Dealing with the Newest Legislation for Foreign Asset Compliance

The Foreign Asset Tax Compliance Act (“FATCA”) became law in March 2010 and was intended to target non-compliance and tax evasion by US taxpayers with foreign accounts and offshore assets.  There were two sides to FATCA.  The first side focused on the taxpayer and increasing the reporting requirements for certain assets.  These provisions included the creation of Form 8938, which must be filed annually by US taxpayers with offshore assets above a certain threshold.

The second side of FATCA focuses on the financial institutions.  This includes foreign financial institutions that have accounts held by US taxpayers or entities in which US taxpayers have significant interest.  It also includes US financial institutions that make certain payments to foreign entities that have not documented their FATCA status.

This latter item resulted in an overhaul in 2014 of Form 1042-S, the annual form that reports U.S. source income and withholding on certain payments made to foreign persons and entities.  This overhaul made preparing these forms significantly more complicated.  Additionally, in most cases, the forms are required to be e-filed through a complicated system called FIRE (“Filing Information Returns Electronically”).  The instructions for the form itself are 28 pages long…the instructions for e-filing the form are 72 pages long!

While FATCA was targeted at financial institutions, it also impacts US businesses with foreign investors that receive payments of investment income, such as dividends and interest.   For instance, there are many venture capital or real estate investment entities that these reporting requirements impact.

Allow us to assist you in navigating these complex and time-consuming requirements.  These forms are so new that few practitioners have working knowledge of their complexities.  We have done our homework and have the software and internal resources to accomplish even sizable 1042-S projects.

Contact our firm today to discuss your Form 1042-S or other FATCA compliance needs and how we can assist you