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US Expat Taxes & FATCA: Tax Tips for Global Trotters

By ZM Ishmurzina, Artio Partners

The latest seminar organized by Artio Partners confirmed that many American expats working abroad are not aware of FATCA requirements.

The primary goal of FATCA is to prevent U.S. taxpayers from hiding assets in offshore accounts. On November 8, 2012 the U.S. Department of the Treasury announced that it has been actively engaged in a dialogue with over 50 countries to improve international tax compliance and to implement FATCA.

Moreover, the Treasury plans to finalize intergovernmental agreements by the end of this year with the following countries: France, Germany, Italy, Spain, Japan, Switzerland, Canada, Denmark, Finland, Guernsey, Ireland, Isle of Man, Jersey, Mexico, the Netherlands, and Norway.

After such an agreement goes into effect, the financial institutions will be required to provide the IRS with bank information and other financial details about their U.S. customers.

What should American expats do to comply with FATCA?

Starting with 2011 tax year, American expats must file the FATCA form 8938 with an expatriate tax return if they meet the FATCA requirements. Americans living abroad have to file the FATCA if the aggregate value of specified foreign financial assets exceeds $200,000 (last day of the year) or $300,000 (anytime during the year). Couples filing a joint return are eligible for a higher threshold.

Two things must be considered in regards to the above threshold:

First, this threshold is applicable only to US expats living abroad who must qualify under the “physical presence test” or “bona fide residence test”. There is no requirement to file the form 2555 with the form 8938 to qualify for the above threshold.

Second, American taxpayers who actually reside in the USA must file the FATCA if the aggregate value of specified foreign financial assets is over $50,000 (last day of the year) or $75,000 (anytime during the year) for “single” filers or “married filing separately”. This is a key point since many U.S. expats working abroad are not aware of this filing threshold when they move back to the USA.

What are the penalties for a failure to file the FATCA form?

Civil penalties are significant. The first penalty is a $10,000 failure-to-file fee. Moreover, this amount goes up by an additional $10,000 penalty for each 30 days within 90 days after the IRS mails a notice regarding a failure to file Form 8938. The second penalty is $50,000 for each failure to file. Criminal penalties can be imposed too.

American expats who pursue global careers have to stay up to date with the latest IRS and Treasury developments to avoid any potential penalties.


About the author:

ZM Ishmurzina
, MBA, CPA. She is the principal at Artio Partners.

Artio Partners is a CPA firm for American expatriates living abroad and dual citizens. We specialize in past due expat tax returns and complex international tax issues like FBAR, FATCA, foreign tax credit, foreign real estate, PFIC, foreign adoption and controlled foreign corporations.

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