What is the role of the USA's Foreign Account Tax Compliance Act (FATCA)?
The Foreign Account Tax Compliance Act (FATCA) is a law in the United States that affects taxpayers with financial activities outside of the United States. FATCA was enacted in 2010 in order to encourage taxpayers to disclose foreign financial assets. In New Mexico, FATCA requires financial institutions and other entities to report to the Internal Revenue Service (IRS) information about financial accounts held by US taxpayers. The purpose of FATCA is to help the IRS identify taxpayers who may be hiding assets and income from the IRS by utilizing foreign accounts. Financial institutions located outside of the United States that do not comply with the requirements imposed by FATCA face an excise tax on certain payments made to them. FATCA also affects tax treaties that the United States has with foreign countries. These treaties limit the taxation of income in a foreign country for US taxpayers. FATCA makes it more difficult for taxpayers to use foreign accounts in order to avoid US taxes because it increases reporting requirements and penalties. Overall, FATCA is a law designed to help the IRS enforce US tax laws. It is important for US taxpayers to understand this law and comply with its requirements in order to avoid penalties. New Mexico taxpayers must comply with FATCA when they have foreign financial accounts or engage in financial activities outside of the United States.
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