FATCA Explained: How to Stay Tax Compliant with Foreign Accounts

Understanding FATCA: An Overview of the Foreign Account Tax Compliance Act

The Foreign Account Tax Compliance Act (FATCA) is a federal law enacted by the United States in 2010, aimed at combating tax evasion by U.S. citizens and residents who hold financial assets in foreign accounts. It mandates that individuals, as well as foreign financial institutions (FFIs), report specific information about these holdings to the Internal Revenue Service (IRS).

At its core, FATCA requires U.S. taxpayers to disclose their foreign assets if they exceed certain thresholds. These thresholds vary depending on factors such as filing status and residency. For instance, single filers living in the U.S. with foreign assets exceeding $50,000 at the end of the tax year or $75,000 at any time during the year must file Form 8938 along with their U.S. tax return.

FFIs, including banks, investment entities, and insurance companies, face compliance obligations as well. They must identify accounts held by U.S. persons and either report this information directly to the IRS or comply through agreements with their country’s government. Failure to comply can result in a 30% withholding tax on certain U.S.-sourced payments.

Key provisions under FATCA include:

• Form 8938: U.S. taxpayers meeting the reporting thresholds must disclose details such as account balances, income generated, and the nature of foreign assets.
• Intergovernmental Agreements (IGAs): Many countries collaborate with the U.S. under IGAs to streamline compliance, reducing the reporting burden on FFIs.
• Penalty Framework: Non-compliance with FATCA can lead to substantial fines, potentially as high as $10,000 for failing to file required forms, with additional penalties accruing for continued delays.

Designed to increase transparency, FATCA imposes reporting duties to ensure individuals and institutions adhere to U.S. tax laws.

Who Needs to Comply? Identifying Individuals and Entities Affected by FATCA

The Foreign Account Tax Compliance Act (FATCA) imposes compliance obligations on a range of individuals and entities with financial ties to foreign accounts. The law primarily targets U.S. taxpayers with overseas financial assets but also extends its reach to various financial institutions and entities facilitating these accounts.

U.S. Individuals

FATCA mandates reporting obligations for U.S. citizens, resident aliens, and certain non-resident aliens who hold specified financial assets in foreign accounts exceeding threshold amounts. These thresholds vary based on factors such as filing status and residency:

• For single taxpayers living in the U.S., the threshold is $50,000 on the last day of the tax year or $75,000 at any time during the year.
• For married taxpayers filing jointly, the limits rise to $100,000 on the last day or $150,000 during the tax year.
• Taxpayers living abroad face higher thresholds, such as $200,000 for singles and $400,000 for joint filers on the last day of the year.

Foreign Financial Institutions (FFIs)

FATCA also obligates foreign financial institutions, including banks, investment entities, and certain insurance companies, to report on accounts held by U.S. taxpayers. FFIs must either register with the IRS or face a 30% withholding tax on U.S.-sourced income.

U.S.-Owned Foreign Entities

Non-financial foreign entities (NFFEs) in which U.S. taxpayers have a substantial ownership interest must also report to the IRS. This ensures income earned through foreign corporations does not escape tax scrutiny.

FATCA compliance requirements aim to close tax loopholes and prevent offshore tax evasion, covering both individual account holders and institutional intermediaries in its expansive scope.

The Importance of FATCA for U.S. Taxpayers with Foreign Accounts

The Foreign Account Tax Compliance Act (FATCA) plays a vital role in ensuring tax compliance among U.S. taxpayers with financial interests abroad. Enacted in 2010, FATCA requires U.S. citizens, resident aliens, and certain entities to report foreign financial assets exceeding specific thresholds. This legislation serves as a safeguard against tax evasion by individuals and enterprises holding undisclosed accounts outside the United States.

One significant reason for FATCA’s importance lies in its broad scope of coverage. It mandates not only individual taxpayers but also foreign financial institutions (FFIs) to identify and report U.S. ownership of accounts. This dual reporting mechanism creates a global network of transparency, which helps minimize tax evasion. Taxpayers with foreign accounts are required to file Form 8938 alongside their annual tax returns if their total assets meet or exceed set limits, which vary based on their filing status and residency.

FATCA compliance also protects taxpayers from severe penalties. Failure to report foreign financial assets can result in fines starting from $10,000, with additional penalties for continued non-compliance. Moreover, underreported or unreported accounts could trigger audits, back taxes, and interest payments. Adhering to FATCA regulations ensures taxpayers avoid such consequences while maintaining a clean tax record.

