In today’s global economy, U.S. businesses and individuals increasingly hold assets and generate income beyond U.S. borders. With this expansion comes heightened scrutiny from the IRS and increased complexity in international tax compliance. Two major laws impacting international tax compliance are the Foreign Account Tax Compliance Act (FATCA) and the Global Intangible Low-Taxed Income (GILTI) provisions. Failing to comply can result in significant penalties, audits, and even criminal investigation.
Americas Tax Defender—a nationwide team of former IRS agents, LLM tax attorneys, and CPA/accountants—stands ready to help your business navigate these complex laws, protect your interests, and maintain compliance across all 50 states.
Understanding FATCA
What is FATCA?
The Foreign Account Tax Compliance Act (FATCA) is a U.S. federal law enacted in 2010. Its primary goal is to combat tax evasion by requiring U.S. taxpayers, and foreign financial institutions (FFIs) that have U.S. clients, to report information about financial accounts held outside the United States.
- U.S. taxpayers (including business entities and individuals) must report specified foreign financial assets if they exceed certain thresholds on Form 8938.
- Foreign financial institutions must identify and report accounts held by U.S. persons or face punitive withholding taxes on certain U.S.-source payments.
Who Needs to Comply with FATCA?
- U.S. businesses with foreign bank accounts or assets
- Multinational corporations
- Shareholders in foreign subsidiaries
- Individuals with substantial foreign holdings
Reporting Obligations
- Form 8938: U.S. taxpayers must file Form 8938 with their annual income tax return to report specified foreign financial assets.
- FBAR (FinCEN Form 114): Although separate from FATCA, businesses and individuals with over $10,000 in foreign accounts must also file the FBAR.
Penalties for Noncompliance
- $10,000 penalty for failure to disclose, with additional penalties up to $50,000 for continued noncompliance
- 40% penalty on understatement of tax attributable to non-disclosed assets
- Potential criminal charges
Understanding GILTI
What is GILTI?
Global Intangible Low-Taxed Income (GILTI) is a provision enacted as part of the Tax Cuts and Jobs Act (TCJA) of 2017. GILTI targets U.S. shareholders of Controlled Foreign Corporations (CFCs) to ensure they pay a minimum level of tax on foreign earnings, especially intangible income such as intellectual property.
- Applies to U.S. shareholders owning at least 10% of a CFC
- Imposes a new inclusion of CFC income on the U.S. owner’s return, even if profits are not repatriated
- Generally taxed at an effective U.S. federal rate of 10.5% (corporations) but may be higher for individuals
Who Needs to Worry About GILTI?
- U.S. companies with subsidiaries or interests in low-tax foreign jurisdictions
- U.S. shareholders of CFCs
- Businesses holding intangible assets (IP, software, trademarks, etc.) in offshore entities
How is GILTI Calculated?
GILTI = CFC’s net tested income – a 10% return on tangible depreciable business assets (Qualified Business Asset Investment or QBAI)
The calculation involves a complex interplay of foreign tax credits, Section 250 deduction, and other factors. Errors can easily result in overpayment or costly IRS disputes.
Penalties and Risks
- IRS audits of GILTI calculations
- Underpayment penalties if inclusion is missed
- Risk of double taxation without careful structuring
How Americas Tax Defender Ensures FATCA and GILTI Compliance
Comprehensive Risk Assessment
Our team conducts a thorough review of your international financial footprint. This includes identifying all foreign bank accounts, financial assets, and business subsidiaries to determine FATCA and GILTI exposure.
Tailored Compliance Strategies
- FATCA Compliance: We ensure proper identification, documentation, and timely filing of Form 8938 and FBAR, and coordinate with FFIs as needed.
- GILTI Planning: We model GILTI exposure and optimize foreign structures to minimize U.S. tax liability—leveraging foreign tax credits, Section 250 deduction, and proper use of QBAI.
Proactive Documentation
- Maintain comprehensive documentation of foreign assets, transactions, and tax positions
- Prepare for possible IRS audits by ensuring all filings are complete and accurate
Responding to IRS Audits and Notices
Our former IRS agents and LLM tax attorneys are equipped to respond to IRS notices, represent clients in audits, and resolve disputes. We provide end-to-end support, from initial response through appeals, to minimize disruption and financial risk.
FAQs on FATCA and GILTI Compliance
What types of accounts must be reported under FATCA?
Foreign bank accounts, brokerage accounts, certain foreign partnership interests, and even some insurance policies.
Is GILTI only for large multinationals?
No, GILTI applies to any U.S. person or business owning at least 10% of a CFC, regardless of company size.
What is the deadline for FATCA and GILTI filings?
Generally, these disclosures are due with your annual federal income tax return, but extensions and additional filing requirements may apply.
Can penalties for FATCA/GILTI noncompliance be waived?
In some cases, yes—especially if you can demonstrate reasonable cause or voluntarily disclose errors before the IRS initiates contact.
For more detailed information on compliance steps, see our
Business Tax Planning,
Tax Compliance, and
Business Tax Filing pages.
Actionable Next Steps for Businesses
- Inventory all foreign accounts and entities annually
- Consult with experienced international tax counsel to assess FATCA/GILTI risks
- Implement internal controls to collect and track required data
- Engage professionals with a background as ex-IRS agents and LLM tax attorneys to ensure timely, accurate reporting
For tailored guidance and to safeguard your business,
contact Americas Tax Defender—serving clients nationwide with unparalleled expertise in business tax compliance, planning, and IRS dispute resolution.
