The Foreign Account Tax Compliance Act became law in 2010. It requires that foreign financial entities report certain accounts that are owned by citizens of the United States. A failure to comply with this law can result in stiff penalties, including a 30 percent withholding tax on income from the United States.
The law was enacted in an attempt to address concerns about terrorists and those who were attempting to avoid tax obligations. In reality, it appears to have a negative impact on small businesses here in the United States.
How does the FATCA impact small businesses? A recent piece in The Washington Times discusses the issue, noting that businesses with less than 500 employees compose over 97 percent of the businesses that run exports. These businesses are required by the FATCA to report all nonfinancial assets annually. Foreign banks are also required to report holdings that belong to citizens of the U.S.
This causes a problem as reporting may violating some country’s privacy laws. However, a failure to report can result in huge fines, as noted above. What’s a foreign country to do? Well, many foreign banks have responded by refusing to provide services to Americans.
What options are available to taxpayers impacted by FATCA? As noted in the piece by The Washington Times, the intricacies of this law make it very difficult to navigate on one’s own. As such, legal counsel is recommended.
While the country awaits tax reform that addresses these issues, taxpayers that find themselves contacted by the IRS about foreign accounts are wise to seek legal counsel. An experienced offshore account compliance attorney can discuss your options and advocate for your rights, better ensuring your business interests are protected.