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UK FATCA Letters

While the United Kingdom signed its FATCA implementation treaty in 2014, UK FATCA letters (i.e. FATCA letters from UK financial institutions) continue to pour into the mailboxes of U.S. taxpayers. In this article, I would like to discuss the purpose and impact of UK FATCA Letters.

UK FATCA Letters

UK FATCA Letters play an integral role in the FATCA Compliance of UK financial institutions. Under the Foreign Account Tax Compliance Act (FATCA), the UK foreign institutions are obligated to collect certain information regarding U.S. owners of UK bank and financial accounts and provide this information to the IRS. The collected information must include the name, address and social security number (or, EIN number) of U.S. accountholders.

In order to collect the required information and identify who among their clients is a US person for FATCA purposes, the UK financial institutions send UK FATCA Letters to their clients, asking them to provide the information by the required date. If there is no response within the required period of time (which may be extended), the UK financial institutions report the account to the IRS with the classification as a “recalcitrant account”.

UK FATCA Letters and Undisclosed UK Bank and Financial Accounts

While UK FATCA Letters are important to FATCA compliance of UK financial institutions, they also may have important impact on U.S. taxpayers with undisclosed bank and financial accounts in the United Kingdom, particularly on the ability of such U.S. taxpayers to timely disclose their foreign accounts.

Once a U.S. taxpayer receives UK FATCA Letters, he should be aware that the clock has started on his ability to do any type of voluntary disclosure. This is the case because UK FATCA Letters demand a response within certain limited period of time. Then, the UK financial institutions will report the account to the IRS, which may prompt IRS examination which, in turn, may deprive the taxpayer of the ability to take advantage of any type of a voluntary disclosure option.

Furthermore, UK FATCA Letters start the clock for the taxpayers to do their voluntary disclosure in an indirect way. If the taxpayers do not complete their voluntary disclosure within reasonable period of time (which may differ depending on circumstances) after they receive the letters, the IRS may proceed based on the assumption that prior noncompliance with U.S. tax requirements by the still noncompliant taxpayers was willful.

Finally, UK FATCA Letters may impact a U.S. taxpayer’s legal position with respect to current and future tax compliance, because UK FATCA Letters can be used by the IRS as evidence to prove awareness of U.S. tax requirements on the part of noncompliant U.S. taxpayers. This is particularly relevant for taxpayers who receive these letters right before the tax return and FBAR filing deadlines.

Contact Sherayzen Law Office if You Received UK FATCA Letters

If you received one or more UK FATCA Letters from foreign financial institutions, you should contact Sherayzen Law Office as soon as possible. Attorney Eugene Sherayzen is one of the world’s leading professionals in the area of offshore voluntary disclosures and he will personally analyze your case and create the appropriate voluntary disclosure strategy. Then, under his close supervision, his legal team will implement this strategy, including the preparation of all required tax forms.

Call Us Today to Schedule Your Confidential Consultation!

Tata Mutual Fund FATCA Letters and Indians in the United States

Tata Mutual Fund FATCA Letters were some of the first FATCA letters received by U.S. investors in India. A lot of these U.S. investors were Indians born in India, but living and working in the United States. However, the process of sending FATCA letters is not over at this point. Therefore, more and more Indian-Americans should expect to receive Tata Mutual Fund FATCA Letters. In this article, I explore the purpose of Tata Mutual Fund FATCA Letters and how these letters affect Indians who live and work in the United States.

FATCA

The Foreign Account Tax Compliance Act (FATCA) became a law in 2010. The main purpose of FATCA is to combat tax noncompliance of U.S. taxpayers with foreign accounts. Since its enaction, FATCA was successfully implemented by most countries around the world and became a new global standard for the exchange of tax information. In fact, more than 110 jurisdictions today operate under the worldwide reach of FATCA.

What makes FATCA different from other tax regimes is the fact that its core target are foreign financial institutions and it has “teeth” in the form of 30% tax withholding on transactions done with noncompliant foreign financial institutions. While the 30% tax withholding provision is important, it is not directly relevant to our discussion.

On the other hand, it is very important to understand how FATCA impacts the behavior of foreign financial institutions – FATCA obligates foreign financial institutions to turn over certain information regarding foreign accounts owned by U.S. persons as well as certain information regarding the U.S. owners themselves. In essence, FATCA effectively turns all compliant foreign financial institutions into de-facto IRS informants.

This means that foreign financial institutions report to the IRS the information which, prior to FATCA, the IRS could only obtain after a long and expensive investigation. Therefore, the investigative reach of the IRS has grown enormously and the IRS is now able to find and track down with far more ease noncompliant U.S. taxpayers.

Furthermore, another part of FATCA is targeting U.S. taxpayers themselves by requiring them to report “Specified Foreign Assets” on Form 8938.

