It means that they have to report their foreign assets by filling 8938 form to the IRS. But does it apply to you too? Are you confused and don’t know anything about it? Don’t worry! Our USTAXFiling.in experts guide you in the best possible way about FATCA exemptions. In this blog, let us discuss everything about FATCA exemptions. Make sure to stay tuned and continue reading this blog to understand in-depth FATCA exemptions.
FATCA Exemption: Everything that you must know
Several United States of America expats under FATCA have to report their foreign assets by filing an 8938 form to the IRS. Also, not all foreign assets are subject to this thing. It means that a few expats also have FATCA exemption. Let us discuss in more detail about FATCA exemption.
What Is FATCA, and Do I Need a FATCA Exemption Code?
The FATCA, or foreign account tax compliant act, is a United States of America regulation that needs United States citizens to report particular foreign financial assets that exceed particular criteria.
FATCA, or foreign account tax compliant act, was first passed so that Americans should be stopped from evading their United States of America tax obligations by hiding their cash in offshore bank accounts. But, now, the main reason for this rule is to foil domestic tax evasion. Several expats might get caught in the crossfire. It is but natural that Americans who are staying overseas will have their foreign assets and keep their money in another country or foreign bank accounts.
The best thing is that not all Americans who stay abroad have to fill FATCA form. And, this form filling is for a US account, then you don’t require a FATCA code too. So, how do you understand if you are exempted from FATCA? Let us discuss in more detail FATCA reporting:
Who Has to File a FATCA Report?
The criteria for FATCA or foreign account tax compliant act filing varies on your filing status and where you stay. For people who have qualified for the bona fide residence test, the criteria are high:
- Expats who owe more than $200,000 and file their taxes individually should file a FATCA report in particular foreign financial assets on the last day of the financial year or $300,000 at any time during the year.
- Expats who have more than $400000 and file a joint income tax return with their partner should file a FATCA report in particular foreign financial assets on the annual day of the financial year, or those who owe more than $600,000 must file FATCA.
Now, you might be thinking about: how you become eligible for a specified or particular foreign financial asset. As per the IRS: Particular foreign financial assets will include foreign non-account assets and financial
- Foreign life insurance
- Foreign financial instruments
- Foreign pensions
- Foreign financial accounts
- Foreign mutual funds
- Interest in foreign entities
- Foreign life insurance
- Foreign securities and stocks
- Foreign hedge funds
But for a better picture of which foreign properties include when calculating when you have to file a FATCA report, let us take a look over which ones are exempt.
Are You a FATCA Exempt Beneficial Owner? And What’s Exempt?
Foreign financial assets from FATCA reporting are exempted by the IRS. For instance, a financial account monitored by a US payor will be exempt. In such a case, a US pay or may include:
- Specific foreign subsidiaries of United States of America corporations
- A foreign branch of a United States of America financial institution
- A US branch of a foreign financial institution
The beneficial interest in a foreign estate or foreign trust is also exempt from FATCA reporting. As you are not at all aware of the interest before as a FATCA-exempt beneficial individual. Also, if you get a distribution from a foreign estate or trust, the IRS might not appreciate a claim that you are not aware of.
Also, another foreign asset that is exempted from FATCA reporting is any social insurance, social security, or the same program monitored by a foreign authority. For more information on what foreign assets are exempted. You may check the information given by the IRS.
What If I Haven’t Filed a FATCA Report Yet?
The files for failing to file a foreign account tax compliance act report when needed might be steep. The IRS lists the possible charges as:
Forty percent fines on an understatement of attributable tax to non-disclosed assets and $10,000 for every violation plus extra charges up to $50,000 for constant failure to file after the notification of IRS.
Also, if you have not filed a foreign account tax compliance act report, then don’t worry at all! As long as you are not aware that you have to file, you may use the IRS streamlined filing process to become compliant without having any harsh fines.
Whether you are compliant or not, you don’t have to file your FATCA or foreign account tax compliance act. At USTAXFiling.in, we are here to help you in the best possible way. Expats from across the globe come to us to optimize their financial strategies and complete their US tax obligations. When you choose USTAXFiling.in, you will never regret as our USTAXFiling.in experts make sure to resolve all your questions and guide you properly. They have all the recent updates related to the foreign account tax complaint act and will ensure to keep you updated with the information. If you need any help at any time, then our USTAXFiling.in experts are there to help you! So, what are you waiting for? If you need any help related to FATCA reporting or exemption? Give us a call at USTAXFiling.in right now!