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Specified Individual | FATCA International Tax Lawyers and Attorneys

Specified Individual is a key tax term that must be correctly understood in order to properly identify the persons who are required to file FATCA Form 8938. In this brief article, I will describe the general definition of a Specified Individual for Form 8938 purposes.

Specified Individual: FATCA Form 8938 Background

In 2010, one of the most important events in modern history of US taxation happened – the passage and signing of the Foreign Account Tax Compliance Act or FATCA. FATCA completely revolutionized the entire landscape of international tax law, elevating the international exchange of tax-related and account-related information to an unprecedented level. FATCA also created a brand-new requirement called Form 8938.

Form 8938 requires US taxpayers to report to the IRS their Specified Foreign Financial Assets (“SFFA”) together with the taxpayers’ US tax returns. Prior to tax year 2016, only a Specified Individual was required to report his SFFA to the IRS. Starting tax year 2016, a Specified Domestic Entity is also required to disclose its SFFA on Form 8938.

Specified Individual Definition

Treas. Reg. §1.6038D-1(a)(2) defines a “specified individual” as anyone who is: (I) US citizen; (ii) resident alien of the United States for any portion of the taxable year; (iii) nonresident alien for whom an election under 26 U.S.C. §6013(g) or (h) is in effect (i.e. nonresident alien who makes an election to be treated as a resident alien in order to file a joint US tax return); or (iv) nonresident alien who is a bona fide resident of Puerto Rico or a section 931 possession (as defined in Treas. Reg. §1.931-1(c)(1) – i.e. Guam, American Samoa and Northern Mariana Islands).

Resident alien includes anyone who is a US permanent resident or meets the substantial presence test.

Contact Sherayzen Law Office for Help With Form 8938 If You Are a Specified Individual

If you are a specified individual who has undisclosed foreign accounts or any other SFFA, you should contact Sherayzen Law Office as soon as possible to explore your offshore voluntary disclosure options. Sherayzen Law Office is a highly experienced international tax law firm that specializes in offshore voluntary disclosures, including Streamlined Compliance Procedures (both Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures), Delinquent FBAR Submission Procedures, Delinquent International Information Return Submission Procedures and Reasonable Cause (so-called Noisy) Disclosures.

We have helped hundreds of US taxpayers all around the globe to bring their US tax affairs into full compliance with US tax laws, and We can Help You! Contact Us Today to Schedule Your Confidential Consultation!

H1B Holder FATCA Requirements

There is a confusion in general public about the H1B holder FATCA requirements. The key concept that lies at the heart of the U.S. tax obligations of an H1B holder is tax residency (which is very different from the definition of a U.S. permanent resident in immigration law). In this article, I will discuss the concept of tax residency and the H1B Holder FATCA requirements.

H1B Holder FATCA Requirements: H1B Visa

H1B visa is a non-immigrant visa that allows U.S. companies to hire foreign workers to work in the United States. These workers have to be working in occupations that require theoretical or technical expertise in specialized fields such as in architecture, engineering, mathematics, science and medicine.

H1B Holder FATCA Requirements: FATCA

The Foreign Account Tax Compliance Act (FATCA) was signed into law in the year 2010. This law was passed by U.S. Congress with the specific purpose of combating tax noncompliance of U.S. taxpayers with undeclared offshore accounts. Today, FATCA is one of the most influential tax information exchange regimes in the world; through a huge network of bilateral treaties, the IRS managed to implement FATCA in the great majority of the countries.

FATCA consists of basically two parts. First, it obligates foreign financial institutions to turn over to the IRS certain information regarding foreign accounts owned by U.S. persons as well as certain information regarding the U.S. owners themselves. The H1B Holder FATCA information is also required to be turned over to the IRS.

The second part of FATCA imposes a new reporting requirement, IRS Form 8938, which must be filed with a U.S. tax return. Form 8938 requires U.S. taxpayers to disclose specified foreign assets to the IRS. “Specified Foreign Assets” includes various class assets, including foreign financial accounts.

H1B Holder FATCA Requirements: Tax Residency and FATCA Requirements

The key to understanding H1B holder FATCA requirements is the determination of whether an H1B holder is a tax resident of the United States. In order for an H1B holder to be classified as a U.S. tax resident, he must pass the “substantial presence test”. The substantial presence test determines the tax residency of a person based on the number of days this individual was physically in the United States.

If the substantial presence test is satisfied, the H1B holder is considered to be a tax resident of the United States. As a U.S. tax resident, the H1B holder FATCA requirements will be the same as those of any other U.S. tax resident, including U.S. citizens and U.S. permanent residents.

