Foreign financial institutions will face tax withholding penalties on Tuesday, July 1 if they have not begun to make efforts to comply with the Foreign Account Tax Compliance Act, or FATCA.

FATCA, which was included as part of the HIRE Act of 2010, requires foreign financial institutions, or FFIs, to report on the holdings of U.S. citizens to the Internal Revenue Service, or else face stiff penalties of up to a 30 percent withholding tax on payments of U.S. source income (see Offshore Crackdown Kicks Off with 30% Tax Penalties for Banks).

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