IRS Update: The Foreign Account Tax Compliance Act and Your Customer

As a reminder, the new reporting requirements under the Foreign Account Tax Compliance Act (FATCA) have been in effect for the past two filing seasons. It is important to understand the FATCA rules so that you can help your customers comply with these reporting requirements.

Below is a brief list of what is considered a foreign financial asset:

• Bank accounts maintained in a foreign bank
• Any interest in a foreign entity
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Under FATCA, a taxpayer must file Form 8938 (Statement of Specified Foreign Financial Assets) with their Federal income tax for each year that they meet the following foreign financial asset reporting thresholds:

• Foreign financial assets of more than $50,000 ($100,000 for joint taxpayers) on the last day of the year; or
• More than $75,000 ($150,000 for joint taxpayers) at any time during the year.

The penalty for not filing Form 8938 when it is required is a $10,000 fine. There is also an additional penalty of $10,000 per month (maximum of $50,000) if Form 8938 is not filed within 90 days after the IRS mails the taxpayer a notice of failure to file.

Click here to read the entire CrossLink Tax Update that includes further information on the Foreign Account Tax Compliance Act and how it affects your customers.