IRS updates FATCA filing and deadlines

The US Internal Revenue Service (IRS) has launched an update to its registration system for foreign financial institutions (FFIs) to comply with the Foreign Account Tax Compliance Act (FATCA) in supplying reports on the holdings of US citizens, and announced a new filing deadline for US taxpayers overseas affecting 225,000 US citizens in the UK

The revamped system allows FFIs to register and renew their agreements with the IRS online. The tax authority says that from the home page link of ‘Renew FFI Agreement’, the financial institute will determine whether it must renew its foreign financial institutions agreement. A table of guidelines is provided to assist in this determination.

Once the determination is made, the system enables an FI to review and edit their registration form. The FI will need to verify and update their registration information and submit to renew their FFI agreement.

Those who are required to renew their FFI agreement and do not by 31 July 2017, will be treated as having terminated their FFI agreement as of 1 January 2017, and may be removed from the FFI List. Along with system fixes, the IRS says the update within the registration application includes the removal of the classification of limited for FIs and FI branches. This classification option will no longer be available for new FI applicants or for renewing FIs.

Two other changes in this release are the inclusion of a warning banner and the attempts to unsuccessfully login is now reduced to three.

Filing requirements

In its guidance to filing, the IRS says an income tax filing requirement generally applies even if a taxpayer qualifies for tax benefits, such as the foreign earned income exclusion or the foreign tax credit, which substantially reduce or eliminate US tax liability. These tax benefits are only available if an eligible taxpayer files a US income tax return.

The IRS is also reminding taxpayers living and working abroad that they must file their 2016 federal income tax return by 15 June.

It says the special June 15 deadline is available to both US citizens and resident aliens abroad, including those with dual citizenship. In addition, a new filing deadline now applies to anyone with a foreign bank or financial account required to file an annual report for these accounts.

Starting this year, the deadline for filing the annual Report of Foreign Bank and Financial Accounts (FBAR) is now the same as for a federal income tax return. This means that the 2016 FBAR, Form 114, was normally required to be filed electronically with the Financial Crimes Enforcement Network (FinCEN) by 18 April 2017.

But FinCEN is granting filers missing the original deadline an automatic extension until 16 October 2017 to file the FBAR. Specific extension requests are not required. In the past, the FBAR deadline was 30 June and no extensions were available.

In general, the FBAR filing requirement applies to anyone who had an interest in, or signature or other authority, over foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2016. Because of this threshold, the IRS encourages taxpayers with foreign assets, even relatively small ones, to check if this filing requirement applies to them.

US citizens and resident aliens living abroad can use the IRS Free File service to prepare and electronically file their returns for free, meaning those with adjusted gross incomes of $64,000 or less can use brand-name software to prepare their returns and then e-file them for free. A limited number of companies provide software that can accommodate foreign addresses.

A second option, Free File Fillable Forms, the electronic version of IRS paper forms, has no income limit and is best suited to people who are comfortable preparing their own tax return.

Both the e-file and Free File electronic filing options are available until 16 October 2017, for anyone filing a 2016 return.

Taxpayers abroad who cannot meet the 15 June deadline can still get more time to file, but they need to ask for it before that date.

FATCA Foreign Financial Institution Registration is here.

Details of the new IRS filing requirements for US citizens abroad are here.

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