What Is FATCA (Foreign Account Tax Compliance Act)?
FATCA (Foreign Account Tax Compliance Act) is a United States tax reporting law under which foreign financial institutions and United States persons disclose foreign accounts.
Also known as: Foreign Account Tax Compliance Act, FATCA Reporting.
How FATCA (Foreign Account Tax Compliance Act) works
FATCA (Foreign Account Tax Compliance Act), passed as part of the HIRE Act, works on two levels: foreign financial institutions identify and report accounts held by United States persons, and United States taxpayers themselves report specified foreign financial assets on Form 8938 when values exceed set thresholds. On the institutional side, a foreign financial institution which does not register with the IRS and agree to report faces a 30 percent withholding tax on certain United States-source payments, while registered institutions receive a Global Intermediary Identification Number (GIIN); in countries with an intergovernmental agreement, institutions often report to the local tax authority, which passes data to the IRS. On the individual side, the IRS sets Form 8938 thresholds by filing status and residence: an unmarried taxpayer living abroad generally files when specified foreign assets exceed 200,000 dollars on the last day of the year or 300,000 dollars at any time, against 50,000 and 75,000 dollars for a taxpayer living in the United States. Because the United States taxes on the basis of citizenship, these duties follow a citizen or green card holder abroad, and foreign banks therefore ask new clients for self-certification of United States status, often on Form W-9 or W-8BEN. FATCA reporting is separate from the FBAR filed with FinCEN, and both obligations can apply to the same accounts.
FATCA (Foreign Account Tax Compliance Act) vs Common Reporting Standard (CRS)
Unlike the Common Reporting Standard (CRS), which is a multilateral OECD standard keyed to tax residence, FATCA (Foreign Account Tax Compliance Act) is a unilateral United States law keyed to United States person status, including citizenship, and backed by withholding.
| FATCA (Foreign Account Tax Compliance Act) | Common Reporting Standard (CRS) | |
|---|---|---|
| Origin | United States statute, passed as part of the HIRE Act | OECD standard implemented by participating jurisdictions |
| Who is reported | United States persons, including citizens resident abroad | Account holders tax resident in a partner jurisdiction |
| Enforcement | 30 percent withholding on certain US-source payments to non-participating institutions | Domestic penalties under each jurisdiction's implementing law |
Example
Illustrative example: A United States citizen, unmarried and living in Country A, opens a brokerage account at a local bank. The bank asks for a self-certification of United States status and, under the intergovernmental agreement between Country A and the United States, reports the account balance to the Country A tax authority for onward exchange with the IRS. At year end, the person's specified foreign assets total 250,000 dollars (illustrative), above the 200,000 dollar year-end threshold which the IRS lists for unmarried taxpayers living abroad, so Form 8938 is attached to the United States income tax return. Because aggregate foreign account balances also exceeded 10,000 dollars during the year, an FBAR is filed separately with FinCEN. Had the bank's client been a resident of Country A without United States status, FATCA would not have applied, although the Common Reporting Standard could still have led to an exchange with the client's country of residence. The example shows that the trigger is United States status, while residence only changes the reporting threshold.
Common misconception
Myth: Living abroad and paying tax locally removes the need to report foreign accounts under FATCA.
Reality: FATCA (Foreign Account Tax Compliance Act) duties follow United States person status rather than residence, although higher Form 8938 thresholds apply to taxpayers living abroad.
Frequently asked questions
What is FATCA?
FATCA (Foreign Account Tax Compliance Act) is a United States law requiring foreign financial institutions to report accounts of United States persons and requiring those persons to report specified foreign financial assets on Form 8938 above thresholds.
What are the FATCA reporting thresholds for Americans abroad?
FATCA (Foreign Account Tax Compliance Act) Form 8938 thresholds for an unmarried taxpayer living abroad are more than 200,000 dollars at year end or 300,000 dollars at any time, according to the IRS; married joint filers have higher thresholds.
What is the difference between FATCA and FBAR?
FATCA (Foreign Account Tax Compliance Act) reporting by individuals uses Form 8938 attached to the tax return, whereas the FBAR is FinCEN Form 114, filed separately when aggregate foreign accounts exceed 10,000 dollars.
Related terms
- Common Reporting Standard (CRS) — Multilateral standard often confused with FATCA
- Report of Foreign Bank and Financial Accounts (FBAR) — Separate US account report filed with FinCEN
- Form 8938 — Individual FATCA reporting form attached to the tax return
- Intergovernmental Agreement (IGA) — Treaty framework through which most banks report FATCA data
- Foreign Financial Institution (FFI) — Institution subject to FATCA registration and reporting
Related guides
- Global tax reform and US digital nomads — US tax obligations for Americans living abroad
- US expat tax reform debate — Policy debate affecting US citizens abroad
Sources
- IRS, Foreign Account Tax Compliance Act (FATCA)
- IRS, Comparison of Form 8938 and FBAR requirements
- IRS, Information for foreign financial institutions
Last verified: 2026-10-08. This entry is general information, not tax or legal advice; rules vary by country and change over time.
