What is FATCA? The Foreign Account Tax Compliance Act explained for US expats
FATCA stands for the Foreign Account Tax Compliance Act – a 2010 US law that requires foreign banks to report accounts held by US persons to the IRS and requires US taxpayers with foreign financial assets above set thresholds to file Form 8938 with their tax return.
FATCA is a reporting law, not a tax. It does not change what income is taxable or create a new tax on US individuals.
FATCA at a glance
This FATCA overview covers the key rules in one table.
| Detail | |
|---|---|
| What it is | The Foreign Account Tax Compliance Act (FATCA) – a US information-reporting and withholding regime enacted in 2010 as part of the HIRE Act |
| Who it affects | US citizens, green card holders, and certain resident aliens with foreign financial assets above the reporting threshold |
| What foreign banks do | Identify US account holders and report their account data to the IRS or to their local tax authority under an intergovernmental agreement |
| What you file | Form 8938, attached to your Form 1040, if your specified foreign financial assets exceed the threshold for your filing status and residence |
| Thresholds for expats | More than $200,000 on the last day of the year or more than $300,000 at any time during the year for single filers living abroad (2025) |
| Penalty for not filing | $10,000 for each year you miss Form 8938, plus up to $50,000 more if the failure continues after IRS notice |
What is the FATCA law, and what does it mean for you?
If your foreign bank recently asked for a W-9 or inquired about your US citizenship, FATCA is the reason. Here is what this article covers:
- How FATCA works – the bank side and your side
- Who must file Form 8938, and at what thresholds
- Which forms apply, and how FATCA differs from the FBAR
- What the penalties are for missing a filing
- How to catch up if you are behind
What does FATCA stand for, and what does it mean?
FATCA means Foreign Account Tax Compliance Act. Congress enacted it in 2010 to give the IRS visibility into financial accounts US persons hold outside the United States.
FATCA is an information-reporting and withholding regime – not a new tax. It does not change what income is taxable or add a tax on US individuals. Its purpose is transparency: making sure the IRS knows about offshore accounts so income from those accounts is properly reported under existing law.
Is FATCA a tax?
No. There is no separate FATCA tax on your income. The 30% withholding that FATCA imposes targets noncompliant foreign institutions – it is an enforcement mechanism.
If you file Form 8938 and provide your bank with a W-9, FATCA withholding does not apply to you.
Key FATCA terms
The following terms appear throughout this article and in your bank's FATCA correspondence.
| Term | Plain-English meaning |
|---|---|
| FFI | Foreign financial institution – any non-US bank, brokerage, investment fund, or insurance company with cash-value products |
| NFFE | Non-financial foreign entity – a foreign entity that is not a bank or investment fund, such as a foreign operating company |
| GIIN | Global Intermediary Identification Number – the unique ID the IRS assigns to each registered FFI |
| Specified foreign financial asset | Foreign bank accounts, brokerage accounts, foreign stock held directly, interests in foreign entities, and certain foreign insurance or pension products |
| Withholding agent | The US or foreign entity that pays US-source income and is responsible for deducting FATCA withholding when required |
| IGA | Intergovernmental agreement – a bilateral deal between the US and another country that defines how that country's banks comply with FATCA |
| Recalcitrant account holder | An account holder who fails to provide the information the bank needs to determine US status – subject to 30% FATCA withholding |
For a deeper look at which accounts and assets are covered, see our FATCA exemptions and reporting thresholds guide.
What law created FATCA, and why does it exist?
The FATCA law was enacted as part of the Hiring Incentives to Restore Employment Act, known as the HIRE Act – Pub. L. 111-147, signed into law on March 18, 2010.
FATCA added two separate legal frameworks to the Internal Revenue Code.
| Legal piece | What it covers | Key provision |
|---|---|---|
| Chapter 4 (IRC 1471–1474) | Foreign financial institutions and withholding | Requires FFIs to report US accounts to the IRS or face 30% withholding on US-source payments |
| IRC 6038D | Individual reporting | Requires specified individuals to report foreign financial assets on Form 8938 with their tax return |
Treasury FATCA regulations at 26 CFR 1.1471-1 through 1.1474-7 implement the institutional side. A separate set of regulations at 26 CFR 1.6038D-1 through 1.6038D-8 implements the individual reporting rules.