Tata Mutual Fund FATCA Letters

FATCA is usually implemented after an adoption of a FATCA implementation treaty. India signed the Model 1 FATCA treaty which came into force on August 31, 2015.

As a foreign financial institution, Tata Mutual Fund is obligated to comply with the obligations accepted by the Indian government under the FATCA agreement. For this purpose, Tata Mutual Fund needs to collect and turn over certain information regarding its U.S. investors.

Tata Mutual Fund FATCA Letters are designed exactly for this purpose – to collect the required FATCA information regarding U.S. investors into Tata Mutual Fund.

Impact of Tata Mutual Fund FATCA Letters on Indian-American Investors

Tata Mutual Fund FATCA Letters may have a profound impact on Indian who live and work in the United States while investing into Tata Mutual Fund, especially if this investment was not timely disclosed to the IRS. I would like to focus here on two issues: identification and voluntary disclosure.

First, Tata Mutual Fund FATCA Letters would allow IRS to identify noncompliant Indian-American investors into Tata Mutual Fund. This can lead to an IRS investigation and imposition of civil and even criminal penalties (depending on the gravity of tax noncompliance).

Second, by reporting noncompliant U.S. investors, Tata Mutual Fund FATCA Letters may trigger an IRS investigation that may prevent these U.S. investors from doing a timely voluntary disclosure. It must be remembered that, one of the fundamental conditions of all IRS voluntary disclosure options is that the U.S. taxpayer is not under IRS examination or investigation.

Hence, when a U.S. taxpayer receives Tata Mutual Fund FATCA Letters, the clock starts on his ability to do timely voluntary disclosure. On the other hand, if the taxpayer refuses to provide the requested information, he may be classified as a “recalcitrant taxpayer” (although, the Indian FATCA Agreement offers better treatment to recalcitrant taxpayers than most other FATCA treaties).

Contact Sherayzen Law Office if You Received a FATCA Letter from India

If you are an Indian-American or just an Indian who lives and works in the United States and you received a FATCA letter from your Indian financial institution, please contact Sherayzen Law Office for experienced help. Our professional legal team will thoroughly analyze your situation, propose the best strategy with respect to responding to the FATCA Letter, review your voluntary disclosure options and prepare all legal and tax documents required to complete your voluntary disclosure.

Call Us Today to Schedule Your Confidential Consultation!

FATCA Letters

Following the implementation of Foreign Account Tax Compliance Act (“FATCA”) on July 1, 2014, foreign banks around the world started sending out FATCA Letters to their US (or suspected US) customers who had accounts on record prior to as well as on June 30, 2014. In a previous article, I discussed the reason for FATCA Letters and their impact on US taxpayers with undisclosed foreign accounts. In this article, I would like to focus the discussion on what type of information is typically contained in FATCA Letters.

FATCA Letters: Background Information

FATCA is codified in the Internal Revenue Code Sections 1471 through 1474 and contains an unprecedented amount of new international tax requirements for US persons, foreign financial institutions (FFIs), and US withholding agents (USWAs).

For the purpose of this article, I will concentrate solely on the FATCA requirement to analyze pre-existing accounts and report them to the IRS. Currently, according to the new deadline extensions found in IRS Notice 2014-43, “pre-existing” accounts are those accounts that were maintained by FFIs prior to or on June 30, 2014.

These pre-existing accounts are the main target for FATCA letters sent out to their clients by foreign banks. Of course, FATCA letters may also apply to the accounts opened after July 1, 2014, but, in many cases, these accounts were already opened according to FATCA account opening procedures (hence, all of the questions that are usually contained in FATCA letters should have been asked at the point when the account was opened).

The purpose for FATCA letters is for the FFI to obtain the necessary information to comply with its own FATCA reporting requirements. Hence ,the content of the FATCA letters is going to be fairly uniform irrespective of the FFI that sends it, even though the format of FATCA letters may differ greatly among the countries and even FFIs within a country.

FATCA Letters: Typical Content

As I mentioned above, virtually every FATCA Letters is geared toward obtaining certain types of information which is necessary for the FFI’s own reporting to the IRS (either directly or through a national tax authority). The overall requested information can be divided into three categories:

1. Personal Information

FATCA letters first typically try to confirm the exact name, nationality and address of the account holder. Most FATCA letters will also ask for the date of birth, country of birth and the account holder’s telephone number.

2. Determination of US Status and Form W-9

This is the most critical part of FATCA Letters, because it aims at verifying whether the account holder is a US person in any common way. The exact format of this part differs greatly from bank to bank, but a typical FATCA letter would either request the account holder to fill-out Form W-9 directly or first ask a few questions (such as “do you have US nationality”, “are you a US Lawful Permanent Resident”, or “Have you spent a substantial period of time in the USA”) and then ask to fill-out Form W-9 if any of these questions are answered positively.

