US residents: The IRS is watching you!
The Foreign Account Tax Compliance Act (FATCA) is an important development in the U.S. It aims to combat tax evasion by U.S. residents holding investments in offshore accounts.
FATCA requires certain U.S. taxpayers holding foreign financial assets with an aggregated value exceeding $50,000 to report certain information about those assets on a form that must be attached to the taxpayer’s annual U.S. tax return. Reporting applies to assets held in taxable years beginning after March 18, 2010. In most cases this would be the 2011 tax return.
The FATCA rules take it further: All financial institutions worldwide will have to transfer certain information to the U.S. Internal Revenue Service (IRS) about financial accounts held by U.S. taxpayers, or by U.S. entities in which U.S. taxpayers hold a substantial ownership interest.
Therefore, the FATCA can have substantial financial consequences for U.S. residents living outside the U.S.