Foreign investments often fall under FATCA

The Foreign Account Tax Compliance Act (FATCA) became law in 2010. It signaled a significant shift in tax obligation for foreign companies and workers doing business in the United States. In essence, it required businesses, financial institutions, banks, and certain insurance companies around the world to report to the IRS that they had U.S. account holders. This was done to ensure that citizens with foreign accounts or investments still pay their tax obligations here in the United States. Those who the IRS deems are not paying the proper amount can face severe penalties.

Most citizens are aware that they provided their Social Security Number (SSN) when they filled out a Foreign Bank Account Reporting (FBAR) form set up a new account, which is then passed along to the IRS. However, there are reporting thresholds that depend upon whether the individual is married or single or files separately (generally $50,000 individually and $100,000 jointly). These are typically reported under Form 8938, but there are also several exceptions.

Non-compliance disputes

A taxpayer may dispute their obligation, or the IRS may believe that the citizen is underreporting their assets. Penalties start at $10,000 and go up to $50,000 if there is continued failure to pay the determined amount. In the era of digital finances, the IRS and Justice Department can often gain access to all the evidence they need to determine if a citizen is underreporting or otherwise failing to comply with FATCA.

Resolving those disputes with the IRS

As with any tax issue involving the IRS, there is a limited window to come into compliance. Moreover, those who feel that the IRS is mistaken will often need to speak with an attorney with experience handling federal tax law disputes. They can provide insight and strategies for effectively resolving FATCA disputes and other matters.