The IRS introduced the FATCA (sometimes misspelled as FACTA) in 2010, which became effective in 2014. By now, most financial institutions like your bank will be FATCA compliant, meaning that they share information with the IRS (Internal Revenue Service which is the US tax collection department).
Many Americans have already experienced this. They received a letter from the bank, informing them about the new Foreign Account Tax Compliance Act legislation and the impact on their bank accounts. Unfortunately the legislation has even led to many financial institutions (especially banks) refusing to serve US citizens. It is too costly for them to become compliant and share information with the IRS.
Who are affected by FATCA?
The FATCA has an impact on all US citizens and businesses that are owned by US Citizens. This includes US passport holders, who live abroad and Dual nationals. Also Green Card holders, people that spend a certain amount of days per year in the US and US Corporations and Partnerships. All these are affected by the Foreign Account Tax Compliance Act legislation.
All banks worldwide are affected by FATCA. Your bank will be required to share your account information on an annual basis with the IRS. The IRS will mainly look at the highest amount of money that was on your bank account during that year.
How does FATCA affect US citizens?
Once you are a US Citizen according to the law, you are required to report your worldwide income in the US. The taxes you have paid in your country of residence can be deducted. This means that in many cases no tax is owed to the US but nevertheless, an annual filing is required.
How Americans Overseas can help you
Two dual nationals living abroad founded Americans Overseas. In the costly and exhausting process of finding the right experts, they realised they had not only accumulated a mountain of knowledge, but also built up a solid network of tax and legal experts. This could be of great benefit to others in similar situations. Americans Overseas informs and connects US persons to a select network of specialised US tax consultant to help them avoid double taxation and become compliant.
Do you need more information about what FATCA is? Do not hesitate to contact us.