The Treasury Department and Internal Revenue Service (IRS) have issued final regulations for their global reporting demands under the controversial Foreign Account Tax Compliance Act (FATCA).
Enacted by Congress in 2010, FATCA was created to target non-compliance by U.S. taxpayers using foreign accounts as a means of tax evasion. It requires foreign financial institutions (FFIs) to report to the IRS information about accounts held by U.S. taxpayers or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. Americans with $50,000 or more of assets held by a foreign institution are targeted.
Under FATCA, a participating FFI will need to enter into an agreement with the IRS to identify U.S. accounts, report information to the IRS regarding U.S. accounts, and withhold a 30 percent tax on certain U.S.-connected payments to non-participating FFIs and account holders who are unwilling to provide the required information. The finalized regulations outline the step-by-step process for U.S. account identification, reporting and withholding requirements.
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