Are You Exempt From Filing FATCA? (3 Filing Exceptions)

Are You Exempt From Filing FATCA? (3 Filing Exceptions)

Are You Exempt From FATCA?

FATCA refers to the Foreign Account Tax Compliance Act. There are many components to FATCA, but for US persons who have foreign accounts and assets, the key component for them is to make sure that they timely and accurately report their foreign accounts and assets on form 8938 in accordance with Internal Revenue Code 6038D. Unlike the FBAR (which is used to report foreign bank and financial accounts aka FinCEN Form 114), FATCA has more escape routes available to assist taxpayers with avoiding having to file the 8938 Form if they can meet some of the different exemptions. Let’s take a look at what some of these exemptions are.

Modify US Tax Filing Status

Unlike the FBAR, which has the same threshold following requirements whether or not the taxpayers is a US resident or foreign resident — and whether or not they file singular married filing jointly — FATCA is different. With FATCA, the threshold requirements for filing will vary depending on whether the person is considered a US resident or foreign resident, and whether or not the taxpayers file Married Filing Jointly or Married Filing Separate/Single. Therefore, if a Taxpayer is considering filing married filing separate but does not want to include their foreign accounts for FATCA, they may consider filing Married Filing Jointly so that the threshold for reporting increases — and possibly keeps the taxpayer below the FATCA reporting threshold.

Not Having to File a US Tax Return

it is also important to note that only US persons who have to file an actual U.S. tax return are required to file a Form 8938 for FATCA purposes. If a person can keep their own personal income sufficiently low so that they did not have to file a tax return — they would not have to file a form 8938 to report their FATCA assets. Sometimes this can be accomplished through gifting between spouses or other relatives.

Election as A non-US Person and Form 1040(NR) – Maybe

Another important requirement for FATCA reporting is that the Taxpayer is required to file tax returns as a US person. Therefore, if a person is either able to modify their US residents so that they do not meet the Substantial Presence Test or possibly make a Treaty Election to be treated as a foreign person sufficient so that they do not have to file a Form 1040 but rather a 1040NR, then they may be exempt from FATCA – at least for the present tax year.

Current Year vs Prior Year Non-Compliance

Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist that specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. 

Contact our firm today for assistance.