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Experienced Tax Attorneys


Call Us Confidentially Now: 202-349-4033


Call us confidentially now:
202-349-4033


Confidential & Experienced Tax Lawyers

Get Help Now: 202-349-4033

FATCA (Foreign Account Tax Compliance Act)

FATCA is United States tax law that was created to reduce offshore tax evasion and fraud.  All U.S. Taxpayers must disclose offshore accounts of face fines, penalties and tax liabilities. Moreover, foreign financial Institutions, and certain other non-financial foreign entities, must report on the foreign assets held by their U.S. account holders or be subject to withholding on withholdable payment.

The Dreaded FATCA Letter and What is FATCA Reporting?

The FATCA legislation became effective on July 1, 2014,  and you may have already received a FATCA letter. If so, your assets at the foreign institution may have already been frozen or cancelled. You will need to show proof that you have complied with the FATCA requirements for filing.

The good news is that we can help. The international tax attorneys at Thorn Law Group have the knowledge necessary to help navigate clients through the complex reporting requirements imposed by FATCA. As former IRS attorneys, our skilled legal team has a keen understanding of the tax laws and regulations designed to control and monitor offshore bank accounts and other foreign property and assets.

We have already helped over 500 clients with these issues

If you want an immediate consultation, call us at 202-349-4033.  If you want to know more about FATCA, please keep reading our frequently asked questions or visit our short page about FATCA here.  

Do you Qualify? What Taxpayers Need to Have a FATCA Report?

Specifically, FATCA requires taxpayers holding foreign financial assets with an aggregate value exceeding $50,000 to disclose those assets on Form 8938, Statement of Specified Foreign Financial Assets. This form must be attached to the taxpayer’s annual federal income tax return. Higher asset thresholds apply to U.S. taxpayers who file a joint tax return or who reside abroad.

If you meet the below requirements, you must file Form 8938:

  • You are a U.S. taxpayer (any individual who is required to file income tax) living domestically or abroad
    • Citizen
    • Resident alien
    • Non-resident alien who either 1) files a tax return or 2) is a bona fide resident of American Samoa or Puerto Rico
    • U.S. taxpayer living abroad with either domestic or foreign-sourced income
  • You have assets held in foreign accounts or issued by foreign institutions or individuals; foreign financial assets or investments not held in an account; foreign-sourced income; or interest in a foreign entity

Financial Institutions will also look for U.S. indicia including:

  1. U.S. citizenship or U.S. residence
  2. U.S. place of birth
  3. U.S. address including U.S. PO boxes
  4. U.S. telephone number
  5. Repeating payment instructions to pay amounts to a U.S. address or an account maintained in the U.S.
  6. Current power of attorney or signatory authority granted to a person with a U.S. address
  7. In care of or hold mail address which is the sole address for the account holder

What do you need to Disclose?
FATCA Types of Accounts Required to Disclose

The following types of foreign assets, income and accounts are required to be disclosed:

  • Financial assets held in or maintained by a financial institution or a broker-dealer outside the U.S., including fluid assets held in personal or business checking, savings and brokerage accounts overseas
  • Financial assets not physically held in an account, including non-liquid assets and securities such as bonds, notes or physical stock issued by a foreign person
  • Financial assets held in overseas companies or issued by foreign corporations, including Controlled Foreign Corporations (CFCs) and Passive Foreign Investment Companies (PFICs)
  • Partnership interest in an overseas partnership
  • Overseas investment accounts, such as mutual funds and retirement savings accounts and plans
  • Investment sale agreements or money-saving agreements entered into with a foreign issuer, such as currency swaps, interest rate swaps, commodity swaps, and interest rate caps
  • Foreign-held trusts and estates
  • Non-U.S. insurance policies or annuities with a cash-surrender value
  • Personal and business income earned outside the U.S., including foreign pension and deferred compensation plans

Even if you do not have any U.S.-based income, if you qualify, you need to file a FATCA. Now, what qualifies for types of income?

What are the limits on Disclosure?

