Are Your Clients Complying With FATCA?

New Terms, Information Reporting, and Withholding Requirements

By Jenny C. Lin, J.D., LL.M. (Taxation)¹

Jenny C. Lin is a certified specialist in taxation law focusing in the international tax area. She is the immediate past Chair of the Tax Section of the Bar Association of San Francisco. She speaks Mandarin and Taiwanese fluently. She can be reached at (925)202-2922 or jlin@lintaxlaw.com.

For several years, the Internal Revenue Service (IRS) and the U.S. Department of Justice have been investigating and pursuing taxpayers, advisers, and foreign banks for their roles in the use of offshore financial accounts to avoid or evade U.S. income tax and reporting requirements. In the midst of these enforcement efforts, Congress passed the Foreign Account Tax Compliance Act, formally titled the "Hiring Incentives to Restore Employment Act of 2010," 124 Stat. 71, relevant provisions codified at Internal Revenue Code² (IRC) § 6038D and §§ 1471-1474 (FATCA). In general, FATCA takes a two-fold approach to require more transparency relating to accounts with foreign financial institutions (FFIs) and assets held with non-financial foreign entities (NFFEs).