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Frequently Asked Questions

General Questions

How to file U.S. taxes in Spain?

We are US Tax Consultants, IRS Certified Professional Tax Preparers and Acceptance Agents.

US Tax Consultants is a company with offices in Madrid, Asturias (Spain) and Algarve (Portugal), with national and international presence, and with 56 years of experience in filing American and Spanish taxes. Thanks to our professionalism and quality control, our clients have the peace of mind that provides a job well done.

Do you file Spanish and US Taxes?

Yes, we do.

Do you File Individual Tax Return for all 50 States?

Yes, we file individual and business Tax Return on paper, so you can always review it beforer filing.

Do you have offices in Madrid and Asturias (Spain)?

Yes, we have offices with permanent staff in bothe locations: Madrid and Asturias

I am planning to do my Tax returns with you, is Audit included?

Yes, If I file and submit your income tax return. If you get Audit letter from the US Federal or State and/or the AEAT, the Tax return Audit is included.

Form 1040

Do I have to file an individual tax return in the U.S.A.?

Yes, if you are U.S. Citizen or Green Card holder, you are required to file US taxes in the U-S every year, with the Form 1040, wherever in the world you live, if you earn over $10,000, or just $400 of self-employment income; regardless of where their income is earned, where in the world they live, whether the US has a tax treaty with that country, or whether they also pay foreign taxes.

Can I take any exemptions?

There are some IRS exemptions just for expats that allow them to reduce or in most cases eliminate their US tax liability completely (although they still have to file a US return to claim these exemptions).

IRS Delinquent filers. Is there any kind of Amnesty for those Americans that have not filed in the past, neither the Individual Tax Return (1040) nor the FBAR?

Expats who have been living abroad but not filing US taxes because they weren’t aware that they were meant to can catch up without facing any penalties using an IRS amnesty program called the Streamlined Procedure. To catch up using the Streamlined Procedure, expats must file their last 3 tax returns and lasts 6 FBARS (as applicable), pay any back taxes owed (often none, once they claim any of the exemptions), and self-certify that their previous non-compliance was non-willful.

When is the due date to file US taxes?

The due date is April 15th, expats have an automatic filing extension until June 15th, with a further extension available until October 15thupon request.

All Americans who earn over $10,000, or just $400 of self-employment income are required to file, regardless of where their income is earned, where in the world they live, whether the US has a tax treaty with that country, or whether they also pay foreign taxes.

Can I take Foreign Earned Income Exclusion, Form 2555?

The most commonly used exemption for expats is called the Foreign Earned Income Exclusion, which allows expats to exclude the first $102,100 (the 2017 figure) in earned income from US tax liability. Only in earned income! Expats must first prove that they live abroad using either the Bona Fide Residence Test (showing that they are a permanent resident in another country), or the Physical Presence Test (showing that they spent at least 330 days outside the US in a year).

1040. Can I take Foreign Tax Credit?

Expats who pay foreign taxes meanwhile may benefit from claiming the Foreign Tax Credit, which gives a $1 tax credit for every dollar of tax paid abroad. If you pay foreign taxes at a higher rate than the US rate, then they will have excess credits left over that can be carried forward for use in subsequent years.

Modelo 100 IRPF

IRPF. If I lived in Spain more than 183 days, last year. Do I have to file the IRPF in Spain?

Yes, you are required to file the Spanish IRPF reporting worldwide income of the entire year, except if your earned income is less that € 22,000 (€ 12,000 if more than one payer), or your passive income is lower than € 1,000.

Expats who live in a foreign country will also have to comply with the tax rules of that country. These vary from country to country, so it’s definitely worth consulting a qualified accountant in your country of residence to see whether you need to file and pay taxes there too, given your circumstances.

IRPF. If I lived in Spain more than 183 days, last year. Do I have to file the IRPF in Spain?

Yes, you are required to file the Spanish IRPF reporting worldwide income of the entire year, except if your earned income is less that € 22,000 (€ 12,000 if more than one payer), or your passive income is lower than € 1,000.

Expats who live in a foreign country will also have to comply with the tax rules of that country. These vary from country to country, so it’s definitely worth consulting a qualified accountant in your country of residence to see whether you need to file and pay taxes there too, given your circumstances.

IRPF. If I lived in Spain more than 183 days, last year. Do I have to file the IRPF in Spain?

Yes, you are required to file the Spanish IRPF reporting worldwide income of the entire year, except if your earned income is less that € 22,000 (€ 12,000 if more than one payer), or your passive income is lower than € 1,000.

