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Foreign Account Tax Compliance Act

The Foreign Account Tax Compliance Act (FATCA) is a US federal law that was enacted on March 18, 2010 to target US Persons that are concealing assets held in foreign accounts. FATCA has classed all non-US entities into two categories: foreign financial institutions (FFIs) and non-financial foreign entities (NFFEs). The definition of an FFI in the US Treasury regulations encompasses a broad range of financial institutions including entities who:

  • Accept deposits in the ordinary course of business;
  • Hold financial assets for others (e.g. custody or nominee services);
  • Are primarily engaged in investing, reinvesting or trading in securities or commodities;
  • Is a certain type of insurance company; or
  • Is a specific type of holding company/treasury center

If the foreign institution is a resident of a country with an intergovernmental agreement (IGA), the IGA agreement supersedes US Treasury regulations.  Depending on the IGA, determined FFIs are required to report to the IRS directly, or through their local revenue government agency, information about financial accounts held by US Persons. FFIs that fail to comply with reporting requirements will have a 30% withholding penalty on certain US income. Certain NFFEs (any entity not classified as an FFI) must also report or certify their ownership, otherwise they will be subject to the same 30% withholding.

These reporting requirements are in addition to the FinCEN Form 114: Report of Foreign Bank and Financial Accounts (FBAR).

You are probably wondering how this affects you.  When an FFI/NFFE identify their US Persons in accordance with FATCA and reports them to the IRS, the IRS will, in turn, check their systems to see if the US Person has filed an FBAR or tax return. If they have not they could be subject to criminal and/or civil penalties.

US Tax & Financial Services takes a realistic approach – with timelines, a step by step process to perform due diligence requirements, and compliance relief. Our goal is to deliver a customized client experience through tailored compliance solutions suited to meet your needs. Our FATCA specialists are former Big 4 professionals who can offer their assistance without the costs associated with a larger firm.

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FATCA For Individuals

Did you Know?

  • Fact Seven

    Thanks to FATCA banks must disclose their American account holders to the IRS or local tax authority.
  • Fact Six

    The IRS is actively looking for non compliant US persons.
  • Fact Five

    It takes an average of 16 hours to do IRS Form 1040.
  • Fact Four

    There are over 500 IRS tax forms.
  • Fact Three

    Since 1916, illegal income has been taxable.
  • Fact Two

    US persons must file tax
    returns no matter where they live and work.
  • Text One

    7 million Americans abroad
    only 500,000 compliant