Increased Disclosure, Penalties, and Audit Periods Courtesy of the Foreign Account Tax Compliance Act

Taxation and International Private Client Group Partner Kevin Packman and International and Cross Border Transactions Associate Mauricio Rivero authored a Journal of Taxation article titled, "Increased Disclosure, Penalties, and Audit Periods Courtesy of the Foreign Account Tax Compliance Act."

Proposed legislation targeting offshore tax abuse that had been in the hopper for awhile was finally enacted as a funding mechanism for a measure designed to stimulate employment. The impact of the Foreign Account Tax Compliance Act (FATCA) may seem a bit spread out due to some staggered effective dates, but even some long lead times may be insufficient to help various foreign entities comply with new disclosure rules concerning U.S. clients and U.S. source income.

FATCA is being used as a revenue offset for the Hiring Incentives to Restore Employment Act (HIRE), enacted March 18, of which it is a part. FATCA will have an impact on the following areas:

• Information returns – increased disclosure
• Penalties
• Statute of limitations
• Foreign trusts
• Dividend equivalent payments
• Foreign targeted obligations

It is clear that FATCA will prove to be burdensome. How U.S. taxpayers, foreign entities and financial organizations deal with the burdens remains to be seen. To read the full article, please click on the link below.