Avoiding FATCA Penalties as an American Abroad
Avoiding penalties under the Foreign Account Tax Compliance Act (FATCA) is critical for Americans living abroad. Here’s how to stay compliant and avoid unnecessary penalties.
Understanding FATCA
The FATCA is a U.S. tax law that impacts American expats significantly. It requires U.S. citizens, green card holders, and tax residents to report foreign financial assets and offshore accounts to the IRS.
Failing to comply can result in severe penalties. It’s not just about the financial implications. Non-compliance can also affect your ability to travel, work, or live abroad.
Understanding the requirements and maintaining compliance is critical.
Key FATCA Requirements
Here are some fundamental FATCA requirements for expats:
- Foreign Bank Account Reporting (FBAR): Any U.S. person with a total of $10,000 or more in foreign financial accounts at any point in a calendar year must file an FBAR.
- Form 8938: U.S. taxpayers with specific foreign financial assets above a certain threshold must report these to the IRS using Form 8938.
- Foreign Earned Income Exclusion (FEIE): Qualifying for the FEIE allows you to exclude up to $105,900 (for 2019) of your foreign earned income from U.S. tax.
Remember, these are only general guidelines. Specific circumstances might require additional forms or reporting.
Facing FATCA Penalties
Non-compliance with FATCA requirements can result in hefty penalties.
For FBAR, the penalty can be as high as $10,000 per violation for non-willful violations. For willful violations, the penalty can be up to the greater of $100,000 or 50% of the amount in the account at the time of the violation.
Penalties for failing to file Form 8938 can be as high as $60,000, along with potential criminal penalties.
As you can see, the financial implications of non-compliance are severe.
How to Avoid FATCA Penalties
Here are some steps to help avoid FATCA penalties:
- Understand your obligations: The key to avoiding FATCA penalties is understanding your reporting obligations. This includes knowing the forms you need to file, the thresholds for reporting, and the deadlines.
- Stay organized: Keep accurate records of your foreign financial assets. This will make it easier when it’s time to report them to the IRS.
- Get professional help: Navigating U.S. tax law can be complex, especially for expats. Consider hiring a professional who specializes in expat tax services to ensure you’re meeting all your obligations.
- File on time: Filing your tax return and any required information reports on time can help you avoid penalties.
Getting Professional Help
Avoiding FATCA penalties can be a complex process. That’s why it’s advisable to get professional help, especially if you’re an American living abroad.
Professional tax advisors who specialize in expat tax services can help you understand your obligations under FATCA. They can ensure you’re filing the right forms on time and avoiding potential penalties.
If you need help navigating FATCA requirements, don’t hesitate to book a consultation with a tax professional. They can provide advice tailored to your specific situation and ensure you’re staying compliant with all U.S. tax laws.
At PCCI Tax, we offer transparent pricing and specialize in helping Americans living abroad navigate their U.S. tax obligations.
Don’t risk facing severe FATCA penalties. Get the professional help you need to ensure you’re staying compliant and avoiding unnecessary penalties.
