Some of our readers in New York may be familiar with what is known as FATCA, the Foreign Account Tax Compliance Act. The law was passed back in 2010 and is finally scheduled to take effect in 2014. Basically, the law is intended to provide transparency for Americans with foreign bank accounts. Contrary to what some people might think, the law is not intended to restrict people’s ability to put their money wherever they wish; instead, it is intended to require disclosure of where that money is being kept.
This is because income that is earned all over the world is subject to U.S. taxes. Many people may have put their money into foreign accounts because they were more difficult for American authorities to find; banks that developed a reputation for secrecy and discretion became popular havens.
In addition to the requirements of FATCA, people with foreign bank accounts that are worth more than $10,000 must also annually complete the FBAR, the Report of Foreign Bank and Financial Accounts. Failure to do so can result in hefty fines and even time in prison. Even people who did not realize they were supposed to file the document have been found liable and required to pay fines.
People who are not compliant with FATCA may find themselves with tax debt. It is crucial for people in that situation to address the issues as soon as possible. An experienced tax attorney can assist people who find themselves having to deal with IRS agents.
