U.S. Citizens Living in Bahamas: The Foreign Account Tax Compliance Act (FATCA)
The Foreign Account Tax Compliance Act (FATCA) is an important development in U.S. efforts to improve tax compliance involving foreign financial assets and offshore accounts.
Depending on the amount of the aggregate value of their assets, US individuals are required to file Form 8938 – Statement of Specified Foreign Financial Assets with their Form 1040 tax returns. American expats should file this form if the aggregate value of their assets is higher than USD 50,000. However, this threshold is sometimes higher depending on certain circumstances. For a list of exact thresholds relating to specific circumstances, please refer to the IRS website regarding Form 8938.
Specified Foreign Financial Assets can include: depository or custodial accounts at foreign financial institutions (FFIs), stocks or securities issued by foreign persons, a financial instrument or contract held for investment issued by a foreign country or party, and any interest in a foreign entity.
When do FATCA reporting obligations start?
As of January 2013, only individuals are required to report their foreign financial assets.
How is failure to comply with FATCA punished?
The civil penalty for failure to supply this information is $10,000, with an additional $10,000 penalty up to a maximum of $50,000, after notice from the IRS.
Any understatement of tax attributable to an undisclosed foreign asset is subject to a 40 percent penalty.
Form 8938, the instructions, regulations implementing this new foreign asset report, and other information to help taxpayers determine if they are required to file Form 8938 is available on the web at the IRS site regarding FATCA. There is also more information at theDepartment of Treasury Website.
