May 2019 - Tax, Litigation, Immigration Law Blog

By: Coleman Jackson, Attorney, Certified Public Accountant
May 16, 2019

The United States Treasury has collaborated with over seventy countries to enforce the Foreign Tax Compliance Act (FATCA) which became U.S. tax law in 2010. FATCA in a nutshell requires Specified Individuals with foreign assets over a certain threshold amount to report those foreign assets annually on their federal tax returns filed with the Internal Revenue Service. The U.S. government has developed two model intergovernmental agreements (IGAs) to implement FATCA. By the end of 2017, countries; such as, Australia, Belgium, Bermuda, Brazil Canada, Colombia, Czech Republic, Denmark, Finland, Guernsey, Iceland, Ireland, Isle of Man, Italy, Jersey, Latvia, Lithuania, Luxembourg, Malta, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Republic of Korea, Slovakia, South Africa, Spain, Sweden and United Kingdom had negotiated and signed an IGA. By the end of last year, another 12 to 15 other countries; such as: Austria, Hungary, Estonia, Croatia, Japan, and Cayman Island had reached some form of cooperation agreement with the U.S. Treasury to enforce FATCA. Intergovernmental Agreements between the United States and several additional foreign governments are in various stages of negotiation or completion today.

The Intergovernmental Agreements’ purpose is to detect U.S. Persons using foreign assets to evade U.S. tax laws. The IGA’s are designed to require all foreign financial institutions (FFIs) within the jurisdiction of a partner government to identify and report U.S. accounts to the proper authority. The property authorities could possibly require the FFI to direct report to the Internal Revenue Service or the operative IGA would require that the FFI indirectly report to the IRS through some form of in-country reporting agency or mechanism. The details of how the disclosures are to be made depend upon the negotiated IGA between a particular country and the U.S. Treasury. The important point is that identity of U.S. persons subject to FATCA reporting requirements will surely be discovered under the global collaborative Intergovernmental Agreements (IGAs) that are being put in force to implement the Foreign Tax Compliance Act.

This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader. You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432.

By: Coleman Jackson, Attorney, Certified Public Accountant
May 06, 2019

Statement of Specified Foreign Financial Assets is Department of Treasury (internal Revenue Service’s Form 8938. Form 8938 is filed with the taxpayers’ annual tax return. Internal Revenue Code Sec. 6038D mandates that specified individuals, who include U.S. citizens, resident aliens, and certain non-resident aliens that have an interest in specified foreign financial assets and meet the reporting threshold must annually report those specified foreign assets using Form 8938. The federal tax law that mandates these reporting requirements was enacted by the U.S. Congress and signed into law by President Obama in 2010. The law is entitled the Foreign Account Tax Compliance Act (FATCA). The law’s stated purpose is to combat tax evasion by U.S. taxpayers using foreign bank accounts and assets. This law is separate and distinct from the better known Bank Secrecy act enforced by the Financial Crimes Network (FinCen) mandating foreign accounts disclosures under the FBAR requirements. We have discussed the FBAR requirements in prior blogs on a number of occasions. We will not repeat those discussions here. Interested readers should look up our prior blogs for discussions regarding the FBAR and the penalties associated with violation of the FBAR reporting requirements. You can read all of our blogs at http://www.cjacksonlaw.com/blog/.

For now, let’s return to our discussion of FATCA and Form 8938. Specified individuals with foreign assets meeting a certain reporting threshold must report their foreign financial assets to the Internal Revenue Service annually using Form 8938. The term, “Foreign Financial Assets” under FATCA is defined broader than mere foreign deposit and custodian accounts; FATCA applies also to “Other Foreign Assets”, which could be any property, including virtual property interest of Specified Individuals. For example, the term other foreign asset could apply to foreign land, foreign buildings & equipment, foreign business interest, such as ownership interest in a foreign partnership, corporation, trust, or estate if the reporting threshold is met for the tax period. Further, other foreign assets also could apply to Specified Individuals’ interest in foreign stocks, bonds, debentures, virtual currency and, practically speaking, wealth or value formulated in any other form and composition if the reporting threshold is met for the tax period. The point is this; the definition of the term ‘asset’ is interpreted broadly under FATCA.

To summarize, specified individuals must annually report their interest in specified foreign financial assets using Form 8938 if the values of the assets are $50,000 on the last day of the tax year or $75,000 at anytime during the tax year (higher reporting threshold amounts apply to married individuals filing jointly and individuals living abroad). Fair market value in U.S. dollars is used to compute the asset value pursuant to the IRS instructions for Form 8938. Normal civil and criminal penalties under the Internal Revenue Code could apply when Specified Individuals who meet the FATCA reporting threshold fail to comply with FATCA requirements.

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432.

Tax, Litigation, Immigration Law Blog

Monthly Archives: May 2019

Global Collaborative Approach Used to Enforce the Foreign Account Tax Compliance Act (FATCA)

Statement of Specified Foreign Financial Assets