Tips for being FATCA compliant

This June the IRS modified its offshore disclosure programs to encourage U.S. citizens to come forward and report their assets and mitigate risk of penalty or prosecution.

To help your clients avoid running afoul of FATCA, a bulletin from PwC advises them to:

Determine citizenship. In some cases, non-resident Americans are unaware of their citizenship. U.S. citizenship is dependent on a variety of factors, including age, parentage and acts of expatriation. However, dual citizens, including Canadians who are unaware that they also hold U.S. citizenship, may be required to comply with IRS filing requirements.

Read: Foreign tax tips from Golombek

Assess program eligibility. Most people can follow the 2014 Streamlined Filing Compliance Procedures, which apply to those who may not have been aware of their filing requirements and did not willfully fail to report their accounts. In the majority of cases, people who fall under this program are required to report three years of tax returns.

The 2014 Offshore Voluntary Disclosure Program (OVDP) is designed for people concerned that their failure to report income and disclose foreign financial assets wish to mitigate substantial penalties and possible criminal prosecution. The voluntary disclosure period under OVDP is the most recent eight tax years.

Read: Dual citizens challenge FATCA

Comply now to avoid penalties later. Time and money spent on compliance now can save U.S. citizens from audits and penalties in the future. In many instances, citizens reporting for the first time find that they owe little or no taxes, but simply need to disclose income and assets. Coming forward before being investigated significantly mitigates the risk of penalties and provides individuals with greater clarity on their responsibilities to the IRS.

Read: IIAC aims to ease FATCA burden

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.