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What is FATCA Reporting: Complete Guide to Compliance Requirements

Latest FATCA Facts and News

With over 100 countries now participating in FATCA agreements and recent IRS enforcement actions resulting in billions in recovered taxes, understanding FATCA compliance has never been more critical for U.S. taxpayers worldwide.

Key 2025 Updates:

Enhanced digital reporting requirements through the IDES system
Increased penalty thresholds for non-compliance
Expanded FFI registration requirements
New IGA agreements with emerging markets
Streamlined Form 8938 filing processes

Most people don’t realize they’re supposed to report their foreign assets until the IRS comes knocking. You might assume your overseas account is too small to matter. Or that your bank takes care of everything. Or that living abroad shields you from U.S. tax rules. But FATCA doesn’t work that way.

Over the years, it has quietly expanded. More banks, more countries, and stricter penalties. And now, with digital systems flagging accounts faster and IRS enforcement on the rise, even simple mistakes can lead to serious consequences.

We will break down what is FATCA reporting, what matters most about FATCA in 2025, what needs to be reported, who’s affected, and how to stay compliant before issues start.

What is FATCA Reporting?

FATCA, or the Foreign Account Tax Compliance Act, is a law that came into existence in 2010 when the government wanted to prevent individuals from hiding money abroad in foreign accounts to avoid paying taxes. Basically, if you have money in accounts outside the U.S., the IRS wants to know about it now.

The Dual Structure of FATCA Compliance

There are two main ways this law works, and honestly, both parts are very important.

1. For People Who Pay U.S. Taxes:

If your foreign accounts have enough money in them, you need to tell the IRS about it every year. The amounts that trigger this reporting are as given below:

If you live in the U.S.: $50,000 at the end of the year or $75,000 at any time during the year
If you live outside the U.S.: $200,000 at the end of the year or $300,000 at any time during the year
If you’re married, these numbers double

You report this using Form 8938. Just another tax form to fill out, unfortunately.

2. For Foreign Banks and Financial Companies:

Foreign banks now have to figure out which of their customers are Americans. Once they identify U.S. customers, they have to send information about those accounts straight to the IRS. This applies to banks, investment firms, and some insurance companies, too.

Key Legislative Background and Implementation Timeline

Since 2010, this law has been in effect, following its formation as a section of the HIRE Act. Enforcement activities began in 2013-14 through agreements between the government of the U.S. and foreign countries. In 2015, foreign financial institutions started informing the IRS about U.S. account matters. After this, it went through amendments and continues to be enforced until 2025. The big steps started with the registration of foreign financial institutions, the intergovernmental agreement, and the phased approach for withholding tax on certain payments.

Who Is Required to Report Under FATCA?

FATCA requires certain U.S. taxpayers and some U.S. businesses to report foreign financial assets.

U.S. citizens, green card holders, and residents
Domestic companies, partnerships, and trusts that have foreign assets

Individual Taxpayer Requirements

If you are a U.S. person and your foreign assets go above IRS limits, you must report them on Form 8938 with your tax return. For single filers living in the U.S., the limit is $50,000 at year-end or $75,000 during the year. Married couples filing jointly have double these limits. People living outside the U.S. have higher limits.

Specified Domestic Entity Obligations

U.S. companies and trusts that hold foreign assets must also report on Form 8938 when their assets exceed IRS limits. This makes sure foreign assets held by entities are reported properly.

Foreign Financial Institution Responsibilities

Foreign financial institutions and banks are required to enroll with the IRS and comply with FATCA regulations. They have to determine whether their clients are U.S. persons and report information regarding these accounts to the IRS or local tax authorities. Failure to do so will result in a fine or penalties.

Who is Exempt from FATCA Reporting?

Some individuals, assets, and financial institutions are not required to file or report under FATCA. The exemptions avoid unnecessary filings and streamline the process.