What is the purpose of FATCA?
FATCA exists to curb offshore tax evasion by US taxpayers using foreign accounts. Before FATCA, a US person could hold income-producing assets at a foreign bank, and the IRS had limited ability to detect unreported income. FATCA closed that gap by requiring the banks themselves to report.
FATCA timeline
- 2010 – FATCA enacted as part of the HIRE Act, signed March 18, 2010
- 2011 – first Form 8938 filings required for tax years beginning after March 18, 2010
- July 1, 2014 – FATCA withholding on US-source payments to noncompliant FFIs begins
- 2012–present – the US signs intergovernmental agreements to implement FATCA, starting with the UK in September 2012; the Treasury list now covers 114 jurisdictions
How does FATCA work?
FATCA operates as a two-sided system. Under FATCA, the IRS receives account data from foreign banks on one side, and individual taxpayers report their own foreign assets on the other.
Side 1 – your bank reports you
FFIs under FATCA must identify their US account holders through a process called FATCA due diligence. The bank screens accounts for US indicia – markers suggesting the account holder may be a US person.
These include:
- US place of birth
- US mailing or residence address
- US telephone number
- Standing instructions to transfer funds to a US account
- A power of attorney granted to a person with a US address
- An “in-care-of” or “hold mail” address as the sole address on file
- Self-certification as a US citizen or resident
If the bank finds US indicia, it asks you to confirm your status – typically by submitting a Form W-9.
The bank then reports your account information to the IRS on Form 8966, either directly through the IRS International Data Exchange Service or through the bank's local tax authority under a Model 1 IGA.
Every registered FFI receives a GIIN – a 19-character identification number – and appears on the publicly searchable IRS FFI List.
Side 2 – you report your assets
If your specified foreign financial assets exceed the reporting threshold for your filing status and residence, you file Form 8938 with your annual tax return.
Why is my bank asking about FATCA?
Your bank identified a US connection on your account – a US birthplace, a US address, a US phone number, or a US passport.
Under FATCA, the bank must classify your account or face withholding on its own US-source income. Respond promptly with a Form W-9 that includes your US taxpayer identification number (TIN). If you are not a US person, the bank needs a Form W-8BEN instead.
Who does FATCA apply to?
FATCA's Form 8938 reporting requirement applies to every US citizen, resident alien, and qualifying nonresident alien whose specified foreign financial assets exceed the reporting threshold – regardless of where they live.
It is not limited to US citizens. Green card holders, dual citizens, and accidental Americans are all within scope.
Specified individuals who must file Form 8938 include:
- US citizens, including those living abroad
- Resident aliens for any part of the tax year
- Nonresident aliens who elect to file a joint return as residents
- Bona fide residents of Puerto Rico or American Samoa
Specified domestic entities – certain closely held domestic corporations, partnerships, and trusts formed or used to hold foreign assets – must also file Form 8938 if their assets exceed $50,000 on the last day of the year or $75,000 at any time (2025).
Dual citizens, accidental Americans, and green card holders
If you hold US citizenship, a green card, or meet the substantial presence test, FATCA applies to you even if you have never lived in the United States.
An accidental American who discovers US status after receiving a FATCA letter from a foreign bank has the same Form 8938 obligation as any other US person.
Does FATCA apply to me? A 3-question checklist:
- US person status – you are a US citizen, green card holder, or resident alien
- Tax return filing requirement – you are required to file a US income tax return for the year
- Asset threshold – your specified foreign financial assets exceed the threshold for your filing status and residence
If all three apply, you must file Form 8938. If you have no US tax return filing requirement for the year, Form 8938 is not required – even if your foreign assets exceed the threshold.
What is FATCA reporting?
FATCA reporting is the process by which foreign banks report US-held accounts to the IRS, and US taxpayers report their own foreign assets on Form 8938.
The two sides operate independently, and both can apply to the same accounts in the same year.
The main FATCA form for individuals is Form 8938, Statement of Specified Foreign Financial Assets.