Expats who live in a foreign country will also have to comply with the tax rules of that country. These vary from country to country, so it’s definitely worth consulting a qualified accountant in your country of residence to see whether you need to file and pay taxes there too, given your circumstances.

IRPF. Do I have to file taxes in Spain if I was Non-Resident?

Yes, you are required to report and pay 24% taxes over your income which source was Spain

Modelo 720

When do I have to file Modelo 720?

You are required to file the Modelo 720 if you are Spanish resident and you own assets abroad whose balance as of 31 December exceeds €50,000.

Modelo 720. Once the first declaration of Form 720 corresponding to a fiscal year has been filed, must it be filed again each year? With regard to what information should it be filed again?

Once Form 720 has been filed about one or more of the disclosure obligations in it, this Form should only be filed again when, in relation to one or more of these obligations, there is an increase of the overall limit established for each information block above 20,000 euros compared with what the last declaration determined.

Modelo 720. Once the first declaration of Form 720 corresponding to a fiscal year has been filed, must it be filed again each year? With regard to what information should it be filed again?

Once Form 720 has been filed about one or more of the disclosure obligations in it, this Form should only be filed again when, in relation to one or more of these obligations, there is an increase of the overall limit established for each information block above 20,000 euros compared with what the last declaration determined.

Modelo 720. Once the first declaration of Form 720 corresponding to a fiscal year has been filed, must it be filed again each year? With regard to what information should it be filed again?

Once Form 720 has been filed about one or more of the disclosure obligations in it, this Form should only be filed again when, in relation to one or more of these obligations, there is an increase of the overall limit established for each information block above 20,000 euros compared with what the last declaration determined.

Modelo 720. Once the first declaration of Form 720 corresponding to a fiscal year has been filed, must it be filed again each year? With regard to what information should it be filed again?

Once Form 720 has been filed about one or more of the disclosure obligations in it, this Form should only be filed again when, in relation to one or more of these obligations, there is an increase of the overall limit established for each information block above 20,000 euros compared with what the last declaration determined.

Do I have to file Modelo 720, in Spain if I was Non-Resident?

No, you are required to file the Modelo 720 from January 1stto April 30thof the following year if you were fiscal resident of Spain.

Modelo 720. If a person or entity is required to file information return form 720 for accounts in financial institutions abroad, for securities, rights, insurance and income deposited, managed and earned abroad, and for properties located abroad and for rights relating thereto, can the same form be used to declare all three groups of assets?

Yes, each one of the three groups of assets represents a different reporting obligation, but the three reporting obligations are expressed using the same information form. As a result, the three reporting obligations are complied with using Form 720, where taxpayers must report all assets and rights for which there is an obligation to report.

FBAR FinCEN 114

FBAR. Do I declare my foreign financial accounts?

U.S. Citizens and Green Card holders who have over $10,000 in total in foreign bank or investment accounts at any time during the year are required to report all their foreign accounts by filing a foreign bank account report (FBAR), or FinCEN 114. It’s important not to neglect this requirement, as penalties for not filing an FBAR when you are particularly steep ($ 10,000), even if you weren’t aware that you were supposed to. FBARs are filed online to FinCEN (Financial Crime Enforcement Network).

FBAR. Do I declare my foreign financial accounts?

U.S. Citizens and Green Card holders who have over $10,000 in total in foreign bank or investment accounts at any time during the year are required to report all their foreign accounts by filing a foreign bank account report (FBAR), or FinCEN 114. It’s important not to neglect this requirement, as penalties for not filing an FBAR when you are particularly steep ($ 10,000), even if you weren’t aware that you were supposed to. FBARs are filed online to FinCEN (Financial Crime Enforcement Network).

FBAR. Do I declare my foreign financial accounts?

U.S. Citizens and Green Card holders who have over $10,000 in total in foreign bank or investment accounts at any time during the year are required to report all their foreign accounts by filing a foreign bank account report (FBAR), or FinCEN 114. It’s important not to neglect this requirement, as penalties for not filing an FBAR when you are particularly steep ($ 10,000), even if you weren’t aware that you were supposed to. FBARs are filed online to FinCEN (Financial Crime Enforcement Network).

FBAR. Do I declare my foreign financial accounts?

