initial consultation is always free, and of course all communication will be confidential. Freeman Tax Law has locations across the country, making it easy for you to meet with us. Given that, Jeffrey Freeman is still personally involved in every case. Please see more about Jeff below.
OFFSHORE VOLUNTARY DISCLOSURE PROGRAM
Below are two of the forms that you may be required to file if you have or have had income or assets in foreign countries:
FinCEN From 114
FinCEN Report 114, Report of Foreign Bank and Financial Accounts, is used to report a financial interest in or signature authority over a foreign financial account. United States persons that have a financial interest in or signature authority over foreign financial accounts must file an FBAR if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year. Foreign financial accounts include bank accounts, brokerage accounts, mutual funds and trusts.
Form 8938 is used to report “specified foreign financial assets” if the total value of all specified foreign financial assets in which you have an interest is more than the reporting threshold (which varies depending on your filing status and whether you live in the U.S. or abroad). You are required to include a reportable asset even if you receive no income or distributions with respect to that asset. Form 8938 must be filed with your income tax return. The penalty for failure to file this form or late filing is $10,000. If you receive a notice from the IRS for failure to file this form and do not file it within 90 days of the IRS notice, additional penalties may be imposed.
FBAR FILING SERVICES BY FREEMAN TAX LAW
Why do people choose Freeman Tax Law?
- Straight-Forward, Easy to Understand Style
- Years of Experience Handling Cases of All Sizes and Types
- Will Handle All Communication with the IRS on Your Behalf
- Free, No-Obligation Initial Consultation
Jeffrey S. Freeman, Esq. has personally represented and counseled hundreds of clients with regard to their tax matters. During his early career, Mr. Freeman worked for a large international tax firm specializing in international tax issues. He has extensive experience representing Fortune 100 clients and high net worth families. By combining large firm training and attention to detail, with a boutique firm approach and a personal focus on resolving complex tax matters efficiently, creatively and strategically, Mr. Freeman’s priority is always to provide his clients with the highest level of representation.
Mr. Freeman holds a Masters of Law in Taxation (LL.M.) from Georgetown University Law Center in Washington, D.C. and Juris Doctor, Cum Laude, from the Detroit College of Law at Michigan State University and a Bachelor of Arts in Accounting, with honor, from Michigan State University.
“The client is the most important person at our firm….it is our job to understand their facts, clearly explain all options to resolving a problem, treat them with integrity and provide the highest level of representation.”
— Jeffrey S. Freeman, J.D., LL.M., Attorney and Counselor
Freeman Tax Law is a comprehensive firm, comprised of a full-service team of Attorneys, CPA's and former IRS agents. We have handled hundreds of offshore disclosure cases, and will help you understand your obligation in regards to the receipt of foreign gifts and bequests.
We will clearly explain your options in making all necessary disclosures to the IRS.
FBAR FILING REGULATIONS
Federal and state laws change frequently. For current tax or legal advice, an attorney or CPA should be consulted.
The information contained in this article is not exhaustive, and is not a substitute for competent legal advice. If you have a question concerning a foreign account or offshore holdings, please contact us. The initial consultation is always free, and of course all communication will be confidential.