The Foreign Account Tax Compliance Act (FATCA) is designed to improve tax compliance involving foreign assets at offshore accounts. This video blog will explain how FATCA affects you as an US expat.
D. McKeegan: Hi everybody. I’m David McKeegan with Greenback Expat Tax Services and our question this week is, ”What is FATCA and how does it affect me as a US expat?” The Foreign Account Tax Compliance Act is designed to improve tax compliance involving foreign assets at offshore accounts. It’s similar to the FBAR, which is a US Treasury form, but it’s not the same and the rules around it aren’t the same and to be honest I don’t know why the Treasury and the IRS can’t communicate better and eliminate one form that people need to file, but they don’t.
Under FATCA, US taxpayers with specified foreign financial assets, bank accounts, foreign stock, partnership interests, foreign mutual funds, these type of things, foreign life insurance, that exceed certain thresholds must report those assets to the IRS and this is done on form 8938. We have another video about that if you’re interested. This is submitted along with your US tax return to the IRS in accordance with your tax deadline. If you’re living overseas, so if you qualify as an expat under the bona fide resident program or the physical presence test, then your thresholds are higher than for people who live in the US. If you live in the US, the threshold starts at $50,000 in overseas accounts, but if you’re living abroad, it starts at account values of $200,000 on the last day of the tax year or $300,000 as a peak value throughout the year for single filers and that is double for people who are married filing jointly.
In addition FATCA rule require foreign financial institutions to report directly to the IRS about Americans who have accounts there. That’s why you’ve probably heard about this. That is one of the things that makes people most nervous about this is the IRS is requiring these foreign financial accounts to report directly to the IRS. If you do have foreign financial accounts, you’re going to want to make sure you’re compliant with this because the IRS is going to be getting that information directly as well. If you have any questions, please let us know and have a look at our website, GreenbackTaxServices.com. Thank you.
Need Help Assessing Your FATCA Compliance?
For more in-depth information, you can refer to our blog post on how FATCA affects US expats. If you have questions about reporting foreign bank accounts or if you would like help assessing your compliance, please contact us today!