U.S. Citizens and Green Card holders who have over $10,000 in total in foreign bank or investment accounts at any time during the year are required to report all their foreign accounts by filing a foreign bank account report (FBAR), or FinCEN 114. It’s important not to neglect this requirement, as penalties for not filing an FBAR when you are particularly steep ($ 10,000), even if you weren’t aware that you were supposed to. FBARs are filed online to FinCEN (Financial Crime Enforcement Network).

FBAR. Do I declare my foreign financial accounts?

U.S. Citizens and Green Card holders who have over $10,000 in total in foreign bank or investment accounts at any time during the year are required to report all their foreign accounts by filing a foreign bank account report (FBAR), or FinCEN 114. It’s important not to neglect this requirement, as penalties for not filing an FBAR when you are particularly steep ($ 10,000), even if you weren’t aware that you were supposed to. FBARs are filed online to FinCEN (Financial Crime Enforcement Network).

FBAR. Do I declare my foreign financial accounts?

U.S. Citizens and Green Card holders who have over $10,000 in total in foreign bank or investment accounts at any time during the year are required to report all their foreign accounts by filing a foreign bank account report (FBAR), or FinCEN 114. It’s important not to neglect this requirement, as penalties for not filing an FBAR when you are particularly steep ($ 10,000), even if you weren’t aware that you were supposed to. FBARs are filed online to FinCEN (Financial Crime Enforcement Network).

FBAR. Do I declare my foreign financial accounts?

U.S. Citizens and Green Card holders who have over $10,000 in total in foreign bank or investment accounts at any time during the year are required to report all their foreign accounts by filing a foreign bank account report (FBAR), or FinCEN 114. It’s important not to neglect this requirement, as penalties for not filing an FBAR when you are particularly steep ($ 10,000), even if you weren’t aware that you were supposed to. FBARs are filed online to FinCEN (Financial Crime Enforcement Network).

Streamlined Procedure

FBAR. Do I declare my foreign financial accounts?

U.S. Citizens and Green Card holders who have over $10,000 in total in foreign bank or investment accounts at any time during the year are required to report all their foreign accounts by filing a foreign bank account report (FBAR), or FinCEN 114. It’s important not to neglect this requirement, as penalties for not filing an FBAR when you are particularly steep ($ 10,000), even if you weren’t aware that you were supposed to. FBARs are filed online to FinCEN (Financial Crime Enforcement Network).

FBAR. Do I declare my foreign financial accounts?

U.S. Citizens and Green Card holders who have over $10,000 in total in foreign bank or investment accounts at any time during the year are required to report all their foreign accounts by filing a foreign bank account report (FBAR), or FinCEN 114. It’s important not to neglect this requirement, as penalties for not filing an FBAR when you are particularly steep ($ 10,000), even if you weren’t aware that you were supposed to. FBARs are filed online to FinCEN (Financial Crime Enforcement Network).

FBAR. Do I declare my foreign financial accounts?

U.S. Citizens and Green Card holders who have over $10,000 in total in foreign bank or investment accounts at any time during the year are required to report all their foreign accounts by filing a foreign bank account report (FBAR), or FinCEN 114. It’s important not to neglect this requirement, as penalties for not filing an FBAR when you are particularly steep ($ 10,000), even if you weren’t aware that you were supposed to. FBARs are filed online to FinCEN (Financial Crime Enforcement Network).

FBAR. Do I declare my foreign financial accounts?

U.S. Citizens and Green Card holders who have over $10,000 in total in foreign bank or investment accounts at any time during the year are required to report all their foreign accounts by filing a foreign bank account report (FBAR), or FinCEN 114. It’s important not to neglect this requirement, as penalties for not filing an FBAR when you are particularly steep ($ 10,000), even if you weren’t aware that you were supposed to. FBARs are filed online to FinCEN (Financial Crime Enforcement Network).

FBAR. Do I declare my foreign financial accounts?

U.S. Citizens and Green Card holders who have over $10,000 in total in foreign bank or investment accounts at any time during the year are required to report all their foreign accounts by filing a foreign bank account report (FBAR), or FinCEN 114. It’s important not to neglect this requirement, as penalties for not filing an FBAR when you are particularly steep ($ 10,000), even if you weren’t aware that you were supposed to. FBARs are filed online to FinCEN (Financial Crime Enforcement Network).

FBAR. Do I declare my foreign financial accounts?

U.S. Citizens and Green Card holders who have over $10,000 in total in foreign bank or investment accounts at any time during the year are required to report all their foreign accounts by filing a foreign bank account report (FBAR), or FinCEN 114. It’s important not to neglect this requirement, as penalties for not filing an FBAR when you are particularly steep ($ 10,000), even if you weren’t aware that you were supposed to. FBARs are filed online to FinCEN (Financial Crime Enforcement Network).

