The Foreign Account Tax Compliance Act (FATCA) brings us more global bank transparency, and aims to discourage offshore tax evasion. FATCA brings with it large civil penalties and possible criminal sanctions, thus enticing taxpayers to be more forthcoming in reporting their non-US income and assets. U.S. persons holding any financial interest in, or signature or other authority over, a bank, securities, or other financial account in a foreign country are required to report the account to the US government if the value of the account(s) exceed(s) $10,000. This is done on a Report of Foreign Bank and Financial Accounts (FBAR, now 114). Since 2003 the IRS has had the task of enforcing the required FBAR (114) filing and assessing the harsh penalties for non-compliance. Currently penalties are $10,000 per account that goes unreported, and $100,000 or 50% of the account’s value for willfull failures to report. Form 8938, Statement of Specified Foreign Financial Assets, may also be required to report foreign accounts and assets such as: • Financial accounts maintained at foreign financial institutions • Foreign retirement accounts • Direct ownership of stock in a foreign corporation (outside of a financial institution) • Foreign life insurance products • Foreign partnership interests, such as foreign hedge funds and foreign private equity funds • Foreign deferred compensation arrangements • Beneficial interests in foreign trusts or estates The reporting requirement for Form 8938 has various thresholds with a minimum reporting threshold of $50,000. Similar to the FBAR (114), there are significant penalties for failure to file Form 8938. Every year, careful consideration needs to be made to determine if foreign reporting requirements affect you. Please keep these factors in mind throughout the year in order to be fully compliant once tax reporting time is upon us. By: Michelle Klement, CPA