Frequently Asked Questions about Becoming and Remaining Compliant with FATCA (Form 8938)
We at Taxes for Expats receive a wide variety of questions from international taxpayers. For your convenience, we have compiled a list of the most frequently asked questions and their answers.
Do I have to report my bank accounts which have been closed during the year?
If you closed a foreign financial account during the tax year, the answer is: Yes, you must include the account and its final balance in your report.
How do I know if my bank has registered with FATCA?
Banks participating in FATCA guidelines were required to register with the IRS by January 1, 2014. Banks that registered were assigned a GIIN (Global Intermediary Identification Number). There is a list of banks that have been assigned a GIIN on the IRS website. You can find this list by visiting the FATCA FFI List Search and Download Tool.
For how many prior tax years will foreign banks be required to report?
When initial reports are due in 2015, participating FFI’s (Foreign Financial Institutions) will be required to report all foreign financial account data from 2013 and 2014. If the IRS decides – for whatever reason – to request more information about your overseas banking activity, it may request records as far back as 10 years.
Is there any reason I should close one or more of my foreign bank accounts?
As far as FATCA reporting is concerned, no, there is no justifiable reason for you to close any of your foreign financial accounts. Arbitrarily closing one or more foreign bank accounts may only serve to flag you with the IRS as a US expat taxpayer trying to avoid detection. If you have one or more foreign bank accounts for which you are in noncompliance, speak with an international tax expert to help you become compliant.
What information will the IRS receive about my foreign financial account(s)?
Through 2016, FFI’s will be required to report your name and address, your United States Tax Identification Number (TIN), your foreign bank account number, end of year balance, and any account closures from the year 2013 to the current date. Beginning in 2017, FFI’s will be reporting all the previously mentioned pieces of information in addition to gross account earnings.
Does FATCA require me to report my foreign real estate?
You are not required by FATCA to report the foreign real estate you own, but you ARE required to report any income derived from foreign real estate. You are, however, required to report any foreign real estate which is owned through a structured entity account such as a foreign foundation or trust. If you bought real estate with foreign financial assets which were unreported at the time of your purchase, the value of your real estate may be used when calculating your penalties.
Will I be required to report foreign bonds?
Yes; foreign bonds fall under the umbrella of foreign financial accounts and should be included in your FBAR (Foreign Bank Accounts Report).
In which countries do the IRS have active FATCA agreements?
There are currently 39 countries with active FATCA agreements. They are: Australia, Austria, Belgium, Bermuda, British Virgin Islands, Canada, Cayman Islands, Chile, Costa Rica, Denmark, Estonia, Finland, France, Germany, Gibraltar, Guernsey, Hungary, Honduras, Ireland, Isle of Man, Israel, Italy, Jamaica, Japan, Jersey, Latvia, Liechtenstein, Luxembourg, Malta, Mauritius, Mexico, Netherlands, New Zealand, Norway, South Africa, Spain, Slovenia, Switzerland, and United Kingdom.
There are 62 more countries which have finalized agreements and are scheduled to have active IGA’s (Intergovernmental Agreements) before the end of 2014. They are: Algeria, Anguilla, Antigua and Barbuda, Armenia, Azerbaijan, Bahamas, Bahrain, Barbados, Belarus, Brazil, Bulgaria, Cabo Verde, China, Colombia, Croatia, Curacao, Czech Republic, Cyprus, Dominica, Dominican Republic, Georgia, Greenland, Grenada, Guyana, Haiti, Hong Kong, India, Indonesia, Iraq, Kosovo, Kuwait, Malaysia, Montenegro, Lithuania, Moldova, Nicaragua, Panama, Paraguay, Peru, Poland, Portugal, Qatar, Romania, St Kitts and Nevis, St Lucia, St Vincent and the Grenadines, San Marino, Saudi Arabia, Serbia, Seychelles, Singapore, Slovak Republic, South Korea, Sweden, Taiwan, Thailand, Turkey, Turkmenistan, Turks and Caicos Islands, Ukraine, United Arab Emirates, and Uzbekistan.
How does the IRS know if I have a foreign bank account?
For starters, the IRS is currently involved in active investigations being conducted through the information sharing agreements held with the aforementioned countries, as well as a recently updated whistleblower program – not to mention the hundreds of criminal investigation professionals stationed overseas. Additionally, the IRS will receive all of your foreign financial account information from participating FFI’s when information sharing begins in January, 2015.
Does required FATCA reporting have a statute of limitations?
There is a 6 year statute of limitations. Through the OVDI (Offshore Voluntary Disclosure Agreement), taxpayers agree to extend this statute of limitations to 8 years.
Am I required to prove that I don’t have any foreign financial accounts?
If you are not a foreign bank account holder, no; you do not need to prove that you have no foreign financial accounts. It’s important to remember, however, that bonds, investments and offshore structured entities are considered foreign financial accounts and should – therefore – be reported.
If the details of my foreign financial account(s) are requested by the IRS, should I submit the information or just let it look them up?
It is highly recommended that you cooperate completely with the IRS and practice honesty as a standard policy. If the IRS is asking for your foreign financial account details, it means they are already aware that you have offshore bank accounts. You can increase your odds of avoiding extreme penalties by allowing an international tax expert to communicate with the IRS on your behalf.
If I ask you to omit information about my offshore financial accounts, would you be willing to comply with my request?
Absolutely not. Taxes for Expats is in excellent standing with the IRS and we will not put ourselves at risk of being found guilty of aiding and abetting tax evasion or report dodging. We recommend complete honesty and transparency and insist on abiding by these guidelines.
FATCA noncompliance should not be taken lightly. If you have foreign bank accounts which have yet to be reported, you will be discovered by the IRS. It’s not a matter of ‘if,’ but a matter of ‘when.’ There is still time to take advantage of the Offshore Voluntary Disclosure Agreement with the IRS to enjoy reduced penalties and to avoid criminal prosecution with incarceration.
I.J. Zemelman, EA is the founder of Taxes for Expats