IRVINE, Calif. -- What the Foreign Account Tax Compliance Act (FATCA) Means to You
The Foreign Account Tax Compliance Act (FATCA) is designed to pull in the reins of individuals trying to conceal money overseas by requiring certain disclosures from foreign institutions, with a focus on identifying tax non-compliance by U.S. taxpayers with foreign accounts.
In years past, foreign countries were happy to maintain accounts from U.S. Citizens - and others required to report their U.S. worldwide income - and keep the money quiet. These foreign banks and institutions failed to disclose and/or report these U.S. Citizen based accounts in order to obtain the overseas business, but the tide has shifted. The result is that several of these large overseas institutions are opting to eliminate their U.S. customers completely from the client roster, rather than risk failing to comply with this complicated U.S. tax law.
As provided by the IRS: “For the period from the opening of the FATCA registration website through December 31, 2013, a financial institution (FI) will be able to access its online account to modify or add registration information. Prior to January 1, 2014, any information entered into the system, even if submitted as final by the website user, will not be regarded as a final submission, but will merely be stored until the information is submitted as final on or after January 1, 2014”
In addition, the law provides “As registrations are finalized and approved in 2014, registering FIs will receive a notice of registration acceptance and will be issued a global intermediary identification number (GIIN). The IRS will electronically post the first IRS Foreign Financial Institution (FFI) List by June 2, 2014, and will update the list on a monthly basis thereafter. To ensure inclusion in the June 2014 IRS FFI List, an FI will need to finalize its registration by April 25, 2014. “
While it makes sense for the banks to eliminate U.S. based clients, what about the U.S. Citizens living abroad? They are the collateral damage in a foreign country whose financial institutions are now refusing to maintain U.S. citizen accounts – even if they reside overseas in the country that institution is located.
Why are these foreign institutions taking such a strong stance? It is due in major part to the severity of the penalties, which amount to a 30% tax on U.S.-sourced income if they fail to comply.
S. Matthew Golding’s domestic and international law practice emphasizes the representation of clients worldwide in matters involving Tax, Estate Planning, and Probate Law. Matthew’s clients include U.S. and foreign citizens living abroad in countries such as Iraq, Japan, Afghanistan, Indonesia, South Africa, Pakistan, and Korea. Matthew is currently enrolled in one of the nation’s Top Master of Tax Law Programs at the University of Denver in a distance program designed for experienced professionals. He worked his way through school, graduating University of Denver (1996) and Whittier Law School (1999) and earning Dean’s List distinction at both institutions.
Member, State Bar of California, 1999-Present
Member, State Bar of New York, 2004-Present
Enrolled Agent, Federally Licensed Tax Practitioner (Highest credential awarded by the IRS)
Admitted, United States Tax Court
Real Estate Broker, California Department of Real Estate
He is the owner and operator of http://www.GoldingLawyers.com http://www.GoldingTaxSolutions.com, and http://www.GoldingRealEstateStrategies.com
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