No More Delays for FATCA: Get Ready for Disclosure

The US Foreign Account Tax Compliance Act (FATCA) will definitely come into effect on 1 July this year with no possibility of further delay, according to officials of the US Internal Revenue Service (IRS).

FATCA, which was signed in March 2010, requires foreign banks and other financial institutions to report U.S. account holders who are evading federal taxes, or else risk steep penalties. Foreign financial institutions with U.S. customers who do not enter into reporting agreements with the Internal Revenue Service will face a 30 percent withholding on U.S. income and capital payments, according to the IRS.

In IRS Notice 2013-43 “Revised Timeline and Other Guidance Regarding the Implementation of FATCA”, the IRS indicates that withholding agents generally will be required to begin withholding on payments made after June 30, 2014.

In a report delivered in December 2013 at the annual Public Meeting of the IRS Information Reporting Program Advisory Committee (IRPAC), the IRPAC recommended that the IRS postpone the requirement to impose FATCA withholding until January 1, 2015.  However, senior IRS officials have now signaled that the delays are over.

IRS deputy commissioner Michael Danilack recently told the New York State Bar Association’s Tax Section that there is ‘absolutely no chance’ of further postponements. During a question-and-answer portion of his keynote address to the New York State Bar Association’s Tax Section, an audience member asked whether the effective date will be pushed back. Danilack responded that there will be no further delays to implementation. “There is absolutely no chance that it’s going to slip,” he said. “We think we can make it, all of us.” Danilack, who runs the large business and international division of the Internal Revenue Service, also said that the much-anticipated guidance on FATCA will be published very soon. “We’re extremely close,” he said. “It’s not just soon, it’s imminent.”

Our law office, which represents many taxpayers throughout the U.S. and around the world with undisclosed offshore accounts, believes that FATCA is a game-changer in international tax compliance. FATCA should encourage more U.S. taxpayers with undisclosed offshore accounts to come forward before the government contacts them.

Patel Law Offices is a law firm dedicated to helping clients resolve complicated tax, criminal tax, and international tax problems. Our firm assists (and defends) clients and their advisors to legally disclose (and legitimize) foreign accounts.