FATCA COMPIANCE CHECKLIST

• What is FATCA?

FATCA is the acronym for the Foreign Account Tax Compliance Act.  Its provisions can be found in the Internal Revenue Code of 1986, as amended (the Code), Sections 1471, 1472 and 1473. It was added to the law in 2010, but many of its provisions have only recently become effective.

• What does FATCA do?

FATCA requires foreign financial companies to tell the IRS about U.S. taxpayers with foreign accounts. The IRS has been slowly forcing foreign banks to provide information about U.S. clients when requested. Now all foreign financial institutions must routinely report U.S. investments to the IRS.

• The reporting requirements are substantial and they concern not just foreign banks. Now foreign brokers, foreign mutual funds and foreign hedge funds must report their U.S. customers to the IRS.

• FATCA Compliance Checklist

1. Are you required to file a U.S. federal income tax return as a tax resident of the U.S.?

Yes, then continue with checklist.

No, then you are not required to disclose specified foreign financial assets under FATCA.

2. Do you own any Specified Foreign Financial Assets?

Specified Foreign Financial Assets include the following:

a) Any foreign financial account;

(This includes, bank accounts, brokerage accounts, mutual funds, hedge funds and other financial accounts)

b) Any foreign stock or security issued by a foreign person that is not held in a foreign financial account;

(This includes an ownership interest in a foreign entity no matter what form the interest takes.)

c) Any interest in a foreign entity that is not held in a foreign financial account;

(This includes foreign business entities not treated as corporations, such as foreign partnerships and other forms of business)

d) Any foreign life insurance policy with a cash value that is not held in a foreign financial account; and

(This is a new item that has not been widely discussed or noted.)

e) Any foreign financial instrument or contract held for investment that has a counterparty that is a foreign person, that is not held in a foreign financial account.

Do not count any Specified Foreign Financial Assets you own through an account with a U.S. taxpayer such as a U.S. brokerage firm, a U.S. based mutual fund, or an asset owned by a domestic corporation that is taxed as a separate taxpayer.

Any Specified Foreign Financial Asset that is held in a Foreign Financial Account is counted in determining the value of the Foreign Financial Account and is not counted twice. If the Specified Foreign Financial Asset is held outside of a Foreign Financial Account then it is treated as a directly held asset and must be reported.

Foreign real estate is not a Specified Foreign Financial Asset. Nor is ownership of a precious metal such as gold or silver that is held in a foreign country treated as a Specified Foreign Financial Asset.

Yes, then continue with checklist

No, then you are not required to disclose specified foreign financial assets under FATCA.
3. Are any of your Specified Foreign Financial Assets used in, or held for use in, the conduct of your trade or business?

Yes, then exclude the trade or business assets from the aggregate value of your Specified Foreign Financial Assets and continue with the checklist.

No, then continue with the checklist.

4. Did the aggregate value of your Specified Foreign Financial Assets exceed the applicable FATCA Reporting Threshold amount for the tax year?

Yes, then continue the checklist.

No, then you are not required to disclose specified foreign financial assets under FATCA.

5. File a Form 8938 with your annual U.S. federal income tax return and disclose the Specified Foreign Financial Assets as required on the return.

PRACTICE AREAS

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