FATCA reporting at a glance: your bank vs you
| Your bank | You | |
|---|---|---|
| Who reports | Your foreign financial institution | You, the US taxpayer |
| What is reported | Account holder name, address, US TIN, account number, account balance or value, certain income payments | Description, value, and identifying information for each specified foreign financial asset |
| Form | Form 8966 | Form 8938 |
| Where it goes | To the IRS directly or to the bank's local tax authority under a Model 1 IGA | To the IRS, attached to your Form 1040 |
Many banks also report under the OECD's Common Reporting Standard, which serves a similar function for non-US countries.
If your bank participates in both regimes, the same account may be reported under FATCA and CRS simultaneously – but your personal filing obligation is only on the US side.
FATCA rules at a glance: thresholds, deadlines, and penalties
FATCA rules determine who must file Form 8938, when, and what happens if you miss it. The thresholds depend on your filing status and whether you live in the US or abroad.
Form 8938 reporting thresholds (2025)
The $50,000 floor is set by IRC 6038D. The higher thresholds are set by Treasury regulation 26 CFR 1.6038D-2. None are indexed for inflation.
| Filing status | Living abroad – year-end | Living abroad – any time | Living in the US – year-end | Living in the US – any time |
|---|---|---|---|---|
| Single or married filing separately | More than $200,000 | More than $300,000 | More than $50,000 | More than $75,000 |
| Married filing jointly | More than $400,000 | More than $600,000 | More than $100,000 | More than $150,000 |
You use the living-abroad thresholds only if you are a US citizen who is a bona fide resident of a foreign country for an uninterrupted period that includes the entire tax year, or you are physically present in a foreign country or countries for at least 330 full days during any 12 consecutive months ending in the tax year. If you meet neither test, the living-in-the-US thresholds apply.
Filing deadline (tax year 2025): Form 8938 is due with your income tax return – April 15, 2026 for most filers, with an automatic extension to June 15, 2026 for US taxpayers abroad and to October 15, 2026 with Form 4868. Interest on any unpaid tax accrues from April 15 regardless of which extension applies.
FATCA penalties for individuals:
- $10,000 for each year you fail to file a complete and correct Form 8938 by the due date
- Up to $50,000 more if the failure continues after the IRS sends a notice – for a maximum of $60,000 per failure
- 40% accuracy penalty on any understatement of tax attributable to an undisclosed specified foreign financial asset
- Extended statute of limitations – the IRS gets six years to assess tax if you omit more than $5,000 of income from specified foreign financial assets
For the full penalty breakdown and examples, see our FATCA penalties guide.
FATCA vs FBAR – one key distinction
FBAR – FinCEN Form 114 – is a separate reporting requirement under the Bank Secrecy Act, not part of FATCA. FBAR applies when the aggregate value of your foreign financial accounts exceeds $10,000 at any point during the year.
Filing one does not satisfy the other. For a side-by-side breakdown of thresholds, assets covered, and penalties, see our FBAR vs FATCA comparison.
How FATCA withholding works
The FATCA withholding tax is a flat 30% on certain US-source payments – known as withholdable payments – made to foreign entities that fail to comply with FATCA.
Withholdable payments include US-source fixed, determinable, annual, or periodical income – interest, dividends, rents, royalties, compensation, and similar payments.
Under 2018 proposed regulations – REG-132881-17 – withholding on gross proceeds from the sale of US securities is eliminated. Taxpayers may rely on those proposed regulations until final rules are issued.
Who the 30% withholding is aimed at:
- Nonparticipating FFIs that have not registered with the IRS
- Recalcitrant account holders who refuse to provide their bank with requested US-status information
- Passive NFFEs that fail to identify their substantial US owners
Why this matters to you: the 30% withholding is the enforcement lever that makes foreign banks comply with FATCA. It is the reason your bank asks for a W-9 or W-8BEN – and the reason some banks have closed accounts held by US persons who do not respond. A compliant individual who provides a valid Form W-9 is not subject to FATCA withholding.
