Enacted in March of 2010, the Foreign Account Tax Compliance Act, or FATCA as it’s more commonly known, has been the subject of much concern and confusion for many U.S. citizens who are either living abroad or who have foreign-held assets or property. The unpopular piece of legislation was passed in an effort by the U.S. government to keep track of U.S. foreign asset holders and crackdown on offshore tax evasion activities.
FATCA noncompliance and the IRS’ Offshore Voluntary Disclosure Program
The provisions apply to U.S. citizens with foreign assets or property that is valued in excess of $50,000. While this requirement seems straight forward enough, many individuals who are subject to FATCA’s terms would likely argue that attempting to abide by the law’s provisions is anything but simple or straightforward.
Consequently, many people who should file under FATCA don’t and the penalties associated with failing to file can be hefty and punitive. In cases where an individual fails to report foreign assets under FATCA requirements and wants to ensure they are compliant with the Internal Revenue Service requirements, the agency offers options—one being participation in the Offshore Voluntary Disclosure Program.
Under the terms of the OVDP, program participants must file amended tax returns and any applicable Foreign Bank Account Reports for the last eight years. In cases where amended returns result in an individual owing the IRS money, he or she must then pay a 20 percent penalty on the amount owed. OVDP participants are also subject to penalties of between 27.5 and 50 percent on their “highest offshore account balance.”
While the penalties and costs associated with the OVDP are significant, participation in the program also affords protection from prosecution as well as the forgiving of other potentially incriminating facts or evidence.
In conclusion, FATCA noncompliance and the IRS’ Offshore Voluntary Disclosure Program effects are large number of New York City residents who have foreign assets and questions or concerns about FATCA, can contact an attorney who handles tax matters to discuss their options.