The word FATCA may sound bit scary these days as your local banks and other investment financial institution use this terminology a lot and ask you to complete additional paperwork subject to be FATCA compliance rules, and this could be
providing your foreign tax I.D. details your for example ( National Insurance number or Unique tax reference number in the U.K or Permanent Account Number (PAN) in India, or passport details, etc.)

The banks and financial institutions may also ask you to complete Form W9 if you’re a U.S. resident with valid Social Security Number(SSN) or fill in Form W8 BEN/W8 BEN E with ITIN number.

If you don’t cooperate with the banks/financial institutions by providing these details, the banks do have the authority to freeze or close bank accounts. So, yes, FATCA compliance cannot be ignored as it does in practice have an impact on
the individual taxpayers.

What is FATCA?

FATCA (Foreign Account Tax Compliance Act) forces the foreign financial institutions (FFIs) to report to the American Internal Revenue Service (IRS) all financial assets/deposits held by U.S. individuals (i.e., U.S. Resident with 183 days filing 1040 tax return filing/U.S. Citizens living abroad) via non-US Foreign bank accounts. USA has entered into several bi-lateral Intergovernmental Agreements (IGAs), which are simply an exchange of information treaties that provide that the FFIs can share information with their local foreign country government, who will, in turn, share with the IRS. In simple terms, FATCA compliance helps the American tax authorities to gather summarised reports from a foreign-based financial institution to match taxpayers’ U.S. income tax return declaration. 

Commonly IRS looks for the FATCA compliance reporting by an individual taxpayer to be complied by filing Foreign Bank Account Reporting(FBAR)/ Form 8938 (Threshold limits apply).

Statement of Specified Foreign Financial Asset/Form 8938 Reporting?

To added compliance requirement in the year 2011, a new law introduced with an additional filing obligation of U.S. taxpayers (excluding non-resident aliens), to report their interest in foreign financial assets, i.e., non-US investments and the income or gains that they generate. FAQ related to Form 8938.

Who needs to report Foreign Bank Account Reporting(FBAR)/FINCEN 114?

If you are a U.S. citizen or U.S. resident who is having financial interest/signature authority over foreign bank accounts and if the combined value of assets in foreign bank accounts in the foreign country exceeds $10,000 during the calendar year, you need to file this form. The form must be submitted no later than April 15th each year/15h October ( if extension filed) with the Department of the Treasury. Failure to comply with these filings could lead to fines between $10,000-100,000 or 50% of the value in the account you may have outside the U.S.

Let’s take a case scenario of Mr. Amit shah I.T. professional who is currently working and residing in the USA on a valid employment visa with 1040 Federal tax return filing requirement based on the 183 residency days test. He holds three bank account with a balance of 400,000INR with AXIS bank, 500,000INR with HDFC,300,000INR with CITIBANK, in this scenario the total maximum balance exceeds $10,000 threshold, so he needs to file FBAR for that tax year to avoid penalties.

Our team specialise with international expatriate U.S. personal tax return service. If you need assistance with US 1040 filing for refund claim/FATCA Compliance work/FBAR FINCEN114 Filing, ITIN/ Form W7 Application/EIN/Form W8BENE or CAA services/1040NR U.S. tax filing for refund claim of excess 1042S / 8288A/ 8805/ W2/ 1099. We are happy to assist our clients in a timely, efficient and cost-effective way.

Contact us for more ITIN/US tax based FAQ.
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