FATCA adds layer of complexity, penalty exposure to offshore asset reporting - by Andrew M. Mattson, CPA

The acronym for the US Foreign Account Tax Compliance Act—FATCA—is easy to remember if one thinks of “fat cat.” Unfortunately, this may be the only thing about FATCA that is easy. This item highlights the provisions of FATCA that are most likely to affect US tax practitioners and their clients, the taxpayer reporting provisions of new Section 6038D of the Internal Revenue Code (IRC).

Since the enactment in 1970 of the Bank Secrecy Act (BSA), US citizens and residents have been required to report the existence of certain foreign bank and financial accounts. Such reportable accounts are disclosed on Treasury Department Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR). The BSA is a part of Title 31 of the United States Code, meaning that it is not part of the US federal tax laws contained in the Internal Revenue Code. The FBAR has received a great deal of attention recently and has been the focus of three amnesty programmes by the IRS.

FATCA, on the other hand, is part of US Code Title 26, the Internal Revenue Code. FATCA requires reporting of a much broader range of offshore assets than a person is required to report on the FBAR. Unfortunately, FBAR and FATCA reporting is duplicative in many instances because filing an FBAR does not fulfill the filing obligation under FATCA, and vice versa. This duplicative reporting, along with the associated client education that needs to take place, represents one of the many challenges of FATCA for US tax practitioners.

Read more: FATCA adds layer of complexity, penalty exposure to offshore asset reporting

Fatca, despite worldwide protests as a major infringement on personal privacy laws could still be forced into law by financial sector and some Governments

The European Nordic banking associations have recently opened FATCA reciprocity talks. This regardless of Fatca being widely criticized by privacy advocates around the World including the European parliament, as an infringement on privacy laws,

FATCA , supported by the financial, banking, insurance industries, and  most conservative national governments, is not only considered to be a very controversial proposal but also a major infringement on Privacy laws, which has resulted in massive criticism of Fatca worldwide

The push for reciprocity under the US Foreign Account Tax Compliance Act (Fatca)

is gaining pace say the supporters of Fatca, with banks in four Nordic countries now  urging their national governments to facilitate this bilateral agreements with the US.

The reciprocity agreements will allow foreign financial institutions to report European and US customer data to their national governments.. 

 

When the draft Fatca regulations were released in February this year, the UK, Spain, Italy, France and Germany issued a statement of intent alongside the US detailing their intention to seek reciprocal agreements.

One can only hope that advocate groups, politicians and others will remain vigilant that Fatca is not sneaked through one way or the other and becomes a law, just like the recent controversial bill that will give the U.S. Department of Home Security access to EU airline passengers' personal information including credit card data..

EU-Digest