Finance & Enjoyment Blog

CPA Denver Reviews The Basics of FATCA

KKB, a Denver CPA firm, wants you to be aware of the changing economic and tax issues that our clients face on a daily basis. The Foreign Account Tax Compliance Act (FATCA) is a federal law that requires US persons, including individuals who live outside the US to report their financial accounts held outside the United States, and requires foreign financial institutions to report to the IRS about their US clients. This includes withholding on payments to those foreign financial institutions that fail to comply with FATCA. As final implementation of this 2010 legislation begins, withholding on US source income that is subject to FACTCA generally took effect July 1, 2014.

Information regarding individuals: U.S. citizens, U.S. individual residents, and a very limited number of nonresident individuals who own certain foreign financial accounts or other offshore assets (specified foreign financial assets) must report those assets - Use Form 8938 to report these assets - Attach Form 8938 to the annual income tax return (usually Form 1040)

Taxpayers with a total value of specified foreign financial assets below a certain threshold do not have to file Form 8938 - If the total value is at or below $50,000 at the end of the tax year, there is no reporting requirement for the year, unless the total value was more than $75,000 at any time during the tax year - The threshold is higher for individuals who live outside the United States - Thresholds are different for married and single taxpayers

Taxpayers who do not have to file an income tax return for the tax year do not have to file Form 8938, regardless of the value of their specified foreign financial assets. - There are penalties apply for failure to file accurately

Information regarding foreign financial institutions (FFI): In order to avoid withholding on payments made to them, an FFI can register with the IRS and agree to report to the IRS certain information about its U.S. accounts. Registration can be done on the IRS website or using Form 8957. As part of the agreement, the FFI may be required to withhold 30% on certain payments to foreign payees if the payees do not comply with FATCA.

Information for U.S. financial institutions: Starting July 1, 2014, U.S. financial institutions and other U.S. withholding agents must withhold 30% on certain U.S. source payments made to FFIs that do not document their FATCA status. (Payments on certain grandfathered debt obligations outstanding on July 1, 2014, may be exempt from withholding.) They must also report to the IRS information about certain non-financial foreign entities with substantial U.S. owners. Failure to comply may result in liability for the tax that should have been withheld and penalties.

Information for Governments: The United States has collaborated with other countries to develop intergovernmental agreements (IGAs) implementing FATCA. Under such an agreement, the reporting and other compliance burdens on the financial institutions in the jurisdiction may be simplified.

How to use this Information

To learn more about FATCA and how it may affect your taxes, call us at 303-815-1100 or visit us at

What questions do you have regarding FATCA?

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