Government Issues Final Rules on FATCA

Foreign financial institutions that shelter Americans' offshore funds will now be required to comply with the final rules on FATCA issued by the U.S. Department of Treasury and the Internal Revenue Service.

The federal officials announced that they have finalized regulations relating to U.S. tax law compliance and Government Issues Final Rules on FATCAoffshore accounts. The groups said that many of the rules relating to the Foreign Account Tax Compliance Act did not differ from those outlined in 2012, but that they took constructive criticism from foreign governments and financial institutions into account, after concerns arose that FATCA was too extensive and would only complicate reporting.

"These regulations give the administration a powerful set of tools to combat offshore tax evasion effectively and efficiently," said Neal Wolin, the deputy Treasury secretary."The final rules mark a critical milestone in international cooperation on these issues, and they provide important clarity for foreign and U.S. financial institutions."

The final rules will require U.S. and foreign entities to phase in timelines for due diligence, reporting and withholding and align them with the intergovernmental agreements, and also refine and clarify the treatment of investment entities. The new rules also seek to expand and clarify the scope of payments not subject to withholding, and outline the compliance and verification obligations of foreign financial institutions. Additionally, the rules require that countries sign intergovernmental agreements that better facilitate cooperation between countries.

Many nations have already forged agreements with the U.S. to prevent future incidences of tax evasion. For example, Norway recently joined six other countries – Denmark, Ireland, Mexico, Spain, Switzerland and the United Kingdom – in reaching an agreement with the U.S. on implementing FATCA. In some countries, banks will provide information on U.S. accounts to their own governments, while financial institutions in other nations will report directly to the IRS.

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James F. McDonough, Jr. concentrates on wealth preservation and estate planning for high net worth individuals, closely held business matters and ownership succession, estate administration and income tax planning. He worked for three years for the public accounting firm, then known as Touche Ross, where he obtained his license as a Certified Public Accountant in 1983. In 1984, he was employed as a tax attorney by Union Camp Corporation where he engaged in planning for corporate income deferred compensation, qualified plan and tax-free exchanges. In 1986, Mr. McDonough was employed as Tax Manager for Monroe Systems For Business, Inc. Thereafter, he was employed as a tax attorney for five years where he engaged in corporate and estate tax planning and estate administration and litigation. For more information, please visit James McDonough's full biography at Scarinci Hollenbeck

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