FBAR. Do I declare my foreign financial accounts?

U.S. Citizens and Green Card holders who have over $10,000 in total in foreign bank or investment accounts at any time during the year are required to report all their foreign accounts by filing a foreign bank account report (FBAR), or FinCEN 114. It’s important not to neglect this requirement, as penalties for not filing an FBAR when you are particularly steep ($ 10,000), even if you weren’t aware that you were supposed to. FBARs are filed online to FinCEN (Financial Crime Enforcement Network).

FBAR. Do I declare my foreign financial accounts?

U.S. Citizens and Green Card holders who have over $10,000 in total in foreign bank or investment accounts at any time during the year are required to report all their foreign accounts by filing a foreign bank account report (FBAR), or FinCEN 114. It’s important not to neglect this requirement, as penalties for not filing an FBAR when you are particularly steep ($ 10,000), even if you weren’t aware that you were supposed to. FBARs are filed online to FinCEN (Financial Crime Enforcement Network).

FBAR. Do I declare my foreign financial accounts?

U.S. Citizens and Green Card holders who have over $10,000 in total in foreign bank or investment accounts at any time during the year are required to report all their foreign accounts by filing a foreign bank account report (FBAR), or FinCEN 114. It’s important not to neglect this requirement, as penalties for not filing an FBAR when you are particularly steep ($ 10,000), even if you weren’t aware that you were supposed to. FBARs are filed online to FinCEN (Financial Crime Enforcement Network).

FATCA

What is FATCA?

The Foreign Account Tax Compliance Act (FATCA) is a 2010 United States federal law requiring all non-U.S. foreign financial institutions (FFIs) to search their records for customers with indicia of a connection to the U.S., including indications in records of birth or prior residency in the U.S., or the like, and to report the assets and identities of such persons to the U.S. Department of the Treasury. FATCA also requires such persons to report their non-U.S. financial assets annually to the Internal Revenue Service (IRS) on form 8938, which is in addition to the older and further redundant requirement to report them annually to the Financial Crimes Enforcement Network (FinCEN) on form 114 (also known as ‘FBAR’). Like U.S. income tax law, FATCA applies to U.S. residents and also to U.S. citizens and green card holders residing in other countries.

Who needs to report Foreign Assets under FATCA?

FATCA requires all U.S. taxpayers who hold foreign financial assets with an aggregate value of more than the reporting threshold (at least $50,000) to report information about those assets on Form 8938, which must be attached to the taxpayer’s annual income tax return. You may have to complete and file other reports about foreign assets, such as FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR) (formerly TD F 90-22.1), in addition to Form 8938.

FATCA Indicia for Foreign Banks?

Banks which are performing functions according to FATCA law will be searching according to FATCA indicia, which include:

  • A U.S. place of birth
  • Identification of the account holder as a U.S. citizen or resident
  • A current U.S. residence or mailing address (including a U.S. PO box)
  • A current U.S. telephone number
  • Standing instructions to pay amounts from a foreign (meaning non-U.S.) account to an account maintained in the United States
  • A current power of attorney or signatory authority granted to a person with a U.S. address
  • A U.S. “in-care-of” or “hold mail” address that is the sole address with respect to the account holder
  • Special note: Others affected by FATCA include
    • any non-U.S. person who shares a joint account with a U.S. person or otherwise allows a U.S. person to have signatory authority on their account.
    • Any business or not-for-profit organization that allows a U.S. person to have signatory authority on a financial account.

Do Foreign Banks report directly to the IRS?

FATCA will require certain foreign financial institutions to report directly to the IRS information about financial accounts held by U.S. taxpayers or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. The reporting institutions will include not only banks, but also other financial institutions, such as investment entities, brokers, and certain insurance companies. Some non-financial foreign entities will also have to report certain of their U.S. owners.

Therefore, if you set up a new account with a foreign financial institution, it may ask you for information about your citizenship. FATCA provides special (and lessened) reporting requirements about the U.S. account holders of certain financial institutions that do not solicit business outside their country of organization and that mainly service account holders resident within it. In order to qualify for this favorable treatment, however, the local foreign financial institution cannot discriminate by declining to open or maintain accounts for U.S. citizens who reside in the country where it is organized.

How FATCA can affect me as US Expat?

