New FATCA regulations shine brighter spotlight on foreign accounts

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					          New FATCA regulations shine brighter spotlight on foreign accounts


The IRS has issued long-awaited comprehensive proposed regulations to implement the Foreign
Account Tax Compliance Act (FATCA). Because FATCA is scheduled to take effect January 1, 2013, the
government will move quickly to obtain comments from the public, hold a public hearing, and issue final
regulations.

Reporting/withholding
FATCA requires foreign financial institutions (FFIs) and other entities to report information to the IRS
about foreign accounts and assets owned by U.S. taxpayers. If the accounts are not properly disclosed to
the IRS, FATCA requires 30 percent withholding on payments made to the accounts.
FATCA is a complex statute that imposes new obligations on FFIs and other entities. These obligations
directly impact the account holders, whether they are individuals, businesses, or trusts. To ease the
transition to the new regime, the IRS will implement FATCA in phases. For example, only identifying
information and account balance or value would need to be reported in 2014 (with respect to 2013
accounts).


Delayed deadlines
To allow entities to make the systems adjustments needed to report income and gross proceeds, the IRS
would not require the reporting of account income until 2016 (with respect to the 2015 calendar year), and
would not require reporting of gross proceeds (from the sale of account assets) until 2017 (with respect to
the 2016 calendar year). The proposed rules also grandfather obligations outstanding on January 1, 2013
from reporting and withholding requirements.

Stakeholders have hailed the IRS for being responsive to concerns. For example, in addition to the
transition rules, the IRS eased up on the due diligence requirements for FFIs and other entities to review
accounts and identify U.S. taxpayers with an interest in the account. The IRS stated that it sought to
retain the goals and purposes of FATCA, while reducing the burden on implementing its requirements.
Treasury also announced that it had proposed an alternative system - an intergovernmental approach
that would allow FFIs to report information to their own home governments. The governments in turn
would report the information to Treasury. Five European governments have agreed to this approach;
Treasury will continue to discuss the proposal with additional countries.


Accountholder responsibilities
Irrespective of the reporting or withholding obligations of FFIs, account holders continue to have a current
obligation to report their accounts and declare any U.S. income tax due on them. There are significant
penalties imposed for ignoring those requirements.


Please contact Doeren Mayhew if you need assistance.




 If and only to the extent that this publication contains contributions from tax professionals who are subject to the rules
 of professional conduct set forth in Circular 230, as promulgated by the United States Department of the Treasury,
 the publisher, on behalf of those contributors, hereby states that any U.S. federal tax advice that is contained in such
 contributions was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be
 imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose.

				
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Description: New FATCA regulations shine brighter spotlight on foreign accounts