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Focus on Taxation:  What To Do If You Receive Correspondence From a Foreign Bank Asking for Personal Information

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Many RubinBrown clients with bank accounts or other financial assets offshore have been receiving correspondence from the institutions holding those assets asking for personal information such as US social security numbers.  This article covers why you may receive these letters and what to do after you receive one.
January 7, 2015
Many RubinBrown clients with bank accounts or other financial assets offshore have been receiving correspondence from the institutions holding those assets asking for personal information such as US social security numbers.  This article covers why you may receive these letters and what to do after you receive one.

On March 18, 2010, the Foreign Account Tax Compliance Act (“FATCA”) was signed into law. FATCA's purpose is to prevent tax evasion by U.S. persons (individuals and companies) holding bank accounts and other financial assets offshore. In order to achieve the goals of FATCA, the United States has collaborated with other countries to create reciprocal Intergovernmental Agreements (“IGA”) which require the sharing of information on certain asset holdings of citizens of the participating countries.

By signing these agreements, the partner government agrees to require all foreign financial institutions (“FFI”) in its jurisdiction to identify U.S. account holders and report their information to the United States. Financial institutions will either report the information to the national tax authorities or they will communicate directly with the IRS.

IGAs ease the process of complying with FATCA rules by removing domestic legal impediments to compliance and clarifying due diligence, therefore making the FATCA process more efficient. If a FFI fails to report information regarding its U.S. customer’s foreign accounts under FATCA, the FFI will face financial penalties.

In addition to FFI reporting, FATCA also requires U.S. taxpayers with certain financial assets outside of the United States to report such assets on Form 8938, which is filed annually with the taxpayer’s income tax return. Note that filling out requested forms for the FFIs and filing Form 8938 does not relieve the taxpayer of the need to file their foreign bank account report (FinCEN Form 114).

Because FFIs have agreed to report U.S. account holders’ information to the United States government, clients should expect to receive a letter from their FFI requesting citizenship information and asking them to complete IRS Forms such as Form W-9 and/or Form W-8. These forms request US social security numbers and other information such as FATCA exemption codes and backup withholding codes.

Even though FATCA was signed into law in 2010, clients will just now be receiving these letters because FFIs have to start complying with the portion of FATCA that requires the communication of such information to the United States government starting January 1, 2015.

Please contact your RubinBrown advisor when you receive these requests.

 

Any federal tax advice contained in this communication (including any attachments): (i) is intended for your use only; (ii) is based on the accuracy and completeness of the facts you have provided us; and (iii) may not be relied upon to avoid penalties.

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