Stay Compliant, Stay ConfidentAs a US expat, you likely have opened bank accounts and perhaps have even acquired some in the foreign country in which you live and work, and maybe in some other foreign countries, as well.
In the past, before the IRS and US Department of the Treasury started enforcing reporting compliance, it was easy for American taxpayers living abroad to avoid paying US taxes on income earned in foreign bank and investment accounts. To crack down on these non-reporting abuses by taxpayers hiding money and assets abroad, FATCA was enacted by the US Congress in 2010.
FATCA stands for the Foreign Account Tax Compliance Act. It is a United States federal law that was enacted in 2010 as part of the Hiring Incentives to Restore Employment (HIRE) Act.
The primary purpose of FATCA is to combat tax evasion by US citizens and residents who hold financial assets and accounts outside of the United States. Under the FATCA provisions, all US citizens must report foreign financial accounts and assets. While FATCA is not aimed directly at cracking down on US expats, it impacts many expats, as they may have an additional reporting requirement to ensure compliance with FATCA.
FATCA reporting is crucial for expats because failure to comply can result in severe penalties. The IRS uses FATCA to track foreign financial assets held by US taxpayers, and non-reporting can lead to significant financial consequences, including penalties up to $50,000 and additional fines for underreported taxes. By filing FATCA forms accurately and on time, you avoid these penalties and stay compliant with US tax laws.
As a US citizen or green card holder living abroad with foreign bank accounts, you may be required to file Form 8938: Statement of Specified Foreign Financial Assets, together with your 2024 US tax return, if the aggregate value of your accounts and assets exceeds a certain threshold (see below), depending on your filing status.
In addition to foreign bank accounts, foreign stock, mutual funds, precious metal holdings, partnerships and even foreign life insurance may be reportable on Form 8938. Please be aware that FATCA requires foreign financial institutions to provide information to the IRS about US citizens holding accounts. If you have substantial balances in foreign banks and own substantial foreign assets, you may be non-compliant if you have not filed Form 8938 to disclose your foreign holdings, even if you have continued to file US returns yearly.
In addition to foreign bank accounts, foreign stock, mutual funds, precious metal holdings, partnerships and even foreign life insurance may be reportable on Form 8938.
Please be aware that FATCA requires foreign financial institutions to provide information to the IRS about US citizens holding accounts. If you have substantial balances in foreign banks and own substantial foreign assets, you may be non-compliant if you have not filed Form 8938 to disclose your foreign holdings, even if you have continued to file US returns yearly.
| Category | Description |
| Foreign Bank Accounts | This includes checking accounts, savings accounts, and certificates of deposit (CDs) held in foreign financial institutions. |
| Foreign Investment Accounts | Accounts held at foreign brokerage firms, including foreign stocks, bonds, mutual funds, and other securities. |
| Foreign Life Insurance Policies | Life insurance policies held outside of the US that have a cash valve. |
| Foreign Partnerships and Businesses | Interests in foreign partnerships, corporations, of businesses that may be held outside of the US. |
| Foreign Real Estate | While real estate itself is not directly reportable, any associated foreign financial accounts related to the property (such as ‘mortgages or income from rental properties) could be. reportable. |
| Foreign Trusts | Interests in foreign trusts, including distributions from foreign trusts or assets held in rust for your benefit. |
| Foreign Commodities | Precious metals (gold, siver, etc.) and other commodities held in foreign accounts. |
| Foreign Exchange Contracts (Forex) | Contracts related to currency exchange or trading that are held in foreign financial institutions. |
No, FATCA and FBAR (Foreign Bank Account Report) are two separate reporting requirements, though they both involve disclosing foreign financial accounts.
While both forms might need to be filed by the same individual, they are reported to different agencies, and each has distinct requirements.
At Universal Tax Professionals, we provide FATCA reporting services to help US expats stay compliant with their tax obligations. Here’s why you should choose us:
If you need help with FATCA reporting, don’t wait until penalties accrue. Contact us today to schedule a consultation and ensure your FATCA compliance is handled smoothly.