Three types of withholding compared
| Type | Rate | Applies to | Legal basis |
|---|---|---|---|
| FATCA (Chapter 4) withholding | 30% | US-source FDAP paid to noncompliant FFIs, recalcitrant account holders, non-compliant NFFEs | IRC 1471–1474 |
| NRA (Chapter 3) withholding | 30% (reduced by treaty) | US-source FDAP paid to nonresident aliens and foreign entities | IRC 1441–1464 |
| Backup withholding | 24% (2025) | US-source payments to payees who fail to provide a correct TIN | IRC 3406 |
FATCA intergovernmental agreements (IGAs): Model 1 vs Model 2
A FATCA IGA is a bilateral agreement between the United States and a foreign government that defines how that country's financial institutions comply with FATCA. Over 100 FATCA countries – 114 jurisdictions in total – have signed IGAs with the US.
Model 1 vs Model 2 IGAs
| Model 1 IGA | Model 2 IGA | |
|---|---|---|
| Who the bank reports to | The bank's own local tax authority | The IRS directly |
| Who sends data to the IRS | The local tax authority exchanges data with the IRS | The bank transmits data to the IRS, with government authorization |
| What it means for you | Your bank complies through local rules, but the data still reaches the IRS | Same result – the IRS receives your account information |
Most countries where US expats live – including the UK, Canada, France, Germany, and Australia – have a Model 1 IGA. Japan and Switzerland operate under Model 2 IGAs instead, so FFIs report US account information directly to the IRS rather than through their local tax authority. The US Treasury maintains the full list of FATCA IGA jurisdictions.
Why banks keep asking for your US TIN: under Notice 2024-78, the IRS extended temporary relief for Model 1 FFIs that have not yet obtained a US TIN for pre-existing accounts – through calendar year 2027 reporting. During this relief period, the bank must request your TIN at least once per year. That is why you may receive the same request annually even after responding previously.
A small number of jurisdictions have no IGA with the United States. Financial institutions in those countries must either register directly with the IRS or accept 30% FATCA withholding on their US-source income.
In non-IGA jurisdictions, banks often rely on the OECD's Common Reporting Standard for cross-border reporting instead.
Which FATCA forms do you need?
FATCA forms serve different purposes depending on whether you are an individual taxpayer, a US payer, or a foreign institution. The table below maps each form to who files it and when you are likely to encounter it.
| Form | Who files it | When you will see it | TFX guide |
|---|---|---|---|
| Form 8938 | You – the US taxpayer | When your specified foreign financial assets exceed the reporting threshold | Form 8938 guide |
| Form W-9 | You – when a bank or payer requests it | When a foreign bank identifies US indicia on your account; individuals generally leave the FATCA exemption code field on line 4 blank | FATCA W-9 guide |
| Form W-8BEN-E | Foreign entities certifying status | When a withholding agent needs to verify a foreign entity's Chapter 4 FATCA status and GIIN | W-8BEN-E guide |
| Bank self-certification | You – requested by your foreign bank | When your bank needs you to confirm US or non-US status under its local IGA obligations | – |
| FATCA filing requirement box on Form 1099 | Your US payer | A checkbox on certain 1099 forms indicating the payer's Chapter 4 reporting obligation – it does not determine your Form 8938 filing requirement | FATCA filing requirement box |
| Form 8966 | Foreign financial institutions | The FATCA report FFIs file with the IRS – you never file this form yourself | – |
FBAR is not a FATCA form. FinCEN Form 114 is filed separately with FinCEN under the Bank Secrecy Act. It predates FATCA by 40 years, uses different thresholds, and covers a narrower set of assets. Filing Form 8938 does not satisfy your FBAR obligation, and filing the FBAR does not satisfy Form 8938.
How to stay FATCA compliant as a US expat
FATCA compliance requires filing Form 8938 every year you exceed the reporting threshold and have a US tax return filing requirement. The following checklist covers the steps.
Annual FATCA compliance checklist:
- List all your foreign financial accounts and assets – bank accounts, brokerage accounts, foreign stock held directly, interests in foreign entities, and foreign insurance or pension products
- Check both the year-end value and the highest value during the year against the threshold for your filing status and residence
- Answer your bank's W-9 or self-certification requests promptly – delays can trigger account restrictions
- File Form 8938 with your Form 1040 by the applicable deadline
- File your FBAR separately with FinCEN if the aggregate value of your foreign financial accounts exceeded $10,000 at any point during the year
Missed FATCA filings?
