What is FATCA?

At a glance

What is FATCA? The Foreign Account Tax Compliance Act cuts down on tax evasion, and you might be required to file. Find out more from H&R Block.

What is FATCA? Thumbnail

When you moved overseas, you probably established new roots by doing things like renting an apartment, taking out health insurance, or opening a bank account. Well, if you opened a bank account or acquired any financial assets overseas, the IRS wants to know about it. That’s where the Foreign Account Tax Compliance Act, or FATCA, comes in.

The Foreign Account Tax Compliance Act (FATCA) Summarized for Americans Abroad

It used to be pretty easy for Americans to get around paying their fair share of taxes by hiding money in foreign banks. To prevent this, U.S. lawmakers passed the Foreign Account Tax Compliance Act (FATCA) which required foreign banks to share financial information with the U.S.

If you are a U.S. citizen or green card holder living abroad and have foreign assets or foreign bank accounts, you may need to file Form 8938 when you file your U.S. tax return if the value of your assets exceeds certain thresholds. FATCA reporting requirements for financial institutions overseas mandates them to disclose information about U.S. citizens who hold accounts overseas. Your foreign bank may have you fill out a U.S. tax document (form W-9) so they can comply with these rules.

If you haven’t been filing U.S. tax returns, FATCA reporting can result in the IRS discovering your failure to file. Don’t worry! H&R Block can help you catch up.

Why FATCA was created

The U.S. Treasury created FATCA to ensure U.S. citizens abroad follow U.S. tax rules.

Before implementation, the U.S. government discovered that they were losing billions of dollars in tax revenue per year thanks to U.S. taxpayers stashing cash in overseas banks and other financial institutions. To combat this, the U.S. drafted legislation—the Foreign Account Tax Compliance Act—that would require other countries to disclose any financial accounts held by Americans abroad.

Its success depends on the cooperation of other countries. To make the whole thing work, each participating country signs an intergovernmental agreement (IGA) that incorporates FATCA into their local laws. You can see which countries have signed IGAs below.

The IRS has a complete FATCA PDF summary on the IRS website.

FATCA reporting requirements

Who is subject to FATCA reporting? Well, both individuals and financial institutions need to disclose information related to FATCA:

  • Individual U.S. taxpayers may need to file FATCA Form 8938
  • Institutions need to disclose information about U.S. citizens with accounts overseas. How each country goes about that depends in their individual IGA with the U.S.

FATCA vs FBAR

Tax law is an alphabet soup of acronyms, and many U.S. expats confuse your FATCA declaration with Foreign Bank Account Report (FBAR) reporting.

While these two forms are similar, FATCA and FBAR have slightly different reporting requirements. For example, the people who need to fill out FACTA are U.S. citizens, residents, and certain non-resident aliens. The FBAR is filed by the above and a wider range of tax filers, including estates, trusts, and other financial entities with assets abroad. Residents and entities in U.S. territories also have to file FBARs, but not FATCA forms

A big difference between the two is the government organization responsible and where you file them. Your FBAR reports any assets in foreign financial institutions to the Financial Crimes Enforcement Network of the U.S. Treasury, or FinCEN. Your FATCA reports assets in foreign financial institutions to the IRS.

You may have to fill out one or both of these forms. If you’re unsure, we recommend you leave it to the pros.

FATCA countries with declarations or treaties

The following are countries with FATCA declarations or treaties with the U.S.:

Algeria
Angola
Anguilla
Antigua and Barbuda
Armenia
Australia
Austria
Azerbaijan
Bahamas
Bahrain
Barbados
Belarus
Belgium
Bermuda
Brazil
British Virgin Islands
Bulgaria
Cabo Verde
Cambodia
Canada
Cayman Islands
Chile
China
Colombia
Costa Rica
Croatia
Curaçao
Cyprus
Czech Republic
Denmark
Dominica
Dominican Republic
Estonia
Finland
France
Georgia
Germany
Gibraltar
Greece
Greenland
Grenada
Guernsey
Guyana
Haiti
Holy See
Honduras
Hong Kong
Hungary
Iceland
India
Indonesia
Iraq
Ireland
Isle of Man
Israel
Italy
Jamaica
Japan
Jersey
Kazakhstan
Kosovo
Kuwait
Latvia
Liechtenstein
Lithuania
Luxembourg
Macao
Malaysia
Malta
Mauritius
Mexico
Moldova
Montenegro
Montserrat
Netherlands
New Zealand
Nicaragua
Norway
Panama
Paraguay
Peru
Philippines
Poland
Portugal
Qatar
Romania
San Marino
Saudi Arabia
Serbia
Seychelles
Singapore
Slovak Republic
Slovenia
South Africa
South Korea
Spain
St. Kitts and Nevis
St. Lucia
St. Vincent and the Grenadines
Sweden
Switzerland
Taiwan*
Thailand
Trinidad and Tobago
Tunisia
Turkey
Turkmenistan
Turks and Caicos Islands
Ukraine
United Arab Emirates
United Kingdom
Uzbekistan
Vietnam

File FATCA documents and your Expat Tax Return with H&R Block

Have more questions? Ready to file your FATCA declaration? No matter how complicated your U.S. tax return is, there’s an expat tax expert ready to help. Get started with Virtual Expat Tax Preparation from H&R Block Expat Tax Services.

Was this article helpful?


See what expats have to say about their experience with us.

Kristi Heinz

H&R Block Expat Tax has always been fast, efficient and answers my questions. For 10 years I filed everything myself and never received a refund. Now I get a big refund every year! Wish I had known sooner. I highly recommend HRB Expat Tax.

Arkadiusz Malinowski

H&R Block U.S. Expat Tax Services does a really great job! Fast and reliable. Tax Organizer was very easy to use. And what I really like most is very quick and precise answers whenever you have a question. Thank you!

Ayesha Sultan

I live in Kenya now and run my own online digital marketing business. Using this service has helped me save tons of time and energy on my taxes. I am also really relieved that they will help if I need it during audits. It really makes living abroad and doing taxes a million times better.

Jennifer Thompson

I have been using H&R block for a few years now. I live abroad, but don't make a lot of money. Filing with H&R block is as painless as doing taxes gets and my Advisor is wonderful and answers all my questions.

Alison Watts

Expat taxes made easy. I had a great experience this year - I used HR Block last year and was very impressed with the efficiency and accuracy and professionalism throughout the whole process.

 

No one offers more ways to get tax help than H&R Block.

Easy online filing designed for expats. Experienced experts if you need them. Get your taxes done in the way that’s right
for you.