FATCA: A New Era of Financial Transparency

AICPA's Journal of Accountancy

FATCA: A New Era of Financial Transparency

The IRS's powerful new tool chips away at bank secrecy.

Excerpt taken from the article.

Since 2008, the U.S. government has been aggressively moving against U.S. taxpayers who have undeclared foreign accounts. Through a variety of mechanisms, the government has obtained information about U.S. account holders and their assets from jurisdictions previously thought nearly impenetrable. These recent developments portend the eventual erosion of traditional concepts of bank secrecy and increased transparency among nations regarding financial information.

One manifestation of this activity is the Foreign Account Tax Compliance Act (FATCA), which was signed into law in early 2010 as part of the Hiring Incentives to Restore Employment Act, P.L. 111-147. FATCA seeks to promote compliance with U.S. law by requiring foreign financial institutions to report information regarding U.S. persons maintaining accounts, and by directing that U.S. taxpayers report certain specified foreign financial assets with their tax filings. For financial institutions and many other foreign businesses and individuals, it is one of the most important (and complex) tax laws to go into effect in many years. The IRS has issued guidance on FATCA, and more is undoubtedly forthcoming. FATCA takes direct aim at U.S. taxpayers who have not properly reported their foreign financial accounts and certain other non-U.S. assets.


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