Through FATCA, the U.S. government strengthens its ability to track global income streams. Taxpayers with overseas accounts must understand this obligation, as their financial transparency helps support broader tax equity. By requiring detailed disclosures, FATCA aligns accountability for all U.S. taxpayers, regardless of where they maintain their accounts.

FATCA Reporting Requirements: Key Forms and Deadlines

Under the Foreign Account Tax Compliance Act (FATCA), individuals and entities with financial accounts outside the United States must comply with specific reporting requirements. These requirements aim to ensure that foreign assets are accurately disclosed to the Internal Revenue Service (IRS). Compliance hinges on completing the correct forms and adhering to established filing deadlines.

Key Forms for FATCA Reporting

The main forms used for FATCA compliance include:

• Form 8938 (Statement of Specified Foreign Financial Assets): U.S. taxpayers meeting certain thresholds must attach this form to their annual tax return (usually Form 1040). It requires detailed information about foreign bank accounts, securities, and other financial assets.
• Form W-8BEN and W-8BEN-E: Foreign individuals or entities earning U.S.-sourced income must file these forms to certify non-U.S. status and claim benefits under tax treaties. The forms ensure withholding obligations are met by foreign financial institutions.
• Form 8966 (FATCA Report): Foreign financial institutions (FFIs) use this form to report information about U.S. account holders to the IRS. This submission is a cornerstone of FATCA’s global enforcement.
• FBAR (FinCEN Form 114): While technically separate from FATCA, the FBAR complements Form 8938. It is required for U.S. taxpayers with more than $10,000 in aggregate foreign financial accounts. Filing is done electronically via the Financial Crimes Enforcement Network.

Critical Deadlines

• U.S. taxpayers must submit Form 8938 by the standard tax filing deadline, typically April 15, with possible extensions to October 15.
• FBAR filings must be completed by the same deadline, although the IRS automatically grants an extension to October 15.
• Foreign institutions filing Form 8966 must adhere to mandated IRS timelines, typically March 31 of the reporting year.

Timely submission of these forms is essential to avoid harsh penalties, which can include fines and additional taxes.

How to Determine if Your Foreign Accounts Are FATCA Reportable

To determine if a foreign account is FATCA reportable, individuals must first evaluate whether they meet key criteria established by the Foreign Account Tax Compliance Act (FATCA). This evaluation involves understanding the account type, balance thresholds, and the individual’s filing status as a U.S. taxpayer. Compliance hinges on careful examination of these elements.

1. Identify Your Filing Status

Filing status significantly impacts FATCA reporting thresholds. Single taxpayers living in the U.S., for example, must report foreign financial accounts if their total value exceeds $50,000 on the last day of the year or $75,000 at any point during the year. For married taxpayers filing jointly, those thresholds double: $100,000 and $150,000 respectively. Taxpayers residing abroad generally adhere to higher thresholds. For example, a single taxpayer abroad reports when total account value exceeds $200,000 on the last day or $300,000 at any point.

2. Determine Whether the Account Qualifies

Not all foreign holdings are FATCA reportable. Reportable accounts may include bank accounts, brokerage accounts, mutual funds, and other financial instruments or entities held outside the U.S. Conversely, certain accounts, such as government retirement funds or certain life insurance policies, could be exempt. Taxpayers must verify whether an account falls under FATCA jurisdiction.

3. Calculate the Aggregate Account Value

FATCA encompasses the combined value of all reportable accounts. Evaluate the highest balance of each account over the year and total them. Even accounts below individual thresholds may trigger reporting if the sum of all accounts exceeds the applicable limit.

4. Understand Beneficial Ownership

Accounts where the taxpayer has control or beneficial interest, even if not titled in their name, must also be analyzed. For example, shared accounts or trust assets may qualify for disclosure under FATCA standards.

IRS guidance and tax professionals provide critical support in this process. Taxpayers must ensure compliance to avoid penalties.

Navigating FBAR vs FATCA: Understanding the Difference

When dealing with foreign accounts, U.S. taxpayers often encounter both FBAR (Foreign Bank and Financial Accounts Report) and FATCA (Foreign Account Tax Compliance Act). While both serve to ensure foreign financial activity is properly reported, their purposes, requirements, and enforcement mechanisms differ significantly.

