Washington was busy this January. While Congress and the president were holding the country back from the edge of the fiscal cliff, the Treasury Department was issuing comprehensive final regulations1 implementing the information reporting and withholding tax provisions commonly known as the Foreign Account Tax Compliance Act (FATCA).2 Enacted by Congress in 2010, FATCA targets U.S. taxpayers (citizens and residents) using foreign accounts to evade U.S. taxes. The final regulations provide a framework for establishing a common intergovernmental approach to combating tax evasion. The Treasury Department also announced that Norway has joined the United Kingdom, Mexico, Denmark, Ireland, Switzerland, and Spain as countries that have signed or initialed model FATCA agreements. It is engaged with more than 50 other countries and jurisdictions to curtail offshore tax evasion, and more signed agreements are expected to follow in the near future.
While the 500 pages of regulations mainly affect bank operations, this article will briefly review how foreign banks will now have to review client accounts; what FATCA in general means for U.S. taxpayers with foreign bank accounts; and what U.S. taxpayers should be doing now to come into compliance with the foreign bank account reporting rules in order not to be exposed to the onerous civil and criminal penalties that would otherwise apply.