Also, depending on a country, an FFI would also typically ask the taxpayer to sign some sort of a consent to the disclosure of FATCA data to the IRS. In Switzerland, it is always present.

3. Further Determination of Status Questions; Possible Forms W-8BEN and W-9

Once the first basic part of the US status determination is finished, FATCA letters go on to ask a second set of questions aimed at uncovering potential inconsistencies in the status claim and verify if the account holder may be a US person in some other way.

In this part, FATCA letters typically ask whether the account holder was born in the United States, is a US person for any other reason, has effectively connected US income, has US mailing address, and has a US telephone number.

If the answer to any of these questions is “yes”, FATCA letters would generally ask the taxpayer to provide further information. For example, where the account holder is a US person for any other reason or cannot prove that he is not a US person if he was born in the United States, then FATCA letters would request Form W-9 and a consent to the disclosure of FATCA data to the IRS.

On the other hand, if the account holder persists in being considered as a non-US person and can prove it, then FATCA letters would ask for Form W-8BEN and a non-US passport (or other similar documentation). In case the account holder was born in the United States but claims to be a non-US person, FATCA letters would demand a copy of the certificate of loss of US nationality.

W-8BEN may also be required if the account holder is not a US person but has US-source income.

Impact of FATCA Letters on US Account Holders

The basic purpose behind FATCA is to allow the IRS to easily identify a US person’s non-compliance with US tax laws concerning reporting of foreign-source income and foreign assets. FATCA letters allow the FFIs to quickly identify with a fair degree of certainty whether their account holders are US persons and ultimately relate this information to the IRS on Form 8966.

This means that US taxpayers with undisclosed foreign accounts are currently facing an imminent risk of a third-party disclosure of their tax non-compliance to the IRS. If these taxpayers do not do anything, the risk of the IRS finding them has become unacceptably high.

Moreover, if the IRS commences an investigation of these US taxpayers before they engage in any type of voluntary disclosure, these taxpayers are not likely to be able to enter the IRS Offshore Voluntary Disclosure Program leaving them potentially unprotected to the draconian FBAR criminal and civil penalties as well as potentially large income tax penalties.

Thus, the receipt of FATCA letters is a critical legal event that starts the clock for these taxpayers in terms of their ability to voluntarily disclose their accounts. This means that these taxpayers need to act quickly and immediately consult an international tax attorney who specializes in this area to explore their voluntary disclosure options.

Contact Sherayzen Law Office if You Received a FATCA Letter

If you have undisclosed foreign accounts and you received a FATCA letter from your foreign bank, you should contact Sherayzen Law Office immediately. Mr. Eugene Sherayzen is and experienced international tax attorney who has successfully helped hundreds of US taxpayers like you to bring their affairs back into US tax compliance. Sherayzen Law Office, PLLC can help you!

Contact Us to Schedule Your Confidential Consultation Now!

Receiving FATCA Letter from Your Foreign Bank

Since July 1, 2014, the most feared US legislation regarding international tax enforcement – Foreign Account Tax Compliance Act (“FATCA”) – is being implemented by most banks around the world. As part of this compliance, foreign banks are sending out so-called FATCA letters to their customers seeking to verify certain types of information. In this article, I would like to introduce this FATCA letter and what the FATCA letter may mean to a US taxpayer with undisclosed foreign bank and financial accounts.

What is FATCA?

FATCA was signed into law in 2010 and codified in Sections 1471 through 1474 of the Internal Revenue Code. The law was enacted in order to reduce offshore tax evasion by US persons with undisclosed offshore accounts. There are two parts to FATCA – US taxpayer reporting of foreign assets and income on Form 8938 and reporting by a foreign financial institution (FFI) of foreign bank and financial account to the IRS.  Here, I will concentrate on the latter, because it is an FFI that sends out the FATCA letter.

FATCA generally requires a foreign payee (i.e. FFI) to identify certain US accountholders and report their accounts to the IRS. Such reporting is done either through an FFI Agreement directly to the IRS or through a set of local laws that implement FATCA.

If an FFI refuses to do so or otherwise does not satisfy these requirements (and is not otherwise exempt), US-source payments made to the FFI may be subject to withholding under FATCA at a rate of 30%. Note that FATCA information reporting and withholding requirements generally do not apply to FFIs that are treated as “deemed-compliant” because they present a relatively low risk of being used for tax evasion or are otherwise exempt from FATCA withholding.

FATCA Implementation and FATCA Letter

As of July 1, 2014, the FATCA went into full effect, which means that FFIs now have to report the required FATCA information to the IRS. However, it appears that the IRS is not likely to fully enforce the penalties until the end of 2014 just to give FFIs enough time to comply.