Purpose and Scope

• FBAR is primarily aimed at identifying foreign financial accounts to help the U.S. combat tax evasion and uncover illicit financial activities. It is enforced by the Financial Crimes Enforcement Network (FinCEN) and focuses on reporting ownership or signature authority over foreign accounts exceeding $10,000 at any point during the calendar year.
• FATCA, on the other hand, was designed to compel foreign financial institutions to report information on U.S. account holders. It targets global transparency and ensures compliance by requiring U.S. taxpayers to report specific foreign assets exceeding predetermined thresholds, which vary based on marital status and residency.

Reporting Requirements

FBAR reporting is conducted through FinCEN Form 114, filed separately from federal tax returns. Submission is mandatory for individuals, trusts, partnerships, and corporations meeting the threshold. FATCA reporting occurs via IRS Form 8938, filed alongside an individual’s tax return, covering additional asset types like foreign trusts, pensions, and stock holdings.

Key Differences to Note

1. Filing Authority: FBAR falls under FinCEN jurisdiction, while FATCA is an IRS directive.
2. Filing Thresholds: FBAR applies to cumulative account balances exceeding $10,000, whereas FATCA thresholds can range from $50,000 to $400,000 and beyond depending on residency and filing status.
3. Penalties: FBAR non-compliance can result in hefty fines or criminal charges, while FATCA imposes penalties for underreporting or failure to disclose specified foreign assets on the tax return.

By understanding the distinct requirements and overlaps, taxpayers can better navigate these regulations, thereby avoiding compliance pitfalls.

Common FATCA Pitfalls and How to Avoid Them

The Foreign Account Tax Compliance Act (FATCA) introduces various challenges for taxpayers with foreign accounts, and failing to navigate these properly can lead to financial penalties and compliance issues. Understanding these common pitfalls and how to address them is essential to ensure adherence.

1. Failure to Identify FATCA Obligations

One common mistake is not realizing that FATCA applies to specific foreign holdings. Many taxpayers mistakenly believe their account size is too small to matter or that accounts in certain jurisdictions are exempt. This assumption can lead to missed reporting. Individuals should thoroughly review FATCA thresholds, which vary based on filing status and residency.

Solution: Regularly review IRS thresholds and seek guidance from a tax advisor to confirm whether reporting obligations apply.

2. Incomplete or Inaccurate Reporting

Errors in completing IRS Form 8938, such as omitting accounts or providing incorrect account details, are frequent. Misreporting can trigger costly audits or penalties from the IRS.

Solution: Maintain detailed records of all reportable accounts, including account numbers, balances, and issuing institutions. Verify all information before filing.

3. Overlooking Joint Accounts

Taxpayers often fail to report foreign joint accounts, assuming the shared nature of the account exempts them from FATCA rules. The IRS, however, requires all qualifying joint accounts to be disclosed, regardless of ownership distribution.

Solution: Confirm the ownership and reporting obligations of all joint accounts, even if a co-owner has already disclosed them.

4. Relying Solely on Financial Institutions

Some believe their financial institutions handle FATCA compliance on their behalf. While banks may report certain accounts to the IRS, their reporting does not replace an individual’s obligation to file Form 8938.

Solution: Personally fulfill all FATCA obligations, regardless of what is reported by foreign banks.

5. Ignoring Foreign Income Reporting

A major pitfall includes failing to report foreign income associated with the accounts. FATCA requirements are separate from income tax obligations, but both must align.

Solution: Include all foreign income on annual tax returns and reconcile this with FATCA disclosures to avoid inconsistencies.

By addressing these pitfalls with proactive measures, taxpayers can reduce FATCA-related risks effectively.

Penalties for Non-Compliance: What Happens If You Ignore FATCA?

Non-compliance with the Foreign Account Tax Compliance Act (FATCA) can lead to severe penalties, impacting both individuals and financial institutions. The legislation is designed to ensure U.S. taxpayers report their foreign financial accounts and assets accurately. Failing to comply can result in monetary fines, legal complications, and further scrutiny from the Internal Revenue Service (IRS).

Penalties for Individuals

U.S. taxpayers who willfully or unintentionally fail to comply face significant financial and legal consequences:

• Failure to File Form 8938: Individuals who neglect to file Form 8938 to report foreign assets may incur a penalty of $10,000 per violation. If the IRS issues a formal notice and the taxpayer continues to withhold information, additional fines of $10,000 per month (with a cap of $50,000 per case) can apply.
• Accuracy-Related Penalties: In cases where underreporting of income occurs due to undisclosed foreign assets, an accuracy-related penalty of up to 40% of the taxes owed may be assessed. This covers underpaid taxes on unreported income tied to foreign accounts.
• Criminal Charges: In cases of willful non-compliance, individuals may face criminal consequences, including fines up to $250,000 and potential imprisonment of up to five years.

