A U.S. statute known as the Foreign Account Tax Compliance Act (FATCA) mandates that foreign financial institutions (FFIs) provide information about the financial accounts owned by U.S. taxpayers or by foreign companies in whom U.S. taxpayers have a significant ownership interest. FATCA aims to stop Americans with offshore accounts from evading taxes. Charities and other tax-exempt entities that are nonprofits are subject to FATCA reporting requirements.
According to FATCA, FFIs are required to disclose any foreign accounts held by American taxpayers or foreign organizations in which they have a significant ownership stake. Accounts owned by charities and other tax-exempt organizations are included in this. If these groups meet specific requirements, international financial institutions may allow them to hold accounts, and those institutions may be required to report on those accounts.
If they have overseas subsidiaries or affiliates, nonprofits and other tax-exempt organizations may also need to comply with FATCA reporting obligations. FATCA reporting rules may apply to bank accounts held by a nonprofit organization’s overseas subsidiary or affiliate. Additionally, any payments made to foreign people or organizations, including those for grants, gifts, or other transactions, may be subject to reporting requirements by the nonprofit organization.
Nonprofits may be subject to Form 1099 reporting requirements in addition to FATCA reporting requirements. Payments paid to independent contractors, rental revenue, and other forms of income are all reported on the form 1099. If vendors and contractors meet certain requirements, such as if they were paid more than $600 during the tax year, nonprofits may be obliged to provide Form 1099s to them.
Generally speaking, FATCA reporting requirements and Form 1099 reporting requirements do not exclude NGOs. If these firms meet specific conditions, such as holding overseas accounts or paying suppliers or contractors, they must adhere to the reporting requirements. For the purpose of ensuring that they are in compliance with all applicable reporting obligations, nonprofits should speak with a tax expert or attorney.