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FATCA – Foreign Account Tax Compliance Act for Individuals

Updated ·

The provisions commonly known as the Foreign Account Tax Compliance Act (FATCA) became law in March 2010.
FATCA targets tax non-compliance by U.S. taxpayers with foreign accounts

FATCA focuses on reporting:

By U.S. taxpayers about certain foreign financial accounts and offshore assets

By foreign financial institutions about financial accounts held by U.S. taxpayers or foreign entities in which U.S. taxpayers hold a substantial ownership interest

The objective of FATCA is the reporting of foreign financial assets; withholding is the cost of not reporting. Notice 2013-43 revises the implementation timeline and provides additional guidance.

U.S. individual taxpayers must report information about certain foreign financial accounts and offshore assets on Form 8938 and attach it to their income tax return, if the total asset value exceeds the appropriate reporting threshold.
Form 8938 reporting is in addition to FBAR reporting

  • U.S. citizens, U.S. individual residents, and a very limited number of nonresident individuals who own certain foreign financial accounts or other offshore assets (specified foreign financial assets) must report those assets
  • Attach Form 8938 to the annual income tax return (usually Form 1040)
  • Taxpayers with a total value of specified foreign financial assets below a certain threshold do not have to file Form 8938
  • If the total value is at or below $50,000 at the end of the tax year, there is no reporting requirement for the year, unless the total value was more than $75,000 at any time during the tax year
  • The threshold is higher for individuals who live outside the United States
  • Thresholds are different for married and single taxpayers
  • Taxpayers who do not have to file an income tax return for the tax year do not have to file Form 8938, regardless of the value of their specified foreign financial assets.
  • Penalties apply for failure to file accurately

 

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