instant tax service rochester ny

April 17, 2018

The Foreign Account Tax Compliance Act (FATCA) is a 2010 United States federal law requiring all non-U.S. (‘foreign’) financial institutions (FFIs) to search their records for customers with indicia of ‘U.S.-person’ status, such as a U.S. place of birth, and to report the assets and identities of such persons to the U.S. Department of the Treasury. FATCA also requires such persons to self-report their non-U.S. financial assets annually to the Internal Revenue Service (IRS) on form 8938, which is in addition to the older and further redundant requirement to self-report them annually to the Financial Crimes Enforcement Network (FinCEN) on form 114 (also known as ‘FBAR’). Like U.S. income tax law, FATCA applies to U.S. residents and also to U.S. citizens and green card holders residing in other countries.
FATCA was the revenue-raising portion of the 2010 domestic jobs stimulus bill, the Hiring Incentives to Restore Employment (HIRE) Act, and was enacted as Subtitle A (sections 501 through 541) of Title V of that law. FATCA is controversial because foreign banks have been forced to comply under threat of a 30% withholding penalty on all their U.S. transactions. The U.S. has yet to comply with FATCA itself, because as of 2017, it has not yet provided the promised reciprocity to its partner countries and it has failed to sign up to the Common Reporting Standard (CRS). FATCA has also been criticised for its impacts on Americans living overseas, and implicated in record-breaking numbers of U.S. citizenship renunciations throughout the 2010s. Bills to repeal FATCA have been introduced in the U.S. Senate and House of Representatives, citing its unconstitutionality, particularly its breach of 4th amendment rights, as well as its high implementation costs and lack of revenue generation. A hearing on the unintended consequences of FATCA was held by the Committee on Oversight and Government Reform on 26 April 2017.

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