The aggregate value of your specified foreign financial assets is more than the reporting thresholds that applies to you:

  • Unmarried taxpayers living in the US..: The total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year
  • Married taxpayers filing a joint income tax return and living in the U.S.: The total value of your specified foreign financial assets is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year
  • Married taxpayers filing separate income tax returns and living in the U.S.: The total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.
  • Taxpayers living abroad.  You are a taxpayer living abroad if:
    • You are a U.S. citizen whose tax home is in a foreign country and you are either a bona fide resident of a foreign country or countries for an uninterrupted period that includes the entire tax year, or
    • You are a U.S. citizen or resident, who during a period of 12 consecutive months ending in the tax year is physically present in a foreign country or countries at least 330 days.
  • If you are a taxpayer living abroad you must file if:
    • You are filing a return other than a joint return and the total value of your specified foreign assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year; or
    • You are filing a joint return and the value of your specified foreign asset is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the year.

Why Do You Need to Have a FATCA Report?  

Taxpayers who fail to report these specified foreign financial assets will face a $10,000 penalty and any underpayments associated with the non-disclosed assets will be subject to a 40 percent penalty. Obviously these are hefty penalties and you need to consult with an experience tax attorney to see if you qualify for a FATCA disclosure.

Moreover, if the IRS believes this was willful, then they will launch a criminal investigation which can lead to seizures and prison.  In fact, in March 2011 two individuals were sentenced to 10 years in prison for concealing $150 million in assets.

What is a FATCA Withholding?

The Foreign Account Tax Compliance Act (FATCA), which was passed as part of the HIRE Act, generally requires that foreign financial Institutions and certain other non-financial foreign entities report on the foreign assets held by their U.S. account holders or be subject to withholding on withholdable payments.  The HIRE Act also contained legislation requiring U.S. persons to report, depending on the value, their foreign financial accounts and foreign assets.

Compliance with FATCA

While there really two common ways to comply with FATCA:  OVDP (Offshore Voluntary Disclosure Program and Streamlined Offshore Disclosure (Domestic and Foreign). Typically OVDP is used for those who are Willful and Streamlined for those who are non-willful.  

They are listed below in more detail. Before you decide whether Streamlined or OVDP is the right choice, you should talk with Kevin Thorn, a DC tax attorney, to find out which option is likely to have the best results for you.

1. OVDP (Offshore Voluntary Disclosure Program)

On January 9, 2012, the IRS introduced the reopening of its Offshore Voluntary Disclosure Program for Undisclosed Offshore Accounts! To enter this program taxpayers with undisclosed accounts must file a Voluntary Disclosure.

Voluntary disclosures are extremely sensitive and complex and they are subject to strict rules and guidelines. Once taxpayers are accepted into the voluntary disclosure program, they must provide the IRS with full cooperation while their case is being reviewed. Thus, a taxpayer's eligibility for this program must be carefully evaluated prior to contacting the IRS. Generally, the IRS’s Voluntary Disclosure policy applies to a taxpayer who:

  • Completely and voluntarily informs the IRS of his tax violations;
  • Had income from only legal sources;
  • Makes the disclosure prior to being informed that he is under criminal investigation;
  • Files a correct tax return or cooperates with the IRS in ascertaining his correct tax liability; and
  • Makes full payment of the amount due, or if unable to do so, makes arrangements to pay.

The Program is not just for individuals. Corporations, partnerships, trusts, and other entities are eligible to participate in the IRS Voluntary Disclosure Program.

Time is of the essence - Once the IRS opens an examination of a taxpayer, that taxpayer is no longer eligible to disclose under the Voluntary Disclosure Program. Thorn Law Group has the civil tax law experience to help you get back into compliance with the IRS through the Voluntary Disclosure Program.

2. Streamlined Domestic and Foreign Offshore Disclosure

Streamlined Filing Compliance Procedures were recently introduced to prompt taxpayers to submit amended returns and to file original returns, which were supposed to be filed but weren't. Tax returns submitted under the Streamlined Filing Compliance Procedures have to report income from foreign sources, income from U.S. sources, and deductions for applicable tax years.

Streamlined filing is different from the Offshore Voluntary Disclosure program because you have to certify that the failure to follow tax rules was not willful, but instead happened because of negligence or mistake.  Willful violators cannot take advantage of Streamlined filing but can take advantage of OVDP.

If you are non-willful, then you may use the streamlined program.  You will need to amend your prior three years of tax returns and  file FBAR reports for the prior six years.  The good news is that there will be no penalty assessed on the assets abroad.