FATCA targets US taxpayers who attempt to evade their tax obligations by concealing assets with foreign financial institutions (FFIs), and non-compliance could result in enormous financial penalties, criminal investigations, and even incarceration in cases of willful tax fraud

What do I need to disclosed with FATCA as an US Expat

It does not matter if you physically reside overseas or in the US: if you hold financial assets which meet certain thresholds with an institution outside of the United States, you must disclose your assets to the IRS. Remember — FATCA also requires FFIs (Foreign Financial Institutions) to comply by disclosing information about their account-holders to the US government, and with the IRS adopting new software to help identify suspected badges of fraud, US taxpayers are at an increased risk for audits, investigations, and prosecutions.

The FATCA reporting requirements may apply to you if you fall into any of the following categories:

  • US citizens.
  • Non-resident aliens residing in Puerto Rico or American Samoa.
  • Non-resident aliens who choose to be treated as a resident alien for joint tax return filing purposes.
  • Non-US citizens who meet the “substantial presence test.”  You pass this test if you were present in the US for at least 31 days during the current year, and for at least 183 days during this year and the previous two years (for a total three-year period).

Reporting thresholds vary based on whether you file a joint income tax return or live abroad. If you are single or file separately from your spouse, you must submit a Form 8938 if you have more than $200,000 of specified foreign financial assets at the end of the year and you live abroad; or more than $50,000, if you live in the United States. If you file jointly with your spouse, these thresholds double. You are considered to live abroad if you are a U.S. citizen whose tax home is in a foreign country and you have been present in a foreign country or countries for at least 330 days out of a consecutive 12-month period.

Taxpayers living abroad. You must file a Form 8938 if you must file an income tax return and:

  • You are married filing a joint income tax return and the total value of your specified foreign financial assets is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the year. These thresholds apply even if only one spouse resides abroad. Married individuals who file a joint income tax return for the tax year will file a single Form 8938 that reports all of the specified foreign financial assets in which either spouse has an interest. 
  • You are not a married person filing a joint income tax return and the total value of your specified foreign financial assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year. 

Taxpayers living in the United States. You must file Form 8938 if you must file an income tax return and:

  • You are unmarried and the total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year 
  • You are married filing a joint income tax return and the total value of your specified foreign financial assets is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year. 
  • You are married filing separate income tax returns and the total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year. For purposes of calculating the value of your specified foreign financial assets in applying this threshold, include one-half the value of any specified foreign financial asset jointly owned with your spouse. However, report the entire value on Form 8938 if you are required to file Form 8938.

What are Foriegn Financial Assets according to FATCA?

Specified Foreign Financial Assets to be disclosed

Specified foreign financial assets include foreign financial accounts and foreign non-account assets held for investment (as opposed to held for use in a trade or business), such as foreign stock and securities, foreign financial instruments, contracts with non-U.S. persons, and interests in foreign entities. 

There are exceptions to the reporting requirement. For example, you do not have to report the following assets because they are not considered specified foreign financial assets:

  • A financial account maintained by a U.S. payor. A U.S. payor includes a U.S. branch of a foreign financial institution, a foreign branch of a U.S. financial institution, and certain foreign subsidiaries of U.S. corporations. Therefore, financial accounts with such entities do not have to be reported. 
  • A beneficial interest in a foreign trust or a foreign estate, if you do not know or have reason to know of the interest. If you receive a distribution from a foreign trust or foreign estate, however, you are considered to have knowledge of your interest in the trust or estate. 
  • An interest in a social security, social insurance, or other similar program of a foreign government. 

Other Exceptions from Reporting 

If you reported specified foreign financial assets on other forms, you do not have to report them a second time on Form 8938. These include interests in

  • trusts and foreign gifts reported on Form 3520 or Form 3520-A (filed by the trust); 
  • foreign corporations reported on Form 5471; 
  • passive foreign investment companies reported on Form 8621; 
  • foreign partnerships reported on Form 8865; and 
  • registered Canadian retirement savings plans reported on Form 8891.

The value of the foreign financial assets reported on these forms is included in determining the total value of assets for the reporting threshold, but you do not have to list the assets on Form 8938. In this situation, identify on Form 8938 which and how many of these form(s) report the specified foreign financial assets.

Additional exceptions from reporting are made for certain trusts, certain assets held by bona fide residents of U.S. territories, and assets or accounts for which mark-to-market elections have been made under Internal Revenue Code Section 475. For example, a U.S. beneficiary of a domestic bankruptcy trust or a domestic widely held fixed investment trust is not required to report any specified foreign financial asset held by the trust on Form 8938.

