|By Melih Oztalay||
|June 5, 2014 09:33 PM EDT||
IRS introduces FATCA transition period for banks and Foreign Financial Institutions
Jeffrey S. Freeman, J.D., LL.M
You may have heard of the relaxed time frame for FATCA that was announced by the IRS, but do not just read the headlines. The IRS has allowed for a relaxation of the time frame for implementation of FATCA for banks and Foreign Financial Institutions (FFIs), not for individual account holders.
The IRS will consider 2014 and 2015 as a transition period for FATCA due, diligence, withholding, and reporting. Banks and FFIs were scrambling to get into compliance with this law and they are breathing a sigh of relief with the new time frame. Implementing FATCA requires banks and FFIs to incur costs and exhaust tremendous effort changing technology, internal procedures and policies, and obtaining proper legal guidance. The law requires these institutions to change how they conduct their business and this is a major change that takes time to implement.
The main reason for the relaxed enforcement is the lack of guidance for these institutions. All Forms W-8 have been published, but some instructions are still pending and will be released shortly. There are still unanswered questions and FFIs are anxiously awaiting further guidance to clear up any vague regulations.
Harsh punishments are associated with non-compliance and the IRS will now recognize the “good faith” efforts made by banks and FFIs to comply with FATCA and the temporary guidance. This may lead you to ask, what does “good faith efforts” really mean? Without a clear definition this allows the IRS leeway when determining if an institution has made good faith efforts.
Account holders are not provided with any grace period. If you have any undisclosed offshore accounts including any foreign bank accounts, retirement accounts, un-segregated gold or precious metal accounts, or insurance products now would be a perfect opportunity to take advantage of the Offshore Voluntary Disclosure Program (OVDP) to come into compliance.
About Freeman Tax Law
Freeman Tax Law is a boutique tax law firm with national exposure with the expertise and professional staff equipped to handle all domestic and international tax law matters. Freeman Tax Law regularly represents clients in disclosures to the IRS. Our firm also routinely advises banks and financial institutions on how to comply with FATCA and works with consulting/technology firms to implement systems for FFIs. In addition to handling complex tax controversies, the Freeman Tax Law team has extensive expertise in assisting clients with wealth management and estate planning.
Freeman Tax Law
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