Foreign Account Tax Compliance Act: What Domestic Financial Institutions Need to Know!

Financial Institutions

March 01, 2014
by Robert Buetow, CPA

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Robert Buetow Robert Buetow, CPA
Director of International Tax Services

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There has been increasing concern by the Internal Revenue Service (IRS) regarding U.S. taxpayers that use offshore investment structures to avoid reporting and paying U.S. income tax. The current withholding rules were determined to be insufficient to prevent this type of tax evasion. Consequently, the Foreign Account Tax Compliance Act (FATCA) was created. Under FATCA, U.S. withholding agents are required (effective July 1, 2014) to withhold federal income tax at 30 percent on specific payments to certain foreign financial institutions (FFIs) and non-financial foreign entities (NFFEs). It is imperative that U.S. withholding agents (including domestic financial institutions) understand and comply with the new withholding requirements.

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