Foreign Account Tax Compliance Act
The Foreign Account Tax Compliance Act was enacted in 2010 as part of the HIRE Act. FATCA will combat noncompliance by U.S. taxpayers through foreign accounts. U.S. taxpayers will report financial assets outside of the U.S. to the IRS. Foreign financial institutions will enter into an agreement with the IRS and be required to identify U.S. accounts, report information on the accounts, and withhold a 30 percent tax on certain payments to nonparticipating FFIs and account holders who are unwilling to provide the required information.
IRS understands FATCA is a major undertaking for financial institutions. The IRS and Treasury are beginning to work closely with businesses and foreign governments to implement FATCA successfully.
Identifying accounts will begin in 2013 and reporting requirements will begin in 2014.
For a timeline of the various requirements, go to www.irs.gov and search Notice 2011-53.