Hungary was the first country in the central European region to join forces with the United States to implement the Foreign Account Tax Compliance Act, also known as FATCA. The agreement between the Hungarian and the U.S. government sets out to achieve bilateral reporting of foreign financial accounts, such as bank accounts, as of January 1, 2017 and tax years going forward.
What does this mean for Hungarian American taxpayers? If you are a U.S. taxpayer who holds accounts in Hungarian financial institutions, your Hungarian accounts, the value of your accounts, and any earnings on the accounts during the year are reported to the Internal Revenue Service. Consequently, your U.S. tax return must match the information already reported to the IRS to avoid the issuance of an IRS discrepancy notice.
In order to achieve this, various informational and tax forms have to be filed with the Treasury Department and the IRS. Most important among these forms are the FinCEN Form 114 (also called Foreign Bank Account Report or FBAR) and Form 8938, a sister form to the FBAR. These forms are widely known, prepared and filed every day by accountants across the country. The requirement to file these forms has been in place a long time; it’s only the bilateral reporting that began January 1, 2017.
Unfortunately for Hungarian American taxpayers, there is an additional difficulty created by the language barrier. Hungarian is not only the second hardest language to pick up by English speakers, but financial statements issued by Hungarian financial institutions use expressions that make these statements difficult to decipher even for native speakers of Hungarian. This situation creates a conundrum for Hungarian taxpayers. One option is to have potentially hundreds of pages of financial statements translated professionally. The other option is to find a Hungarian speaking U.S. tax accountant.
A few months ago, our firm was approached by a client asking for help with the reporting of her Hungarian assets. As a native speaker of Hungarian, I was only too familiar with the client's concern in facing these unusual challenges. By combining our language and international tax expertise here at Kerkering Barberio, we were able to serve all the client's needs by translating various documents from Hungarian to English and preparing and submitting the required forms and returns to the IRS. I am very pleased that I was able to provide a valuable service to a fellow Hungarian American.
After receiving the following feedback from the client, it is my hope to continue to help others in the future:
“Hungarian is a uniquely difficult language, and the prospect of having to translate every piece of an important financial document that I had to file was very frightening. Annamaria Kiss and the International Tax team at KB put me at ease immediately, laying out a plan and letting me know what to expect. Her fluent Hungarian and knowledge of Hungarian banking and tax law allowed me to handle a complex situation in a way that made me feel comfortable and confident.” I.S.