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The Diligent team
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FATCA reporting requirements checklist

March 19, 2019
0 min read
Checklist for FATCA reporting

Whether you are the company's Compliance Officer, a member of the legal team or a compliance professional tasked with putting together a report, it's helpful to have a clear list of requirements so you can create a checklist and avoid the pratfalls, distractions and confusion that come with digging through the morass of regulatory obligations.

What to Include in a FATCA Checklist

Well, if you are staring down the process of filing for FATCA, you're in luck because below we have created a checklist to make sure you provide the Internal Revenue Service (IRS) with everything they need and nothing they don't. Whether you are a qualifying U.S. taxpayer, a business entity with overseas holdings or a foreign financial institution, you need to know how to report U.S. earnings correctly and efficiently. Hopefully, this list will save you time, money and headaches, and allow you to get back to growing your business.

1) Determine your FATCA status

First on the list, determine whether you need to file FATCA reports at all.

For individuals and business entities (non-FIFA), determine whether you are required to file a U.S. federal income tax return, then continue on to the next step.

If not, then you do not have to report to FATCA. Read on for educational purposes only.

2) Do you own any Specified Foreign Assets?

Specialized Foreign Assets is a term used to describe all the different ways one can earn money in a foreign market. These possibilities include the following:

  1. Any foreign financial account. This might be bank accounts, brokerage accounts, financial accounts, mutual funds or hedge funds.
  2. Foreign stock or security issued by a foreign person not held in a foreign account; for example, if you had an ownership interest in a foreign entity.
  3. Any interest in a foreign entity not held in a FIFA account.
  4. Any foreign life insurance policy with a cash value not held in a FIFA account.
  5. Any foreign instrument or contract held for investment that lists a foreign person as a counter-party.

If you answered "yes" to any of these, please continue reading.

If you answered "no," you are in the clear.

3) Determine whether any of your Specified Financial Assets are used in, or held for the use in, the conduct of your organization's business dealings.

If so, then you need not include your business assets in the aggregate value of your Specified Foreign Financial Assets.

Filing FATCA Forms

So, once you've gone down the list...if you determine that you need to file FATCA reports, then you will need a Form 8938. File it when you file your federal tax return and you should be good to go.

But can't I just skip this? How will the IRS know?

This, my friend, is a bad idea. The reason FATCA is so successful at revealing the underpayment of foreign earnings is that, in addition to relying on you being on the up and up, FATCA also requires the foreign financial institutions that handle this money to report all deposits made by U.S. taxpayers. So, while you may think you can hide money in a foreign account, the bank managing the account is not going to want to run afoul of the IRS. While there are some exemptions for publicly traded corporations and other business entities, the wisest option is always going to be to comply with your legal obligation.

If you still choose the path of non-compliance, you've got it coming to you. Penalties for noncompliance could range as high as forfeiture of 100% of unreported funds plus subjecting your organization to a multi-year audit process. There are few phrases more terrifying in the business world than multi-year audit. So, don't let that happen to you, either through poor judgment or poor planning.

Make your list. Check it twice.


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