Consequences for Financial Institutions

Foreign financial institutions (FFIs) that fail to meet FATCA requirements are also at risk:

1. Withholding Penalties: Non-compliant FFIs face a 30% withholding tax on certain U.S.-source payments, including dividends, interest, and sales proceeds of U.S. assets.
2. Loss of Business Opportunities: Failure to comply can lead to strained partnerships with U.S.-based entities due to legal and operational risks.

The implications of non-compliance extend beyond financial repercussions. The IRS may increase scrutiny of an individual’s or entity’s entire tax history, leading to audits or further legal action.

Steps to Ensure FATCA Compliance: A Practical Guide

Ensuring compliance with the Foreign Account Tax Compliance Act (FATCA) requires careful attention to detail and adherence to regulatory obligations. The following steps outline a practical approach to staying compliant:

1. Understand FATCA Requirements Familiarize oneself with the key provisions of FATCA, including reporting thresholds, filing deadlines, and specific forms such as Form 8938. Research the IRS guidelines and determine whether they apply to an individual’s or entity’s financial situation.
2. Determine Reporting Obligations Assess whether foreign accounts or assets meet the thresholds for mandatory reporting. For U.S. citizens, green card holders, and certain legal entities, the threshold depends on factors such as filing status and residency. Consultation with a tax advisor may help clarify obligations.
3. Gather Relevant Documentation Compile necessary records, including account balances, income earned, and transaction details for all foreign financial accounts. Maintain documentation for investments, securities, and other foreign assets to ensure accurate reporting.
4. File the Required Forms Submit Form 8938 as part of an individual’s annual income tax return if required. Verify whether additional forms, like the FBAR (FinCEN Form 114), are necessary based on account ownership or control. Ensure proper electronic or paper filing formats are used.
5. Stay Informed of Updates Monitor updates to FATCA regulations that may affect reporting requirements. Changes to thresholds or deadlines might require adjustments, making it essential to stay current with IRS announcements and resources.
6. Consult with Professionals Engage tax professionals or legal advisors with expertise in international compliance. These experts can provide personalized recommendations and assist in avoiding errors that might result in penalties or audits.
7. Maintain Recordkeeping Retain detailed records of foreign accounts, statements, and filed forms for at least the required duration. These records may be requested by the IRS in the event of audits or inquiries.

By following these steps, individuals and entities can more effectively navigate FATCA requirements and maintain their compliance with U.S. tax laws.

Working with a Tax Professional for FATCA Compliance: When and Why You Should

The Foreign Account Tax Compliance Act (FATCA) introduces complex reporting requirements for U.S. taxpayers with foreign financial accounts, often requiring professional assistance to navigate. Engaging a tax professional can be crucial in managing compliance, especially for individuals and businesses facing unique financial circumstances or unfamiliar with tax regulations.

When to Seek Assistance

1. Complex Financial Portfolios: Taxpayers with multiple foreign accounts, including investments, trusts, or offshore holdings, often face intricate reporting requirements. A tax professional ensures these accounts are accurately disclosed under FATCA rules.
2. High Account Balances: Higher-value accounts are subject to stricter scrutiny by the Internal Revenue Service (IRS). Tax professionals can identify applicable thresholds and file the necessary forms, such as Form 8938, to avoid errors or omissions.
3. First-Time Compliance: Individuals new to FATCA often find the reporting processes overwhelming. Professionals streamline the process, helping to interpret legal jargon, understand deadlines, and complete required documents.
4. Non-Compliance Issues: Taxpayers who have missed prior FATCA reporting deadlines or improperly disclosed foreign assets may need guidance on participating in IRS programs, such as the Streamlined Filing Compliance Procedures.
5. Cross-Border Situations: U.S. citizens living abroad or dual citizens often face overlapping tax rules. A tax professional with expertise in international taxation can help resolve conflicts and avoid double taxation.

Why Professional Help is Beneficial

• Error Prevention: Professionals minimize the likelihood of errors, which can lead to penalties or audits. They ensure that all income and assets are reported in a compliant manner.
• Time-Saving: FATCA reporting can be time-intensive, especially for those unfamiliar with the forms. Having an expert reduces the burden and ensures timely submissions.
• Tax Optimization: A professional identifies opportunities to maximize deductions or exclusions, such as the Foreign Earned Income Exclusion (FEIE) or Foreign Tax Credit.
• Staying Updated: FATCA regulations can change. Professionals stay informed about updates, ensuring continued compliance.