Nevertheless, many FFIs are making a full effort to comply with FATCA. As part of this effort, FFIs around the world have been sending out “FATCA letters”. A FATCA letter is basically a letter from your bank or other financial institution which introduces FATCA to their customers and asks them to provide answers to a various set of questions aiming to find out information specific to FATCA compliance. Often, instead of asking all of these questions directly a FATCA letter would simply list out a series of forms that contain these questions (for example, W9, W8BEN, et cetera).

If the customer refuses to answer the questions or provide the necessary forms, the financial institution would often close the account and report it as a “recalcitrant account” to the IRS.

Impact of FATCA Letter on US Taxpayers with Undisclosed Accounts

A FATCA letter may have a very profound impact on a US taxpayer with foreign accounts which were not properly disclosed to the IRS (usually on the FBAR and/or Form 8938). Let’s concentrate on two most important aspects of receiving a FATCA letter. First, a FATCA letter puts the taxpayer on notice that he is required to report his foreign financial accounts and foreign income to the IRS. This may have a big impact on whether the taxpayer can later certify his non-willfulness for the purposes of the Streamlined Filing Compliance Procedures.

Second, a FATCA letter starts the clock for the taxpayer to beat the bank’s disclosure of his account to the IRS.

In essence, receiving a FATCA letter forces the taxpayer to quickly choose the path of his voluntary disclosure under significant time pressure.

Contact Sherayzen Law Office if You Received a FATCA Letter

If you received a FATCA letter from your bank or any other financial institution, contact Sherayzen Law Office immediately to assess your situation and determine the path of your voluntary disclosure. Our highly experienced team of international tax professionals will thoroughly analyze your case, prepare all of the required documentation (legal documents and tax forms), conduct the voluntary disclosure and defend your interests before the IRS.

Remember, time is of the essence in these matters. So, Call Us Now to Schedule Your Confidential Consultation!

FATCA, Form 8938 and TD F 90-22.1 Disclosure: Making Informed Decisions

The past decade brought on a wave of new international tax legislation as well as unprecedented enforcement of older tax laws. From FinCEN Form 114 (formerly Form TD F 90-22.1) (commonly known as “FBAR”) to new FATCA legislation that led to the creation of Form 8938, the current US tax regime with respect to international obligations of US persons has become so complex that it is almost impossible to navigate it for most taxpayers without the professional help of international tax lawyers.

Increasing Complexity of US Tax Laws Requires International Tax Attorney Involvement

With increased complexity of the international tax landscape, the chance of running afoul some US tax rule has become very, very high. Since international tax laws are usually associated with high non-compliance penalties, the taxpayers need to make an informed decision on how to deal with their prior tax non-compliance.

Nowhere is the urgency and necessity of making informed decisions is so high as when it comes to FBARs and Form 8938, primarily because of draconian penalties associated with failure to file these forms Form 114 (formerly TD F 90-22.1). The ability to analyze the fact pattern, spot all the issues and identify available options based on experience are crucial in this esoteric area of law and the international tax attorneys experienced in voluntary disclosures should be handling such cases.

Choosing the Right Attorney is a Challenge

Unfortunately, it is precisely in this area that there is a serious obstacle to getting the necessary information to make an informed decision. The obstacle is that there is a tremendously small number of international tax attorneys who practice in this area of law and these professionals are shielded by a mass of inexperienced and unqualified attorneys and especially accountants.

It is virtually impossible for taxpayers to state with certainty who is the right lawyer for their case. A lot of taxpayers immediately fall into the trap of going to their accountants to do voluntary disclosure. In a prior article, I already explained why this could be present a huge problem for the taxpayers.

Other taxpayers correctly realized that they need a tax attorney to get help with their voluntary disclosure. However, some of these taxpayers often make a mistake of hiring a tax lawyer who is not practicing international tax law.

Some taxpayers fall into the “local” trap where they choose an attorney because he or she is in their state or town, not because the attorney is an international tax attorney or experienced in the area of voluntary disclosures.

You Should Choose an International Tax Lawyer Experienced in Form 8938 (FATCA) and FBAR Voluntary Disclosure

In order to make an informed decision, the taxpayers who have undisclosed foreign assets should contact an international tax attorney who is experienced in the are of voluntary disclosures.

Sherayzen Law Office is an international tax law firm that is highly experienced in the area of voluntary disclosures involving FBARs and Forms 8938. Owner Eugene Sherayzen is an experienced international tax attorney who will thoroughly analyze your case, identify all relevant issues, provide accurate estimates of your FBAR and Form 8938 liability, and propose creative legal voluntary disclosure options.

Contact Sherayzen Law Office for help with FBARs and Form 8938.