What is FATCA reporting?

 

What is FATCA reporting? 

FATCA refers to Foreign Account Tax Compliance Act. Expats will usually come across the need to deal with FATCA. In such a situation, you must have a strong understanding of what is FATCA reporting. Then you will be able to go ahead with the reporting that you have to do and make sure that you are making all the tax payments that you are eligible to do.

What exactly is FATCA?

Before taking a look at FATCA reporting, you need to understand what exactly it is and why it exists. FATCA was introduced back in the year 2010. In fact, it was introduced along with the HIRE ACT, which came into play during 2010. There are numerous people who cheat on their taxes and hide their assets and money offshore. The main objective of FATCA was to discover such people.

Along with the introduction of FATCA, the IRS was able to recover billions of dollars effectively in terms of taxes. That’s because lots of people in the United States were hiding their assets in offshore destinations with the purpose of evading the taxes. All those people were caught with FATCA.

As implemented by FATCA, all the citizens in the United States should report their offshore assets to the IRS. It is perfectly fine to keep offshore assets. However, it is important to report the offshore assets to the respective agencies, which is usually the IRS. However, the IRS has designated several threshold values that you need to adhere to as well. If you are having any such offshore assets, you need to be mindful about “What is FATCA reporting” and how you will be able to do it.

The main objective of FATCA reporting is to force all the tax evaders in the United States to make their tax payments. This method is quite effective, and we can see how lots of tax evaders are now making tax payments.

FATCA is quite different from FBAR

Some people tend to assume that FATCA is the same thing as FBAR. There are certain differences that you can see between them. FBAR refers to the Foreign Bank Account Report. It is true that you will be able to discover similarities between FBAR and FATCA. However, there are some major differences between them.

FBAR was designated to locate the tax evaders as well. For example, people started opening offshore bank accounts to keep their money hidden. However, FBAR is only focusing on bank accounts. People who have assets offshore will still be able to avoid it. This is where FATCA was introduced. FATCA is focusing on bank accounts as well as the other assets that are held by people.

It is important to keep in mind that FATCA is more comprehensive. Even though you will need to report the foreign assets and bank accounts, the threshold associated with them is relatively higher. By getting in touch with a property lawyer, you will be able to overcome all sorts of complications you have related to these.

You need to understand what exactly you should be reporting

We often see how people who work along with FATCA reporting come across numerous challenges. The main challenge that you have to face is understanding what exactly you need to report. When it comes to FBAR, you will not come across any such confusion because you know what exactly has to be reported. It will be your foreign bank accounts and nothing else. However, the definition of FATCA is quite vague because it is associated with the term assets. You can have different assets. Due to the same reason, you will start wondering what exact assets you will need to report.

Here is the list of assets that you will need to consider for FATCA reporting. This list of assets is defined by the IRS. If you can stick to this list of assets, you will be able to make all the asset payments without coming across any complications.

-          Foreign stock holdings.

-          Foreign pensions

-          Foreign financial accounts

-          Foreign partnership interests

-          Life insurance plans offered in foreign countries

-          Foreign mutual funds

-          Foreign hedge funds

-          The foreign homes you have will not have to be reported

-          Foreign real estate that you got through a foreign entity.

In case if you are still having any confusion, the best thing you can do is to get in touch with an attorney. Then you will be able to get a clear understanding of what you should be doing to overcome the confusions that are in your mind.

What would happen if you don’t adhere to FATCA reporting?

While learning “what is FATCA reporting”, you should also understand what would happen when you ignore the process and try to refrain from them. You will be able to evade FATCA reporting, but it would introduce you to numerous complicated situations.

There are penalties imposed on all the people who don’t adhere to the terms and conditions that are associated with FATCA reporting. It is important for you to keep these in mind and make sure that you don’t become a victim of any of the penalties.

If you fail to file FATCA reporting, you will be asked to pay $10,000 per each violation as a penalty. On top of that, you will also have to pay $50,000 for continued failure to file the FATCA reporting for the IRS. Along with these penalties, you will have to pay a 40% penalty when you underestimate the assets that you have in other countries.

As you can see the penalties associated with FATCA reporting can be complicated. Hence, it is important to make sure that you don’t become a victim of any of those complications. Work along with a reputed attorney and file the FATCA reporting in a timely manner. Then you will be able to refrain from all the struggling situations that you will have to face.

FATCA reporting is not something complicated

Some people assume that FATCA reporting is complicated. You shouldn’t assume that it is complicated and end up facing penalties. Instead, make sure that you seek legal assistance to understand how to proceed with FATCA reporting. The lawyer who works with you will be able to help you with getting a complete understanding of how to proceed with FATCA reporting. Then you will be able to make the payments in a timely manner and refrain from negative consequences that could come on your way.