The Internal Revenue Service’s decision to modify the timelines for withholding agents and foreign banks to comply with the stiff new due diligence requirements under the Foreign Account Tax Compliance Act is providing them, as well as taxpayers and preparers, with some welcome relief.
FATCA was included as part of the HIRE Act of 2010 and requires foreign financial institutions, including hedge funds, to report to the Internal Revenue Service on the foreign holdings of U.S. taxpayers or else face large penalties. The requirements have provoked an outcry abroad, particularly from dual citizens and expatriates, in addition to the financial institutions that are expected to comply. Some foreign banks reportedly have been reluctant to do business with U.S. customers, and some expats have even renounced their U.S. citizenship.
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