Understanding FATCA

Enacted in 2010, the Foreign Account Tax Compliance Act (FATCA) is America’s global tax law.  Not only does FATCA effect Americans, but its impact on the world is most astounding.  FATCA requires foreign banks to reveal Americans with accounts over $50,000 and non-compliant institutions could be frozen out of U.S. markets, thus, everyone is complying.  Provided below are a few facts about FATCA:

1. FATCA Grew out of a Controversial Rule.  In 2009, the IRS struck a deal with UBS for $780 million in penalties and American names.  Since then, for hundreds of Swiss banks taking a DOJ deal, banking is more transparent. 
2. China and Russia Agreed.  While Russia and China have been notoriously difficult, they are even on board with the agreement. 
3. FBARs are Required.  FBARs predate FATCA, yet, be ready for duplicate reporting.  FATCA adds to the burden, and does not replace FBARs.  U.S. persons with foreign bank accounts exceeding $10,000 must file an FBAR by each June 30^th. 
4. No Repeal in Sight.  Republicans have mounted a repeal effort, however, there is no serious effort to repeal FATCA.  Canadians recently filed suit to block FATCA and prohibit handover of U.S. names to the IRS.  The legal claim challenges the constitutionality of the agreement the Canadian government struck with the United States.   
5. Other Passports Won’t Work.  Dual nationals or U.S. Green Cardholders think they can bypass FATCA by using a non-U.S. passport and non-U.S. address with their foreign bank.  However, this is not possible.  Your bank and IRS will eventually figure it out. 

See Robert W. Wood, 10 Facts About FATCA, America’s Manifest Destiny Law Changing Banking Worldwide, Forbes, Aug. 19, 2014.