FATCA Tax Lawyers
FATCA Tax Lawyers & Expatriation: One of the key ingredients to a successful expatriation is exit tax planning. One important aspect to exit tax planning is to be in FATCA compliance prior to the expatriating act. Being compliant with FATCA may help to either avoid covered expatriate status — or otherwise minimize the exit tax. FATCA is Foreign Account Tax Compliance Act. From an expatriation standpoint, FATCA’s biggest annoyance for the soon to be expatriate realizes is when they realize they did not properly comply with FATCA in the past five years. As a result, the taxpayer cannot certify under penalty of perjury on form 8854 that they have been tax compliant in the previous five (5) years prior to filing.
It is very important to get into FATCA compliance prior to expatriation for the prior five years.
FATCA Tax Lawyer Recommendations
Here are 5 tips about FATCA compliance from our FATCA tax lawyer team:
Responding to a FATCA/CRS/KYC Letter
More than 110 foreign countries and over 300,000 Foreign Financial Institutions (FFIs) have agreed to report foreign account holder information to the US government. Sometimes, the FFI is unsure whether or not the account holder is a US person. As a result, the foreign institution may send the account holder a FATCA letter, which may include a W-9 and W-8 BEN.
These letters are oftentimes time-sensitive.
If you do not respond to the letter timely, the FFI will (generally) presume the account holder is a U.S. person and will usually notify the US government and/or freeze the account.
U.S. Person Status Timeline
We get it, it’s tempting. For example, Dean opened up accounts in Italy before coming to the United States. When he completed the initial bank form, he was a non-US person and was able to certify under penalty of perjury those facts at that time.
Now, 10 years later, Dean is a Legal Permanent Resident and therefore would be considered a U.S. person at the time he received the FATCA letter.
If you are in this type of situation, you should speak with a FATCA lawyer before responding as it is very important to assess all the factors before responding, and what your immediate future U.S. person status will be.
- Do you plan on giving up your U.S. status in the near future?
- Will you be considered an expatriate or covered expatriate?
- How much time did the letter give you to respond?
Are You Even Required to File FATCA?
Unlike the FBAR, when it comes to FATCA, there are different threshold reporting requirements for the taxpayer depending on whether the taxpayer is married and filing joint or filing separate or single.
In addition, the threshold requirements are different depending on whether the taxpayer resides in the United States or is considered a foreign resident.
Therefore, it is important to determine whether or not the taxpayer must even file for FATCA before just doing so.
Prior Year FATCA Amnesty vs. Filing Forward
When it comes to filing the FATCA form, there are hidden traps throughout the form. And, if you have been noncompliant in prior years, it is important to get into compliance for prior years before filing the current year return using one of the approved FATCA Amnesty programs.
For example, the FATCA form asks taxpayers whether or not the account was opened in the current year. If it was not opened in the current year and the IRS realizes the taxpayer is only just filing the form beginning in the current year (but should have filed in prior years) — it may lead to an audit or examination about the prior years.
Burying Your Head in the Sand and Closing Accounts
This is a common response our FATCA Tax Lawyers hear often when clients first receive a FATCA/CRS letter — and it is only human nature to want to consider this option of immediately closing the foreign accounts.
While this may bring the account holder immediate relief — and benefit the account holder in moving forward — it does not resolve the prior year FATCA noncompliance, and may give the impression the taxpayer was willfully avoiding FATCA.
FATCA Tax Lawyers: Offshore Disclosure and Compliance Specialist Firm
In conclusion, while FATCA may seem scary and overwhelming our FATCA Tax Lawyers can work with you to safely disclose and report your foreign accounts, assets, investments, and income.
Our firm specializes exclusively in international tax, and specifically IRS offshore disclosure, Voluntary Disclosure, and New OVDP.
Contact our firm today for assistance with getting compliant.