FATCA is a widely used term to refer to the US tax implications for US citizens overseas. While citizenship based tax laws have existed since 1864, it is only quite recently that this has come to the forefront of the tax world, due to FATCA.
FATCA (Foreign Account Tax Compliance Act) was introduced under the Barack Obama administration in 2010. A series of laws were introduced under the banner of FATCA, and in essence, now required foreign institutions (such as banks) to report the existence (and balances) of financial accounts owned by US citizens, directly to the IRS. This meant that the veil of secrecy regarding foreign bank accounts was now lifted, and foreign income could not be concealed.
It was with these laws, that the reporting requirements of US citizens based overseas came to the spotlight. Ordinary US citizens who lived outside the United States (and in some cases, had never even been to the United States) were gradually becoming aware of their requirements to file tax returns to the US.
New Zealand and Australia signed FATCA legislation with the United States in 2014 and 2015 respectively. This new ability by the IRS to obtain information on the bank accounts of overseas US citizens sent shockwaves through expatriate communities, especially those who had been completely unaware that they had been required to file US tax returns all along.
This is not something that needs to be cause for worry or panic, however, it is important also not to bury your head in the sand.
The IRS is well aware that only a very minor portion of the US expatriate community was aware of their US tax obligations, and that the vast majority US expatriates were completely unaware of their obligations.
The IRS has created various amnesty programs, allowing US citizens residing overseas to become compliant with their tax obligations, without penalty for original failure to file. In most cases, this involves filing only a limited number of returns and certainly does not go back to the original date of leaving the US.Call us today to learn more
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