This means that, under FATCA, foreign banks should disclose to the IRS all of the foreign financial accounts owned directly, indirectly or constructively by the H1B holder. At the same time, the H1B holder FATCA obligations extend to filing Form 8938 for all of the required specified foreign assets, including foreign financial accounts, foreign stocks and other securities, foreign bonds, foreign derivatives and ownership of foreign businesses (unless such ownership is reported on another IRS form; in this case, Form 8938 should indicate the form on which such foreign business ownership is disclosed), and other assets.

H1B Holder FATCA Requirements: Late Disclosure

What if H1B holder FATCA obligations were not timely satisfied (i.e. Forms 8938 should have been filed, but they never were) and the H1B holder just found out about it? If an H1B holder did not file Forms 8938 timely, he may be subject to Form 8938 penalties. Moreover, in most such cases, such an H1B holder is likely to have failed to comply with other important U.S. international tax requirements such as FBAR and worldwide income reporting. The combination of FATCA, FBAR, income reporting and other penalties may create a huge tax liability that may even exceed the total value of the H1B holder’s foreign assets.

In such cases, the H1B holder should contact an international tax attorney experienced in offshore voluntary disclosures as soon as possible. Various offshore voluntary disclosure options offer varying rates of reduced penalties, sometimes even with the possibility of eliminating all penalties. However, time is of the essence – if foreign banks report the H1B holder’s foreign assets as part of their FATCA compliance and the IRS commences its investigation of the H1B holder FATCA noncompliance, then all of the voluntary disclosure options may automatically close.

Contact Sherayzen Law Office for Legal Help with H1B Holder FATCA Compliance

If you work in the United States on H1B visa, have foreign assets which are required to be disclosed under FATCA and have not done so, you should contact Sherayzen Law Office as soon as possible. Sherayzen Law Office is an experienced international tax law firm that specializes in FATCA compliance for U.S. taxpayers, including voluntary disclosures for H1B holders.

Contact Us Today to Schedule Your Confidential Consultation!

Minneapolis MN FATCA Tax Lawyer Update: FATCA-Related Forms

As a Minneapolis MN FATCA Tax Lawyer, I often receive questions about what US tax forms precisely are affected by the implementation of the Foreign Account Tax Compliance Act (FATCA). Here is a list of the tax forms most affected by FATCA:

1. Minneapolis MN FATCA Tax Lawyer: IRS Form 1042 and 1042-S

Form 1042 is used as an annual withholding tax return for US-source income of non-US persons. Form 1042-S is used to report income that is considered to be “Amounts Subject to Reporting on Form 1042-S” (basically US-source income paid to foreign persons such as FDAP (fixed or determinable annual or periodical) income; certain gains from the disposal of timber, coal or domestic iron; and gains related to contingent payments received from the sale or exchange of intangible property (such as intellectual property rights), amounts withheld under Chapters 3 and 4 of the Internal Revenue Code, distributions of effectively connected income by a publicly traded partnership (or nominee), and certain federal procurement payments paid to foreign persons who are subject to withholding under Section 5000C.

2. Minneapolis MN FATCA Tax Lawyer: IRS Form 8966

For a Minneapolis MN FATCA Tax Lawyer, IRS Form 8966 is highly important. The main reason is because Form 8966 is an actual FATCA Report that needs to be filed by foreign financial institutions (FFIs) and their variations (PFFI, Us Branch of a PFFI treated as non-US person, RDC FFI, Limited Branch or Limited FFI, and Reporting Model 2 FFI), QI (qualified intermediary), WP (withholding foreign partnership), WT (withholding foreign trust) , direct reporting NFFE, and a Sponsoring Entity.

The purpose of this form is to allow these filers to report the required FATCA information with respect to mainly foreign accounts held (directly or indirectly) by US persons.

3. Minneapolis MN FATCA Tax Lawyer: IRS Forms W-8 Series

The full list of these forms include: Form W-8BEN, Form W-8BEN-E, W-8ECI, Form W-8EXP, and W-8IMY. The full discussion of these forms is beyond the scope of this article; suffice it to state that all of these forms play a critical part in FATCA and tax withholding compliance of various FFIs and NFFEs.

4. Minneapolis MN FATCA Tax Lawyer: IRS Form 8938

As a Minneapolis MN FATCA Tax Lawyer, I believe that IRS Form 8938 is one of the most important developments that came out of FATCA. Unlike the other forms listed in this article, this form needs to be prepared directly by the US taxpayers and filed with their US tax returns. The importance of this form cannot be overstated, because Form 8938 is a “catch-all” form which steps-in with its own reporting requirements when other international tax forms are not required. It also incorporates by reference some of the most important international tax compliance requirements even when other international tax forms contain detailed information.

Minneapolis MN FATCA Tax Lawyer: Other Forms

The four categories of forms above describe the US tax forms that have been impacted by FATCA in a direct and profound way. There are other forms that have been affected by implementation of FATCA, but this impact is a rather indirect one (by reference or implication).