While this sounds like a good deal for U.S. taxpayers, it is important to realize that the Streamlined Compliance rules don't limit civil penalties which could arise due to reporting income from U.S. sources.  Streamlined Compliance also does not necessarily protect taxpayers from criminal prosecution if their actions were found to be in violation of the tax law.  OVDP, on the other hand, can provide protection from criminal prosecution but financial consequences can be dire.

Streamlined Domestic Offshore Disclosure

If you are a United States taxpayers who reside in the United States then you use the Domestic program

Streamlined Foreign Offshore Disclosure

For nonresident taxpayers who are also non-willful, the streamlined program is available.

Make Sure You Are Non-Willful

Taxpayers using either the Streamlined Foreign Offshore Procedures or the Streamlined Domestic Offshore Procedures, will be required to certify, in accordance with the specific instructions set forth below, that the failure to report all income, pay all tax and submit all required information returns, including FBARs (FinCEN Form 114, previously Form TD F 90-22,1) was due to non-willful conduct.

What is Non-Willful?

Non-willful conduct is defined as “negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.  Willfulness is available via evidence, since it is a state of mind.  It is usually drawn based on a reasonable conclusion based on the facts.  

Morever, You Must Provide a Non-Willful Conduct “Narrative” Statement
Any submission that does not contain a narrative statement of the facts will be considered incomplete and will not qualify for streamlined penalty relief.”

Other Risky Ways to Comply with FATCA?

In addition to the ODVP and Streamlined program, there are two riskier methods to complying.  Typically we do not recommend these methods.

One is the reasonable cause statement where an attorney will amend your prior returns and draft a persuasive letter and necessary forms.  This is still a riskier method than the ODVP or Streamlined Disclosure.  

Moreover, an even riskier method is the quiet dislclosure statement.  This is where you simply amend your prior returns.  We do not recommend the quiet disclosure statement as you are violating U.S. law.

How is the IRS Finding Offshore Accounts and Related Tactics for Compliance and Reporting

In addition to FATCA, The IRS is using various tactics to track down offshore funds:

  1. TIE - Tax Information Exchange Agreements
  2. MLAT - Mutual Legal Assistance Treaties
  3. Subpoenas - A new tactic to get people to incriminate themselves.
  4. Customs Hold - This area of international tax noncompliance remains an area of concern for the IRS.  So if the individual has delinquent taxes, the IRS can put a customs hold on your passport using the TECS system.  

Do Financial Institutions Report on Me?

Yes, in addition to individuals, FATCA also requires foreign financial institutions (FFI) to report information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest, directly to the IRS. In order to comply with FATCA, FFIs must enter into special agreements with the IRS that set forth specific obligations and procedures for the FFI.

What is a FFI?  What is FATCA in Banking?

A FFI is a foreign financial institution.  

  1. Any foreign entity that accepts deposits in the ordinary course of banking or a similar business such as banks and credit unions.
  2. Holds financial assets for the account of others as a substantial portion of its business such as brokerages or custodians.

Examples from the IRS include:

  • Depository institutions (for example, banks)
  • Custodial institutions (for example, mutual funds)
  • Investment entities (for example, hedge funds or private equity funds)
  • Certain types of insurance companies that have cash value products or annuities

Need a FATCA Lawyer?

If you need help, please contact us for a consultation.  The international tax attorneys at Thorn Law Group have the knowledge necessary to help navigate clients through the complex reporting requirements imposed by FATCA. As former IRS attorneys, our skilled legal team has a keen understanding of the tax laws and regulations designed to control and monitor offshore bank accounts and other foreign property and assets. We have already helped over 500 clients with these issues.  If you want an immediate consultation, call us at 202-349-4033.  If you want to know more about FATCA, please keep reading our frequently asked questions.


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"Kevin E. Thorn and the tax attorneys at Thorn Law Group are exceptional. When I came to them, I had just received a letter from the Department of Justice concerning an undisclosed bank account at a Swiss bank. I thought I was going to go to jail and lose everything I had worked for just because my family and my business are international. Mr. Thorn's knowledge of the tax laws and his skills in presenting my situation to the IRS and Department of Justice proved superior!"