The purpose of the Foreign Account Tax Compliance Act (FATCA) is to prevent tax evasion by U.S. persons who have various assets and bank accounts stashed in foreign banks and institutions. You may have to file a FATCA form if the aggregate amount of assets and money reach a certain threshold. Failure to file this form could result in serious tax penalties. If you are concerned about whether you need to file a FATCA form with your taxes, you should consult with an experienced U.S. tax planning accountant today. Ted Kleinman, founder of US Tax Help, can help you manage your tax liability if you have foreign assets that must be reported to the Internal Revenue Service. US Tax Help explains when you need to file a US FATCA form.
When Do You Have to Report Foreign Financial Assets?
If you are a U.S. taxpayer living within the U.S. and you have foreign financial assets that when aggregated equal at least $50,000 at the end of the tax year, you must use Form 8938, Statement of Specified Foreign Financial Assets to report this income. Also, if you have $75,000 of foreign assets at any point during the tax year, you are subject to FATCA regulations. This form must be filed in addition to your annual tax returns.
It is important to note that the reporting threshold for foreign assets may change depending on certain circumstances. For example, if you are married and file a joint tax return, this may double the typical $50,000 reporting requirement to $100,000. Similar to single filers, if a joint filer has $150,000 of foreign financial assets at any time during the tax year, they must file a Form 8938.
Additionally, there are other filing requirements if you are a U.S person that lives in a foreign country. If you live abroad and you have more than $200,000 worth of foreign financial assets at the end of the year, you must file a Form 8938. According to the IRS, you live abroad if you have a tax home in a foreign country and you reside in a foreign country or multiple foreign countries for at least 330 days in a consecutive 12-month timeframe.
It is important to be constantly aware of your foreign asset liability to avoid being subject to a tax penalty. As these regulations often shift from year to year, you should work with an experienced CPA to stay abreast of any changes.
Multiple factors determine whether a person or business will be affected by FATCA. As mentioned, U.S. citizens and resident aliens (U.S. persons) must comply with FATCA whether they live in the United States or a foreign country. However, other scenarios that FATCA regulations may affect include:
- Businesses that are owned by a U.S. person or businesses with a majority shareholder that is a U.S. person
- Foreign financial institutions that handle money and assets for U.S. persons
- S. financial institutions and investment firms that conduct business with foreign banks and similar financial companies
- Foreign governments
Many foreign financial institutions are required to report any financial dealings they have with U.S. persons. This can sometimes lead to problems for a taxpayer because some foreign banks may not want the trouble of reporting your accounts to the United States. As a result, foreign institutions are likely to freeze or close an account held by a U.S. person. For a person living abroad, this can make it feel impossible to handle tax compliance for multiple countries.
To learn more about reporting your foreign financial assets, you should continue reading and consult with an experienced U.S. certified public accountant.
What is a Foreign Financial Asset?
A foreign financial asset can take many different forms. For example, a bank account in a foreign bank qualifies as a foreign asset. However, there are other assets that you may not expect to be a foreign asset. A contract made with a non-U.S. person is one example of a foreign financial asset that is easy to overlook. It is also important to note that if you have non-account assets that you are using solely for investing, this must also be reported as a foreign asset.
There are some exceptions to what is considered a foreign financial asset. If you have an interest in a foreign social insurance program, this may be exempt from FATCA reporting requirements. Additionally, if you an interest in a foreign estate but you are not aware of that interest, you do not have to report that interest until you become aware.
There are other exceptions to FATCA that a US accountant can help you take advantage of depending on your unique tax situation.
Our US Tax Preparation Accountant Can Help You File a FATCA Form
At US Tax Help, CPA Ted Kleinman is ready to assess your tax situation and determine whether you need to file a FATCA Form with your annual tax return. Ted Kleinman possesses over 30 years of experience handling a wide range of U.S. and international tax law issues. To schedule a confidential consultation to discuss whether you are affected by FATCA regulations, contact US Tax Help online or by calling (541) 923-0903.