If you have investments in foreign banks or tax havens, the chances are good that you are aware of your offshore reporting obligations. But if the acronyms FATCA and FBAR have you puzzled, we can help.
In order to remain compliant, avoid penalties, or an IRS audit, it is important to keep mandatory reporting requirements in mind. The days of truly anonymous offshore assets, at least those that are legal, are pretty much over.
Both the FATCA and FBAR require investors and interest holders to identify their monies and value held abroad. Regulations also require banks and foreign holding companies to report your assets to the IRS. When the numbers you report do not match up with value reported by your financial institution, it could trigger a civil or criminal investigation.
So what are these reports? Let’s take a look. Here are some points of comparison and difference:
- The Foreign Account Tax Compliance Act (FATCA) is intended to halt or slow down offshore tax evasion by requiring you to report foreign-held assets on Form 8938, a Statement of Specified Foreign Financial Assets. Your Form 8938 report should be filed with your tax returns.
- A Report of Foreign Bank and Financial Accounts (FBAR) is also a reporting tool used to combat tax fraud through identification of investments and accounts that are held abroad. At present, the FBAR is due on April 15, but there is an automatic extended due date of October 15, 2018.
- Americans who own certain types of foreign-held assets with an aggregate value that exceeds $50,000 are required to file a FATCA report. The thresholds for filing vary if you are living in the US, single or filing jointly, or living abroad. US citizens with an interest in holdings, accounts, or investments that exceed $10,000 in value any time during the year must file an FBAR.
- FBAR reports must be filed by residents, entities, and citizens of the US and US territories. A wider range of entities are caught in the FATCA net, including trusts, estates, non-resident aliens, residents, and US citizens. It is worth taking a look at the exceptions to FATCA filing to ensure that you must report. There are a number of exceptions including whether you already reported your foreign-held assets on other forms. Keep in mind you are not exempted from filing a FATCA if you file an FBAR.
If an IRS audit finds you are not compliant with foreign reporting requirements, you could face substantial financial penalties or charges of criminal tax fraud. If you have questions about FBAR or FATCA reporting requirements, speak with an experienced tax attorney for guidance and strategic solutions to de-escalate the IRS penalty process.
Work with a knowledgeable IRS tax lawyer in Chicago
The law offices of Robert J. Fedor, Esq., LLC provide strategic legal representation on tax audits, criminal tax matters, and other tax controversy. When you become aware you are under investigation, or receive a notice of an audit, call us at 800-579-0997.