Foreign Account Tax Compliance Act (FATCA) Facts

Last updated on September 24, 2013

Foreign Account Tax Compliance Act (FATCA) was enacted in 2010 to curb tax evasion. Under the law, U.S. citizens living abroad must report their financial assets and income to the IRS if they exceed a certain threshold.

Foreign financial institutions must also report to the IRS financial activities that involve U.S. taxpayers. Even if a U.S. taxpayer holds a substantial ownership interest, the financial details must be reported to the IRS. This is done to increase transparency in financial activities to curb tax evasion.

The U.S. has made treaties with many countries to implement FATCA and limit tax evasion. The countries which have FATCA agreements with the U.S. are required to share the financial details of U.S. taxpayers with the IRS. Account holders that do not provide FATCA-required documentation are penalized.

Many of the FATCA rules will not be fully implemented until the middle of 2013. Financial institutions will need to conduct certain assessments to comply with FATCA, including:

• Performing a current state assessment of your systems and operations.
• Conducting gap analyses against identified requirements.
• Planning to implement changes required for FATCA compliance.

U.S. taxpayers living abroad must take account of FATCA rules so that they are in compliance with the new tax rules.