FATCA TAX TRAPS and WATCH OUTS
1. No Asset Too Small. If the Threshold is reached for the aggregate of all Specified Foreign Financial Assets, all such Specified Foreign Financial Assets must be disclosed, even if the value is less than zero (an asset with a liability greater than its value).
2. FBAR reporting is not enough. One of the Specified Foreign Financial Assets is a foreign bank account. Foreign Bank Accounts are required to be reported on the Report of Foreign Bank Account or FBAR required to be filed by June 30th of each calendar year. IF a FATCA disclosure must be made, it should include all of the assets reportable on the FBAR in most situations. Having reported an asset on a current or prior FBAR will not prevent a FATCA penalty for failure to include the asset on the IRS Form 8938.
3. FBAR assets are included in the Threshold for FATCA disclosure. A single individual living in the United States with a $50,000 foreign bank account, is required to report a $10 share of stock in a foreign corporation. Failure to do so could result in a $10,000 penalty.
4. Jointly owned assets count twice. Any person who owns a Specified Foreign Financial Asset jointly must report the full value of the asset on his or her Form 8938 and count the full value in determining whether or not the Threshold for disclosure has been crossed. An exception applies to married individuals filing a joint return, but not if they file married filing separately. A special rule may provide relief if the individuals are considered to be living abroad for FATCA purposes.
5. Change in Reporting Canadian Registered Retirement Plans. Beginning with tax years ending after December 31, 2013, Canadian Registered Retirement Plans must be reported on IRS Form 8938 under FATCA. Prior to this change, reporting such plans on IRS Form 8891 was sufficient to avoid the FATCA requirement.
Call Paul Wigg-Maxwell – (973) 507-9760 for FTACA compliance advice. Paul is an international tax attorney with over 25 years of experience representing individuals and business with cross-border ties.