What Is FATCA?
Initially enacted in 2010 and implemented on July 1, 2014, FATCA – which stands for “Foreign Account Tax Compliance Act,” requires foreign banks to reveal the names of Americans and U.S. companies with accounts greater than $50,000.
The primary purpose FATCA is to prevent the use of offshore bank accounts and similar shelters as a means of hiding taxable income from the IRS. Its intent is to make these international banking practices more transparent. Many people are now referring to FATCA as America’s global tax law, because its reach encompasses the entire planet.
FATCA Has Received Universal Compliance
More than 80 nations around the world have agreed to comply with FATCA, including Russia and China. Foreign institutions that fail to comply will be frozen out of U.S. markets, which serves as a strong incentive for agreeing to abide by the new law. Under FATCA, non-compliant foreign financial institutions will also incur a 30% withholding tax on U.S. financial flows.
FBARs Must Still Be Filed
U.S. taxpayers with income that falls under the FATCA provisions must report it on IRS Form 8938. This is in addition to the filing of the appropriate Foreign Bank Account Reports (FABRs). The failure to file FABRs could result in a fine of up to $50,000 and a prison term of up to 10 years. In terms of civil penalties, a non-willful FABR penalty can draw a $10,000 fine, while a willful violation can incur a fine that’s the greater of $100,000 or 50% of the account value – and this fee pertains to each account found to be in violation.
The Importance of Efficient Document Management to Ensure FATCA Compliance
The implementation of Foreign Account Tax Compliance Act emphasizes the importance of having a reliable document management system in place. Your company will need to ensure all income held by foreign banks that exceeds the FATCA threshold is tracked and reported accurately, and that all essential documentation is furnished to the IRS.
eFileCabinet Document Management Software Solutions Will Support Your Compliance Efforts
eFileCabinet is your source for innovative accounting document management solutions that will significantly enhance your regulatory compliance efforts. You’ll get the benefit of comprehensive document tracking to create thorough audit trails. Fill out the form on this page to contact us today to learn more about how we can help your company fulfill all Foreign Account Tax Compliance Act reporting requirements — and give you peace of mind in the process.