As a family-run firm with international roots, we understand better than most how complicated managing finances across borders can be. And, in light of the Foreign Account Compliance Act (FATCA), it’s more important than ever to get it right.
That’s because the potential fines are painfully high: a taxpayer can be exposed to hundreds of thousands of dollars for non-disclosure and even, potentially, criminal charges. Fortunately, all that you need to avoid this, as a U.S. taxpayer, is to disclose any foreign holdings; FATCA does not impose any new taxes.
What You Need To Know:
- 1) The difference between Tax Residency and Legal-Immigration Residency
Many people operate on the belief that if they spend less than 180 days in the U.S., that they don’t have to pay taxes here. What many of them don’t realize is that there is a Three Year Look-Back test the IRS conducts to determine Tax Residency. - 2) What Constitutes a Foreign Asset
According to the IRS, any financial account that is maintained by a foreign financial institution (this doesn’t include either the foreign branch of a U.S. institution or a U.S. branch of a foreign one) counts as a foreign asset. Assets such as stock or securities issued by someone other than a U.S. person, any interest in a foreign entity, or any financial instrument or contract that has an issuer or counterparty other than a U.S. person are also counted as foreign. - 3) What Actions Needs to Be Taken
In general, any U.S. taxpayer with more than $50,000 in foreign assets needs to file an 8938 form with their tax return. But there are many complexities with FATCA, so it is important to speak with a tax professional about your particular situation to determine what your requirements are.
Have any questions? Feel free to contact us today.