American living abroad started receiving requests from their foreign bank where they reside and work asking them to update their information using Know Your Customer (KYC) Policy especially the dual citizenship. Most common question on the bank data updates request is do you have another citizenship? If yes, what is the citizenship?
That was the best way a foreign financial institution can clear their FATCA responsibility toward the US government as all the FFI are required to report all US Persons conducting business with to the US government annually by March 15th.
Effective 2014 as a result of FATCA compliance all foreign financial institution reports a US citizen financial information including the social security number, address, bank account number, aggregate balance and more, so as of 2014 you are no longer hidden expat! US government through IRS and US Department of Treasury know where you live and what you do and how much money you earn or invest.
How FATCA Impact an American Living Abroad?
Foreign Account Tax Compliance Act – FATCA was officially in effect 2014, as a result all foreign financial institution – FFI require to report all financial information for their all-American clients once an account exceeds $50,000 in any day of the year for individual account ownership or signatory authority and $250,000 at any day of the year for any business account with a US person ownership or a signatory authority. Effective 2014 the IRS requested every foreign financial institution FFI to register with the IRS and get a G number.
As a result, the FFI reporting due date is March 15th of the following year and failure to report will cause severe penalties to such FFI.
So how that will impact you while you live and work or invest abroad?
Frankly with no doubt since 2014 US Government knows all your financial information!! So they leave you with no options to buy comply!!
How to comply? Simple file your US Tax return considering taking advantage of the Foreign Income Exclusion and FBAR balance threshold if required every year timely, due April 15th with an automatic 2-month extension that extend your deadline to June 15th, and with an extension request you may elect to extend your due date to October 15th. Please note the additional extension is only applied to the filing requirement not to the payment of tax liabilities if any, in a nutshell if you owe the IRS money it is better to be paid even as an estimation by April 15th.
What about prior years? Great question, part of FATCA the US government allow all of us citizen living abroad who never file their US Taxes and FBAR or filed it not accurate to file using one of these programs, Streamlined Procedure – SLP or Offshore Voluntary Disclosure Program which unfortunately currently CLOSED. That leave the US Expat with one option which is the Streamlined Procedure – SLP, that require an expat to file the most recent 3 tax years and 6 foreign bank accounts FBAR to avoid all FATCA and FBAR penalties.
Unfortunately, it is no longer your choice as all the foreign financial institution-FFI are committed though country to country signed agreement to comply with FATCA and to report all of American conducting business with them every year!!
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