What are the major controversial issues of FATCA?

Certain aspects of FATCA have been a source of controversy in the financial and general press. The Deputy Assistant Secretary for International Tax Affairs at the US Department of the Treasury stated in September 2013 that the controversies were incorrect (myths). In April 2017 the Committee on Oversight and Government Reform, led by Congressman Mark Meadows, held a hearing on unintended consequences of FATCA.

The controversies primarily relate to the following issues:

  • Benefits versus cost. The intention of locating US persons and their non-US financial accounts was to increase tax revenues from the interest, dividends, and gains of those assets. The majority of that income is already (by tax treaty) attributable to the country where it resides. (IRS Form 1116 is normally used to credit foreign taxes upon passive income.) Another source from which FATCA intends to raise revenue is in the identification of a wider population of US persons. However, the majority (82%) of overseas US persons filing owe no tax to the US (due to tax treaties).
  • Foreign relations. Forcing ‘foreign’ financial institutions and governments to collect data on US persons at their own expense and transmit it to the IRS has been called divisive and imperialist.
  • Effect on “accidental Americans”. The reporting requirements and penalties apply to all US citizens, including accidental Americans, those who are unaware that they have US citizenship. Since the US considers all persons born in the U.S., and most foreign-born persons with American parents, to be citizens, FATCA affects a large number of foreign residents, who are unaware that the US considers them citizens.
  • Citizenship renunciations. A rise from 189 people in Q2/2012 to 1,131 in Q2/2013. According to the legal website International Tax Blog, the number of Americans giving up U.S. citizenship started to increase dramatically in 2010 and rose to 2,999 in 2013, almost six-fold the average level of the previous decade. In 2016, renunciations rose by 26% from the previous record set in 2015, bringing the total to a new record of 5,411 Many newspapers mentioned that this total included accidental American Boris Johnson, British Foreign Secretary and former Mayor of London, who was taxed by the IRS on the sale of his home in London despite only living in the US briefly as a toddler. In the second quarter of 2017, 1,759 American citizens were reported to have renounced. The third quarter saw 1,376 renunciations.
  •  
  • IRS not equipped. According to The New York Times, the IRS is not equipped to handle millions of extra complicated filings. The IRS allowed 2014 and 2015 as a transition period for enforcement and administration for entities but not individuals. This lack of capacity, including closure of all IRS overseas offices, has contributed to breaches of taxpayer rights as noted in the ‘most serious problems’ section of multiple annual reports by the IRS Taxpayer Advocate.
  • Complexity. Doubts were expressed as to workability of FATCA due to its complexity, and the legislative timetable for implementation was pushed back multiple times.  According to U.S. national taxpayer advocate Nina Olsen in regards to FATCA: “This is a piece of legislation that is so big and so far-reaching, and [has] so many different moving pieces, and is rolling out in an incremental fashion (…) that you really won’t be able to know what its consequences are, intended or otherwise,’ Olson said. “I don’t think we’ll know that for years. And by that point we’ll actually be a little too late to go, “Oops, my bad, we shouldn’t have done this,’ and then try to unwind it.”
  • Identity theft. The IRS reports that identity thieves are using fraudulent compliance requests as a “phishing” ruse to obtain sensitive account-holder information. As of April 2015, more than 150,000 financial institutions throughout the world were storing social security numbers and asset values of US citizens.
  • Account closures. Due to the costs and complexity of implementing this legislation, many banks have been excluding US persons from holding financial accounts at their institutions. These closures, based upon nationality, have not been halted by government authorities. In fact, the EU affirmed the practice of closure based upon nationality, by stating “Banks have the right, under the contractual freedom principle, to decide with whom they want to contract. They can in any event refuse clients for sound commercial reasons.”
  • Duplicate reporting requirements. FATCA has implemented reporting requirements that significantly overlap with FBAR reporting requirements already in place. National taxpayer advocate has recommended multiple times to eliminate this duplication.
  • Extreme penalties. The maximum penalty for failing to file an FBAR is $100,000 or 50% of the value of the account, whichever is greater for each unfiled report. Because the statute of limitations period is six years, the maximum penalty is essentially 300% of the maximum account balances. Another penalty of $10,000 or more may apply if the person does not report the same account on Form 8938, Statement of Specified Foreign Financial Assets. This would be true even if the taxpayer did not owe any U.S. tax on unreported income from the account, and even if the taxpayer’s tax preparer did not inform him or her of the FBAR filing requirement.