FATCA is the Foreign Accounts Tax Compliance Act, F.A.T.C.A.
Agreements have been signed between foreign countries and the United States whereby the banks in those countries will disclose the information about the Americans with accounts at the banks. So, now they will, ultimately, be in a matching exercise. Have the bank accounts been reported on the schedule B on their tax return? Have the FBAR – Foreign Bank Account Reporting forms been filed, and does it all line up with what the banks are saying to the department of justice?
The Foreign Bank Account Reporting (FBAR) forms are not part of FATCA but have been required since the early 70’s. Strictly a reporting requirement – you just disclose the information about the bank, the name, address and account number and the highest balance. That’s it!
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Many people are concerned because money flows in and out. Perhaps they took a car loan or borrowed some money, maybe they got a salary transfer to go pay rent, so there’s a high balance that immediately disappeared. That’s not a concern, there’s a paper trail on it. You just have to report. Not reporting has very harsh penalties that start at $10,000 and can include criminal penalties. So, it’s a good idea to stay in compliance, we can absolutely help with that.
There is one more very important form. Depending on your marital status, the filing status and where you are living in the US or outside, there are filing thresholds for an additional form 8938 that disclose the high balance, and this goes with the tax return. If you don’t have an obligation to file the tax return, you don’t have to file the 8938, but you do have to find the FBARs. So, make sure to disclose to your tax accountant exactly what’s in the accounts because, again, failure to file this form can lead to harsh penalties and there is no tax to pay anyway, so there is no reason not to report it.