General Articles

Foreign bank account reporting issues

By December 1, 2014 No Comments

The Foreign Account Tax Compliance Act (FATCA) legislation was passed as part of the Hiring Incentives to Restore Employment Act of 2010. This legislation created various new requirements for account holders and financial institutions. The requirements have been phased in over the last few years.

A quick recap of the individual filing requirements

Individuals are required to file form 8938 as an attachment to their personal tax return starting in 2012. The form refers to foreign financial assets such as stocks, bonds, bank accounts, pensions, and other various assets. The foreign financial assets need to meet a certain dollar amount before the form is required.   If you think this may apply, I would encourage you to review this blog post related specifically to this form.

Financial institutions were affected in a couple of ways and these rules took effect as of July 1, 2014.

  1. Foreign financial institutions are now required to provide certain financial information. This is in regards to financial accounts with United States owners, as well as entities’ accounts that have substantial United State owners to the Internal Revenues Service. So, many people will be seeing requests from their foreign financial institution to provide accounts owner’s name, address, and social security number. Companies with assets overseas will see similar requests, since they face the same filing requirement.
  2. U.S. financial institutions, with account owned by foreign individuals or entities, also have new requirements. The U.S. financial institution will have to collect specific data, as required by this legislation, or they will need to complete a 30% backup withholding on certain payments.

These two points became effective July 1. Therefore, banks will be working hard this year to gather the required data to comply with these new requirements. In addition, account holders will receive their requests for forms and information so the financial institutions can get their records in compliance.

For more information on this topic, please contact Patrick Mutcher, at (231)726-5870.

Author: Patrick Mutchler, CPA