Individual Exemptions and Threshold Limits

U.S. single filers: $50,000 at year-end or $75,000 at any time during the year
U.S. married couples filing jointly: limits are doubled
Individuals living outside of the U.S.: $200,000 at year-end or $300,000 at any time
Some U.S. government employees, military personnel, and diplomats may be exempted in certain situations

Asset-Specific Exemptions

Direct foreign real estate ownership is not required unless held in a company or trust
Cash or bank deposits may be exempt under certain characteristics
Precious metals like gold and silver are not required to be reported
Assets already listed on Form 3520 or Form 5471 might not need duplication on Form 8938

Institutional Exemptions and IGA Benefits

Foreign financial institutions also have exemptions under FATCA:

“Exempt beneficial owners” include foreign governments, central banks, and international organizations
Deemed-compliant financial institutions have fewer or no reporting requirements
IGAs allow reporting to local authorities instead of directly to the IRS

FATCA Reporting Forms and Filing Requirements

Form 8938: Statement of Specified Foreign Financial Assets

If a U.S. person holds foreign financial assets above a certain amount, this form must be filed with a tax return. Include account info, asset value in USD, and submit with tax return by the due date. Retain supporting documents for IRS review.

Form 8966: FATCA Report for Foreign Financial Institutions

FFIs file Form 8966 electronically with the IRS to report U.S. account holders. Includes account holder info, balances, and payments. Report usually due March 31. Compliance ensures FATCA adherence.

FATCA vs. FBAR: Key Differences and Overlapping Requirements

Aspect	FATCA (Form 8938)	FBAR (FinCEN Form 114)
Purpose	Report foreign financial assets as part of tax return	Report foreign bank and financial accounts to U.S. Treasury
Who Must File	U.S. taxpayers with foreign assets above limits	U.S. persons with foreign accounts > $10,000 at any time
Filing Threshold	$50,000+ for individuals in U.S.; higher outside	>$10,000 total in foreign accounts
Accounts/Assets Covered	Bank accounts, stocks, partnerships, insurance, annuities	Only foreign financial accounts
Reporting Frequency	Once a year with tax return	Once a year, separate from tax return
Filing Deadline	Same as tax return	April 15, automatic extension to Oct 15
Filing Location	IRS with tax return	Electronically with FinCEN
Form Type	IRS Form 8938	FinCEN Form 114
Penalties	$10k + $10k per 30 days up to $50k, possibly criminal	Up to $10k per mistake; higher if willful, fines or 50%
Information Reported	Asset details, value, account info, institutions	Account owner, numbers, account value
Extension Possibility	With tax return extension	Automatic to Oct 15
Reporting Agency	IRS	FinCEN

FATCA Compliance Penalties and Consequences

Individual Taxpayer Penalties

$10,000 fine for failure to file Form 8938
Additional $10,000 every 30 days after IRS notification, up to $50,000
Possible 40% tax on unreported asset income

Institutional Penalties and Withholding Requirements

Foreign banks: 30% withholding tax on U.S. payments if non-compliant

International Cooperation: IGAs and Global FATCA Implementation

Model 1 vs. Model 2 IGA Structures

Model 1: Banks report to local tax agency, then shared with IRS
Model 2: Banks report directly to IRS where permitted

Why IGAs Matter?

IGAs allow foreign banks to comply with FATCA legally without violating local laws, ensuring smooth information sharing.

Find the Right Help for FATCA Challenges With Verni Tax Law!

FATCA rules are complex and mistakes can be costly. Antony N. Verni, an experienced tax attorney, can guide you through filings, corrections, and compliance. Contact Verni Tax Law for support and protection.

FAQs

Do I need to report foreign retirement accounts under FATCA?

Yes, most foreign retirement/pension accounts must be reported on Form 8938 if above thresholds.

What happens if I discover unreported foreign assets from previous years?

Use IRS voluntary disclosure or amended returns. Acting early may reduce penalties.

How does FATCA affect dual citizens living outside the U.S.?

Dual citizens must report like any other U.S. person if assets exceed limits.

Can FATCA reporting requirements be waived for small amounts?

Assets below thresholds are exempt. Any amount above triggers reporting.

How do cryptocurrency holdings affect FATCA compliance?

Foreign crypto accounts or wallets may need reporting if held with a financial institution or converted to fiat. Rules expanded in 2025.

What is FATCA Reporting 2025: Who Must File, and Penalties for Non-Compliance