FATCA
FATCA is a 2010 US law that requires foreign financial institutions to report on accounts held by US taxpayers, and requires US taxpayers with foreign financial assets above threshold to file Form 8938 (Statement of Specified Foreign Financial Assets) with their tax return.
FATCA created a global reporting regime by requiring foreign banks (Foreign Financial Institutions or FFIs) to identify their US-person customers and report on those accounts to the IRS. FFIs that don't comply face a 30% withholding tax on US-source payments. As a result, virtually every global bank now identifies and reports on its US-person customers, often making it difficult for US persons to open foreign accounts.
Form 8938 is filed by US persons whose specified foreign financial assets exceed reporting thresholds: $50K (single filer in US, year-end) or $75K (any time during year); $100K (married filing jointly in US, year-end) or $150K (any time during year); higher thresholds for filers living abroad.
FATCA and FBAR are complementary but distinct. FBAR is filed with FinCEN; FATCA Form 8938 is filed with the IRS. FBAR's threshold is $10K aggregate; FATCA's is higher and varies by filing status. Many foreign accounts trigger both filings; the filings request similar but not identical information. US persons with significant foreign assets typically need both.
| FBAR | FATCA Form 8938 | |
|---|---|---|
| Threshold (US resident, MFJ) | $10,000 aggregate | $100K year-end / $150K any time |
| Threshold (Expat, MFJ) | $10,000 aggregate | $400K year-end / $600K any time |
| Filed with | FinCEN | IRS (with tax return) |
| Form | FinCEN Form 114 | Form 8938 |
| Scope | Foreign financial accounts only | Broader: also foreign-issuer securities, pensions, trusts |
| Penalty | Up to $10K non-willful per account/year | $10K per failure + escalation |
Synthetic cross-border households should include FATCA-reportable foreign assets beyond bank accounts: foreign-issuer stocks held outside US brokerages, foreign mutual funds, foreign pensions, and foreign trusts. Form 8938 has broader scope than FBAR; the data should distinguish what triggers each filing.
Common pitfalls
- Treating FATCA Form 8938 as a substitute for FBAR — they are separate filings with separate thresholds and agencies; both may be required.
- Missing 'specified foreign financial assets' that aren't accounts — foreign-issuer securities held in a US brokerage are NOT in scope; foreign-issuer securities held in a foreign brokerage ARE.
- Forgetting the higher thresholds for expats — US persons living abroad have $200K single / $400K MFJ year-end thresholds, dramatically higher than US-resident filers.
- Failing to include foreign retirement accounts — UK SIPPs, Australian superannuation, and similar foreign retirement plans are FATCA-reportable under most interpretations.
Examples
US citizen living in UK with US$280,000 in a UK pension (SIPP), US$45,000 in a UK ISA holding US-domiciled funds, US$10,000 in a UK current account. Total specified foreign financial assets: $335,000. Living abroad, MFJ: threshold $400,000 year-end / $600,000 any time. Below threshold; Form 8938 NOT required. Same household resident in US: threshold $100,000 year-end / $150,000 any time; well above threshold; Form 8938 required. The same assets, same household, different residency = different filing requirement.