The right path depends on your facts and filing history. Do not file late forms without a strategy – the approach matters.
| Situation | Recommended next step |
|---|---|
| Non-willful failure across multiple years, with unreported foreign income | Streamlined Filing Compliance Procedures – three years of returns, six years of FBARs, zero penalty for qualifying expats abroad |
| One missed year, all income reported, reasonable cause | File the missing Form 8938 with an amended return and attach a reasonable-cause statement |
| Received an IRS notice about missing Form 8938 | Respond to the notice and get professional help immediately – penalties escalate after notice |
If you only missed a Form 8938 or FBAR but reported all income correctly, the Delinquent FBAR Submission Procedures or the Delinquent International Information Return Submission Procedures may apply instead of the Streamlined program.
The Streamlined Foreign Offshore Procedures carry zero penalty for qualifying expats abroad – but eligibility depends on your specific facts.
Key takeaways
Five things to remember about FATCA:
- FATCA is a reporting law, not a tax. It does not change what income is taxable or create a new tax on US individuals. Its purpose is transparency on foreign accounts.
- It applies to all US persons – not only citizens. Green card holders, dual citizens, accidental Americans, and qualifying resident aliens are all in scope.
- Your bank reports your account to the IRS. Under FATCA, foreign financial institutions identify US account holders and report their data – which is why your bank asks for a W-9.
- You file Form 8938 if your foreign assets exceed the threshold. Thresholds depend on filing status and residence. For single expats living abroad, the year-end threshold is more than $200,000 (2025).
- Penalties start at $10,000 per missed filing. Missing Form 8938 can also keep the IRS assessment period open until three years after you file it, and can trigger a 40% accuracy penalty on related underpayments.
If you are unsure whether FATCA applies to you, check the three-question checklist above: US person, tax return filing requirement, assets above threshold. If all three apply, file Form 8938 – or get help.
FAQs about FATCA
US citizens, green card holders, and qualifying resident aliens whose specified foreign financial assets exceed the applicable threshold must file Form 8938 with their tax return. If you have no US tax return filing requirement, Form 8938 is not required.
Your bank found a US connection on your account – such as a US birthplace, address, or phone number. Under FATCA, the bank must verify your status or risk 30% withholding on its own US-source income. Responding with a Form W-9 resolves the request.
No. By FATCA definition, it is an information-reporting and withholding regime. FATCA does not impose a new income tax on US persons. The 30% withholding applies to noncompliant foreign institutions, not to individual taxpayers who file correctly.
No. The FATCA Act applies to all US persons – including green card holders, resident aliens, and certain nonresident aliens who elect to file jointly. Dual citizens and accidental Americans are also covered.
FATCA exists to detect unreported foreign accounts held by US taxpayers. The FATCA meaning is about transparency: foreign banks report US accounts to the IRS, and US taxpayers disclose their foreign assets on Form 8938.
The FATCA full form is the Foreign Account Tax Compliance Act. You will see this name on bank self-certification forms and KYC documents when your foreign bank needs to confirm whether you are a US person under US tax law.
Most major economies have signed a FATCA IGA with the US – 114 jurisdictions in total. A small number of countries have no agreement, and banks in those jurisdictions must register directly with the IRS or accept 30% withholding.
The Treasury FATCA page lists every jurisdiction and its IGA status.
No. FATCA and the FBAR are separate requirements under different laws. FBAR covers foreign financial accounts exceeding $10,000 in aggregate and is filed with FinCEN; Form 8938 covers a broader set of foreign assets and is filed with the IRS.
Both can apply to the same accounts in the same year. See our FBAR vs Form 8938 comparison for a side-by-side breakdown.
No. Closing an account does not remove your reporting obligation for the years the account was open. If you held a foreign account during a tax year and exceeded the threshold, you must report it on Form 8938 for that year. Closing accounts to avoid detection may also raise suspicion with the IRS.
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