Working with a tax professional empowers individuals and businesses to fulfill their obligations under FATCA with accuracy and confidence, mitigating risks while optimizing financial outcomes.

FATCA and Dual Citizenship: Unique Considerations for Dual Citizens

The Foreign Account Tax Compliance Act (FATCA) introduces challenges for individuals holding dual citizenship, particularly those residing outside the United States. As dual citizens often maintain financial accounts and investments abroad, their obligations under FATCA can be multifaceted and complex, requiring careful attention to avoid penalties.

One critical consideration is the requirement for U.S. citizens, including dual citizens, to report foreign financial assets exceeding certain thresholds. FATCA mandates the filing of Form 8938 alongside their annual U.S. federal tax returns, disclosing significant foreign accounts or assets. The specific reporting threshold varies depending on the individual’s residency and filing status. For instance, thresholds are typically higher for those married to non-U.S. citizens or living abroad.

Dual citizens often face additional scrutiny from foreign financial institutions (FFIs). Under FATCA, FFIs are required to identify and report U.S. account holders to the IRS. This can create significant challenges for dual citizens, as foreign banks may view U.S. citizenship as a liability and restrict access to their services. In some cases, dual citizens have encountered account closures or difficulties in opening new accounts.

It is also essential to understand how FATCA compliance intersects with foreign tax obligations. Dual citizens living abroad may be subject to tax laws in both their countries of residence and the United States. While the U.S. allows for foreign tax credits and treaties to mitigate double taxation, navigating these can be administratively burdensome.

Due to FATCA reporting requirements, dual citizens need to maintain thorough documentation of all foreign accounts, including account balances, interest received, and income generated. Accurate record-keeping ensures compliance and avoids triggering audits or fines.

How FATCA Impacts Foreign Financial Institutions and Your Accounts

The Foreign Account Tax Compliance Act (FATCA) significantly affects foreign financial institutions (FFIs) and account holders with international financial ties. This legislation requires FFIs to identify and report accounts held by U.S. taxpayers or entities with substantial U.S. ownership to the Internal Revenue Service (IRS). FATCA’s goal is to enhance tax compliance and reduce offshore tax evasion, but its implications can be far-reaching.

FFIs face multiple obligations under FATCA. They must register with the IRS, conduct due diligence processes to identify U.S.-linked accounts, and report detailed account information such as balances, interest payments, and dividends. Non-compliance exposes these institutions to a 30% withholding tax on specific U.S.-sourced payments, including interest and dividends. Many FFIs incur steep operational costs for compliance, including developing data systems, implementing new procedures, and training staff to meet FATCA standards.

For individuals, FATCA increases the scrutiny placed on foreign accounts. U.S. taxpayers with foreign financial accounts are required to disclose these accounts annually through Form 8938 if they exceed certain thresholds. FATCA reporting is separate from but complementary to FBAR (Foreign Bank Account Report) requirements, raising the stakes for non-compliance with steep penalties. Non-disclosure can result in fines or legal action.

Some FFIs have opted not to serve U.S. clients to avoid the complexity and costs of compliance. U.S. citizens living overseas may encounter difficulties opening or maintaining accounts as a result. Therefore, it is essential for U.S. citizens and green card holders to remain vigilant about their obligations while considering professional advice to navigate these regulations effectively.

Recent Updates to FATCA: Staying Informed on Policy Changes

The Foreign Account Tax Compliance Act (FATCA) continues to evolve through amendments, updated guidance, and procedural modifications. Keeping track of these updates is crucial for taxpayers, financial institutions, and advisors who interact with foreign financial assets. Recent changes have focused on clarifying certain provisions, improving compliance mechanisms, and refining reporting protocols for both individual taxpayers and foreign financial institutions (FFIs).

Key regulatory adjustments include expanded definitions surrounding U.S. persons and the types of accounts subject to reporting obligations. For example, changes have further defined financial assets such as cryptocurrencies. As digital assets gain prominence, revisions now outline reporting requirements for crypto holdings held in foreign accounts, ensuring that they fall under FATCA’s scope in alignment with existing tax codes.

The IRS has also introduced a streamlined compliance program designed to encourage non-compliant taxpayers to come forward voluntarily. This program offers reduced penalties for those who failed to report foreign assets due to unintentional oversight. Alongside this, updates to Form 8938 filing instructions now clarify thresholds for reporting based on filing status and residency outside the United States, helping taxpayers better navigate obligations.

