FATCA Compliance Efforts Give Taxpayers and Foreign Financial Institutions an Advantage with IRS
FATCA causes foreign banking and financial institutions to place priority on information sharing practices and procedures.
Foreign banks, financial institutions, and U.S. taxpayers living abroad are being advised to show a strong “good faith” effort in complying with the Foreign Accounts Tax Compliance Act. Passed in 2010, the law requires banks, investment groups, and other financial institutions to gather and disclose information on all accounts held by U.S. citizens. Failure to comply would lead to penalties for U.S. taxpayers and a 30% tax withholding penalty on all U.S. funds for banks and other financial institutions.
Putting Effective Practices into Place
FATCA officially went into effect in July, 2014 and as a result many banks and overseas institutions are dealing with the real effects of meeting compliance. For some, it can be a costly process. By showing that they have made legitimate efforts to set up training and procedural processes regarding FATCA compliance, financial institutions may have a better chance of avoiding restrictions or penalties imposed by the United States. Furthermore, institutions should realize inter-governmental cooperation regarding tax information sharing is becoming more and more standard, and setting effective documentation and communication practices could be of significant benefit in the future.
Current Effects of FATCA
The recent efforts of U.S. tax authorities have enable the United States to gather a wealth of information on individuals and companies who have failed to disclose income and assets oversees. In an effort to reduce the overall occurrence of tax avoidance, the United States has levied fines, and even criminal charges on those who fail to comply. A variety of amnesty programs have also been put forth allowing those who failed to disclose fully in the past to provide information regarding all interactions with foreign banks and pay back taxes without facing more serious penalties.
According to data reported by Thompson Reuters, nearly 50,000 U.S. citizens have participated with the IRS’ Offshore Voluntary Disclosure Program (OVDP) to date by sharing information about previously undisclosed offshore bank information.
Smart Planning for the Future
As more and more countries and jurisdictions align with the requirements of FATCA, banking institutions are now in a position to follow suit and set important processes and training in place regarding tax information sharing compliance. Professional assistance is available from law firms such as Freeman Tax Law which can help U.S. financial institutions navigate the requirements of FATCA and remain in compliance.
About Freeman Tax Law
Freeman Tax Law (FTL) is a boutique law firm consisting of a multi-disciplinary team of tax professionals including tax attorneys, CPAs and a professional staff that have vast experience with foreign tax compliance and regulatory matters for financial institutions. FTL consults with both FFIs and USFIs with regard to Foreign Account Tax Compliance Act (FATCA) and related regulatory matters and assists them developing procedures on how to comply with these laws. FTL provides a multidisciplinary approach for filing offshore voluntary disclosures. Working to help clients prevent future tax headaches we offer a complete wealth management and estate planning team. As an experienced firm with wide reach, Freeman Tax Law provides immediate assistance to our clients planning for and resolving all tax related challenges.
