The Foreign Account Tax Compliance Act (FATCA) and its subsequent regulations have created a dizzying array of implementation deadlines for taxpayers, financial institutions, and withholding agents. The accompanying chart organizes the key dates related to FATCA implementation. Please note that because of the complexity of FATCA it was not practical to include all implementation dates and that new regulations or publications may alter the dates provided in the chart.
US taxpayers were required to begin reporting certain foreign assets that were held in taxable years beginning after March 18, 2010, the date FATCA was enacted. For virtually all taxpayers, this meant that 2011 would be the first year for which they would have to file Form 8938 was with their annual tax return.
To ensure that US taxpayers properly report their off-shore assets, FATCA also introduced provisions which required withholding agents to withhold 30% of payments from US source income to Foreign Financial Institutions (FFIs) that do not verify and report US taxpayers’ account information to the US. In effect, if FFIs ignore FATCA they will be subject to withholding on 30% of their gross US source income. This harsh penalty has prompted most foreign financial institutions to comply with FATCA.
To comply with FATCA, FFIs will need to implement new computer programs and procedures to ensure that their internal systems can identify the ultimate owner of an account, and whether those account holders are US taxpayers. They must also be able to report account information directly to the US or to their own governments, who will then inform the US. Because of the complexity of these requirements, the Internal Revenue Service (IRS) has created a staggered FATCA implementation timeframe so FFIs have an opportunity to comply with their FATCA reporting obligations from the outset.
While the chart below is not an exhaustive list of the FATCA implementation timeline, it highlights many key dates and can be used as a guide to understand the complex nature of FATCA. In future articles we will discuss individual implementation issues in greater detail.
Click here to view the FATCA Timeline