What is FACTA?
FACTA is the acronym for Fair and Accurate Credit Transactions Act. This act is an amendment to the Fair Credit Reporting Act (FCRA) which was implemented in order to protect the customers from the theft of identity. This particular act, FACTA, stipulates and regulates information accuracy, information privacy, and disposal of information. FACTA further limits the way in which the information of the consumers can be shared. Some of the essential details regarding FACTA include:
- All the three major credit reporting agencies need to prove the credit report of consumers to the consumers, that too without charging them anything.
- It enables the consumers to send an alert message upon their files in case they suspect is a victim of fraud.
- All the systems which print the receipts of payment card need to employee PAN (Permanent Account Number) Truncation so that the full account number of the customer is never viewable on the slip for the safety of the customer.
Foreign Assets Reporting IRS
- IRS is the acronym for Internal Revenue Service. This is the department which oversees the revenue services of the Federal Government of the United States. Under the IRS norms, it is essential to adhere to FBAR (Foreign Bank Account Reporting) guidelines. Therefore, all the Indians residing in America and are classified as US residents need to comply with FBAR.
- Under FACTA, all the taxpayers in the US with specified foreign financial asset holding beyond the specified threshold limit (crosses USD 10000 at any point of time within a financial year or as prescribed by the Act), need to report those assets to the IRS on Form 8938. Failure to report all the details can lead the Indian Americans in a deep financial mess which can result in severe punishments and penalties.
Do Foreign Banks Report to IRS?
Yes, the Foreign Banks do report to the IRS. Foreign Account Tax Compliance Act (FATCA), passed in 2010 makes it mandatory for any foreign financial institution to report information regarding the account of all US citizens (whether living in US or abroad) since its implementation on July 1, 2014. Thus, the IRS will get all the information regarding foreign bank accounts and transaction. IRS has all the details of all the foreign bank account holdings, though it encourages voluntary compliance to such mandatory requirements. Any discrepancy in reporting, thus, can lead to severe penalties.
FATCA Reporting Requirements to IRS
- Foreign Account Tax Compliance Act or FATCA is an effort by the U.S. government towards combating tax evasion by US residents or citizens holding accounts and other financial assets offshore.
- As per the guidelines of FATCA, US taxpayers holding financial assets outside the United States require reporting those assets to the IRS on Form 8938 which is the Statement of Specified Foreign Financial Assets. This FATCA requirement is an addition to the already long-standing requirement of reporting foreign financial accounts on FinCEN Form 114 under the Report of Foreign Bank and Financial Accounts (FBAR) (formerly TD F 90-22.1).
- Apart from individual compliance, FATCA also compulsorily require foreign financial institutions to report all information regarding financial accounts held by the US taxpayers and information regarding foreign entities where US taxpayers hold a substantial stake or ownership interest, directly to the IRS. Such reporting institutions thus include banks, financial institutions, investment entities, brokers, and some insurance companies. Even some non-financial foreign entities need to report information about any US owners.
FATCA Requirements for Reporting Foreign Income and Assets to IRS
FATCA mandates the requirement of US taxpayers reporting information about foreign income and financial assets in case such individuals hold foreign financial assets with an aggregate value of more than the reporting threshold on Form 8938. This form needs to be attached to the annual income tax return of the taxpayer. Such reporting threshold is certainly fixed on the basis of some standard and thus is higher for certain individuals, such as married taxpayers who are filing a joint annual income tax return or some individuals residing in some other country.