The Foreign Account Tax Compliance Act (FATCA) is a federal law that establishes reporting requirements for U.S. taxpayers who own offshore accounts. For taxpayers who are subject to FATCA, compliance is extremely important, as non-compliance can lead to civil—or even criminal—penalties. On the same token, if your offshore assets are not subject to FATCA, you don’t want to report them if you don’t have to. So, when don’t you need to file under FATCA? Boston international tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, explains.
The FATCA Reporting Thresholds
FATCA establishes different reporting thresholds for taxpayers living in the United States and taxpayers living abroad. If the value of your reportable offshore accounts falls below the relevant threshold, then you are not required to report your offshore accounts to the Internal Revenue Service (IRS). The FATCA reporting thresholds are:
- Taxpayers Living in the U.S. – $50,000 in aggregate value on the last day of the tax year or $75,000 at any time during the tax year (these thresholds double for married taxpayers filing jointly).
- Taxpayers Living Abroad – $200,000 in aggregate value on the last day of the tax year or $300,000 at any time during the tax year (these thresholds double for married taxpayers filing jointly).
Assets that Aren’t Subject to FATCA
The FATCA reporting requirements apply to offshore accounts and other foreign non-account assets held for investment purposes. This includes assets such as foreign securities and financial instruments but excludes assets such as:
- Accounts held by U.S. branches of foreign financial institutions
- Accounts held by foreign branches of U.S. financial institutions
- Accounts held by certain foreign subsidiaries of U.S. corporations
- Beneficial interests in foreign trusts and estates of which you are unaware at the time you would otherwise be required to report them under FATCA
- Interests in social security and other similar programs administered by foreign governments
Other FATCA Reporting Exceptions
In addition to excluding certain types of assets, FATCA also includes exceptions for certain foreign financial assets that taxpayers report to the IRS through other means. For example, if a taxpayer reports any of the following to the IRS outside of FATCA compliance, then an additional FATCA filing is not required:
- Foreign corporations reported on Form 5471
- Foreign partnerships reported on Form 8865
- Passive foreign investment companies reported on Form 8621
- Registered Canadian retirement savings plans reported on Form 8891
- Trusts and foreign gifts reported on Form 3520 or 3520-A
Of course, when it comes to any matter of federal tax law compliance, it is better to be safe than sorry. If you have any questions about your reporting obligations under FATCA, you should consult with a lawyer promptly.
Request an Appointment with Boston International Tax Lawyer Kevin E. Thorn
Boston international tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, has nearly two decades of experience representing U.S. taxpayers with regard to FATCA compliance and other cross-border tax matters. To request an appointment with Mr. Thorn, call 617-692-2989, email firstname.lastname@example.org or contact us online today.