Three Must Dos if You Get a Foreign Bank FATCA Reporting Letter
If you received a letter request from a foreign bank to report FATCA required tax identification information there are three things you must do:
1. Get professional legal and tax advice before June 30, 2016.
2. Prepare to file an FBAR report for your foreign bank accounts by June 30, 2016.
3. Unless otherwise advised by a tax professional, send the foreign bank the requested identification information.
FATCA requires foreign banks to get tax identification information from their account holders. More and more banks are sending letters requesting U.S. social security numbers, EINs or ITINs from their U.S. clients.
FATCA stands for the foreign account tax compliance act. It was adopted in 2010. It is designed to force foreign banks and financial institutions to provide tax information about U.S. account holders so that the foreign account earnings can be verified and taxed by the IRS. FATCA has been phased into effect so that some of the requirements are only now being felt.
Over the past few months many foreign banks have sent out first batches of letters notifying their U.S. customers that the bank is complying with its reporting requirement under FATCA and that their names, addresses, and bank balances are being reported to the IRS. These letters also request the account holders to confirm their U.S. identity and to provide their U.S. taxpayer identification number (Social Security Number).
Clients in my office have been reporting letters received from India and Portuguese banks this month. However, banks in many other countries are also sending out letters. It is reported in the press that nearly 100 foreign banks have recently sent out letters to U.S. account holders.
If you receive one of these letters, there may not be any need for immediate panic. Most U.S. account holders receiving these letters have small balances in the accounts. If your account balance has never exceeded U.S. $50,000, you are unlikely to be in any serious tax difficulty.
Nonetheless it is prudent to take advantage of the current relatively forgiving tax climate and legitimize the account. An important part of this legitimization is not to miss the 2016 FBAR reporting deadline of June 30 th . Get help and get this job done now.
If your unreported foreign financial assets exceed $1 million, you know that you have a serious issue. If you have not already done so, contact a tax attorney specializing in international tax issues this week. There isnt any time left for delay.
If your unreported foreign financial assets are in the range from U.S. $50,000 to $1 million, you need advice now. Plan to get it before June 30, 2016 so that you don’t miss another filing deadline and compound the problem. The streamlined program may be an option for you.
If not, the OVDI is still a worthwhile choice. Just remember that now is your best opportunity to fix this problem.