Key Facts about the New FATCA Rules

Reporting Requirements and Penalties for Individual Taxpayers

Barry N. Cooper, CPA, and Joel M. Barker, CPA

Effective with the July 1, 2014, dead-line for the Foreign Account Tax Compliance Act (FATCA), the IRS released new rules that aimed to combat tax evasion on the part of taxpayers failing to report their worldwide income and disclose investments and other financial assets in offshore accounts when filing their U.S. tax returns. Unfortunately, many tax-payers remain unaware of the new FATCA rules, reporting requirements, and onerous penalties for noncompliance. Such penalties are in addition to those related to the Report of Foreign Bank Accounts (FBAR), which was created under the Bank Secrecy Act of 1970 and is designed for taxpayers to report their offshore financial accounts. FBAR penalties for noncompliance can be as high as 50% of the value of each account for each tax year; likewise, FATCA penalties can be as high as $60,000, plus interest, for failure to comply with the reporting requirements.