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FATCA transitional rules extended

On Behalf of | Sep 24, 2015 | IRS Issues

The Foreign Account Tax Compliance Act may affect people in Georgia who have deposits in foreign financial institutions. Part of the HIRE Act of 2010, FATCA imposes penalties on FFIs if they fail to report information to the IRS about assets they are holding for U.S. taxpayers. The penalties that could be imposed under FATCA may be as high as 30 percent of the income an FFI earns from U.S. sources.

The IRS created some transitional rules for FFIs and withholding agents while they move towards FATCA compliance. On Sept. 18, the IRS announced that it was extending the time period that certain transitional rules would apply. This extension will give FFIs and withholding agents more time to change their systems so that they will comply with FATCA.

FATCA has been controversial in some foreign countries, and the delays to implementation of the act have been welcomed. In order to help with the transition towards FATCA compliance, the U.S. Treasury Department is reportedly negotiating with foreign tax authorities and developing intergovernmental agreements. The foreign tax authorities may work as middlemen, receiving financial information about U.S. account holders and then relaying that information to the IRS.

People who have deposits in foreign financial institutions may want to talk to a lawyer about how FATCA may affect them. A lawyer may be able to help clients to determine whether the new tax implications for foreign assets create any problems for them. If an individual is facing an IRS levy after being accused of hiding assets in a foreign bank account, a lawyer may be able to help dispute the charge or negotiate a settlement with the IRS.