The Foreign Account Tax Compliance Act (FATCA) was enacted in the wake of the UBS scandal to crack down on tax evasion overseas. “FATCA requires foreign financial firms to report to the IRS offshore accounts held by Americans that are worth more than $50,000.
Foreign financial institutions that fail to comply with FATCA face a 30-percent withholding tax on their U.S. source income, a penalty that could effectively freeze them out of U.S. financial markets.
FATCA does not take effect until July 2014, but there have been many steps leading up to it, including this latest step: the registration process. Remember though, the registration process is not an individual tax requirement but, rather, is meant to secure the cooperation of financial institutions. If you are a in charge of a foreign bank, investment firm, or insurance company and you need to know, the schedule of events appears to be as follows:
- Now: Online registration at http://www.irs.gov/Businesses/Corporations/Information-for-Foreign-Financial-Institutions
- January 2014: IRS begins approving registration forms
- April 25, 2014: Registration deadline
- June 2014 (and once per month thereafter): IRS will publish a list of all compliant financial firms
- 2015: IRS begins collecting financial firms’ customer account information
Registration may be done on paper, but the IRS highly encourages that it be done through their secure online web application. Once a firm has registered, the IRS issues them a Global Intermediary Identification Number (GIIN). Registration ensures that the IRS knows who to call when they have questions about suspected tax cheats.