Six Countries Publish Model FATCA Agreement

December 01, 2012 (Press-News.org) The United States Department of the Treasury recently partnered with five other countries to publish a model intergovernmental agreement to implement provisions of the Foreign Account Tax Compliance Act (FATCA). FATCA is a federal law that contains provisions to enforce tax compliance among holders of foreign accounts and assets.

France, Germany, Italy, Spain and the United Kingdom joined with the United States to build an agreement that would help all countries join together to fight tax evasion while creating minimal burdens for countries trying to comply. All six countries will continue working with other nations, the Organization for Economic Cooperation and Development, and, where appropriate, the European Commission to implement FATCA in a way that supports compliance.

Earlier this year the same nations issued a joint statement that made a commitment to collaborate on an international, intergovernmental approach to implement FATCA and enforce tax evasion laws. The model agreement follows through on that commitment by establishing a framework for reporting by financial institutions and allowing the automatic exchange of that information according to existing tax treaties and agreements. It also addresses some legal issues that been raised regarding FATCA and simplifies implementation for banks and other financial institutions.

Key provisions of FATCA

FATCA was enacted in 2010 as part of the Hiring incentives to Restore Employment (HIRE) Act. FATCA requires some U.S. taxpayers who hold foreign financial assets to report those assets on their annual tax return. It affects taxpayers with $50,000 or more of aggregate foreign-held assets and applies to assets held in taxable years beginning after March 18, 2010.

FATCA also sets some requirements for FFIs, or foreign financial institutions. FFIs will need to report some information about financial accounts held by American taxpayers and foreign entities in which American taxpayers hold a substantial ownership interest directly to the IRS. To do this, they must enter into an agreement with the IRS by June 30, 2013.

Charges of failure to comply with FATCA or other tax laws can have serious consequences. Failure to report foreign assets on the Form 8938 can result in a penalty of $10,000. If you do not file a correct and complete Form 8938 within 90 days after the IRS mails you a notice of failure to file, you may be subject to an additional penalty of $10,000 for each 30-day period up to $50,000. In addition, taxpayers who underpay because of undisclosed foreign assets will be subject to additional penalties of up to 40 percent. If you underpay your tax due to fraud, the penalty of 75% will be imposed. Lastly, if the Form 8938 is not filed, you may be subject to criminal penalties as well.

If you are facing accusations of failing to properly disclosure offshore financial accounts, consider speaking with an experienced tax law attorney right away. They may be able to help you protect your financial future while helping you respond to charges and comply with necessary regulations.

Article provided by Law Offices of Jeffrey S. Freeman
Visit us at www.freemantaxlaw.com