On the enforcement side, there are recent developments in intergovernmental agreements (IGAs) involving foreign jurisdictions. Updates to IGAs emphasize the exchange of financial information, fostering an atmosphere of increased global cooperation to combat tax evasion. Affected jurisdictions may experience modifications to their domestic protocols to harmonize local regulations with FATCA.

Staying informed requires regular consultation of IRS guidance, FATCA news bulletins, and collaboration with tax professionals. By keeping up with these developments, stakeholders can effectively manage their compliance responsibilities under evolving statutes. Understanding recent updates ensures a proactive approach in mitigating legal and financial risks.

Benefits of Staying FATCA Compliant: Protecting Your Financial Future

Staying compliant with the Foreign Account Tax Compliance Act (FATCA) offers significant advantages for individuals and businesses with foreign financial accounts. These benefits go beyond meeting legal obligations, providing tangible financial safeguards and maintaining long-term stability. Understanding these positives is crucial for those navigating the complexities of international taxation.

Avoidance of Penalties and Legal Consequences

FATCA non-compliance can result in severe financial penalties, totaling up to 50% of the value of undisclosed accounts or hefty fines on unpaid taxes. By staying compliant, taxpayers avoid these costly consequences, as well as the potential legal challenges that could arise. Compliance ensures uninterrupted access to accounts and reduces the risk of scrutiny from the IRS or other tax authorities.

Improved Financial Transparency

Remaining FATCA-compliant promotes accountability and transparency in financial reporting. Accurately reporting foreign assets builds trust with financial institutions, regulators, and potential business partners. This transparency can lead to smoother interactions when seeking loans, investments, or other financial opportunities.

Preservation of Access to Banking Services

Non-compliance may lead to foreign banks and financial institutions closing accounts or restricting services due to the risks associated with unreported accounts. Staying compliant helps ensure uninterrupted access to accounts and prevents disruptions that could affect a person’s ability to transfer funds or manage global finances.

Long-Term Financial Stability

Proper compliance with FATCA regulations helps establish a secure foundation for future financial planning. It allows individuals to focus on wealth preservation, investments, and asset diversification without concerns about unexpected liabilities tied to undisclosed accounts. Compliance fosters peace of mind, ensuring that financial decisions align with lawful practices.

Protection of Reputation

Reputational harm is a potential consequence of being flagged for tax evasion or non-compliance. Maintaining FATCA compliance protects an individual’s or business’s standing in the global financial community and avoids negative associations that could deter partnerships or investments.

Staying compliant ultimately secures a more predictable and stable financial outlook, creating opportunities for growth while safeguarding existing wealth.

Frequently Asked Questions About FATCA Compliance for U.S. Expats

What is FATCA and who does it apply to?

The Foreign Account Tax Compliance Act (FATCA) is a U.S. law designed to prevent tax evasion by requiring U.S. taxpayers to report certain foreign financial accounts and assets. It specifically applies to U.S. citizens, green card holders, and certain non-citizens with U.S. tax obligations, even when they reside abroad. Foreign financial institutions are also required to report information about accounts held by these individuals to the IRS.

What are the thresholds for reporting foreign assets?

FATCA reporting thresholds depend on filing status and whether the individual resides in the U.S. or abroad. For example:

• U.S. Expats:
• $200,000 on the last day of the tax year or $300,000 at any time during the year (single or married filing separately).
• $400,000 on the last day or $600,000 at any time (married filing jointly).
• U.S. Residents:
• Lower thresholds apply for those living in the U.S., beginning at $50,000 for single taxpayers.

What forms must U.S. expats file under FATCA?

U.S. expats may need to file Form 8938 (Statement of Specified Foreign Financial Assets) if they meet the reporting thresholds. This form must be submitted with an expat’s annual tax return. It’s important to note that filing Form 8938 does not replace the separate FBAR (FinCEN Form 114) requirement, which has its own set of rules.

What are the penalties for non-compliance?

Failure to comply with FATCA can result in steep penalties. A non-filing penalty starts at $10,000 but may increase to $50,000 for prolonged non-compliance. Additionally, underreporting foreign assets can lead to severe financial repercussions, including up to 40% penalties on understated income.

How can U.S. expats achieve compliance?

To remain tax-compliant, expats must file all necessary forms annually and disclose their foreign financial assets as required. If falling behind on compliance, the IRS offers offshore amnesty programs, such as the Streamlined Filing Compliance Procedures, to help taxpayers rectify past omissions without major penalties.