What Is FATCA Reporting?
The Foreign Account Tax Compliance Act (FATCA) is a US tax law that requires foreign financial institutions to disclose information about their customers. It was enacted in 2010 as part of the USA Patriot Act.FATCA is intended to help the IRS track down and collect taxes from individuals and companies who are hiding money offshore. By sharing this information, banks can avoid sanctions from the IRS.
Banks that comply with FATCA Services are able to receive a reduced penalty for not reporting an account. In addition, It has had a positive effect on the US economy by increasing investment in US-based businesses by foreign entities.
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Disclosures and Citizenship Questions
The Foreign Account Tax Compliance Act (FATCA) is a US tax law that requires foreign financial institutions (FFIs) to report information about their customers to the US Treasury. FATCA also requires that certain non-US citizens who have income from US sources report this income to the IRS. FATCA was enacted in 2010 as part of the American Recovery and Reinvestment Act (ARRA).
There are a number of ways for taxpayers to avoid having their foreign bank accounts subject to FATCA reporting. One way is for taxpayers resident outside of the United States to establish and maintain an account at a FFI located inside of the European Economic Area (EEA). Another way is for taxpayers resident outside of the United States and having a direct or indirect interest in a US entity or company to Form 8938, Report Of Foreign Bank and Financial Accounts, which discloses such interest and provides instructions on how to report it.