What is FATCA and Why It Matters for U.S. Citizens Abroad

If you’ve ever opened a bank account overseas and been hit with a million questions about your U.S. citizenship, you’ve met FATCA—whether you knew it or not.

Short for the Foreign Account Tax Compliance Act, FATCA was born in 2010 when the U.S. government decided it really, really didn’t want to miss out on taxes from Americans living abroad. Today, it’s why banks from Bangkok to Brussels ask if you’re a “U.S. Person” before they’ll even hand you a pen.

In 2025, FATCA is still very much alive—and it still matters. If you’re a U.S. taxpayer or an expat with foreign accounts, FATCA isn’t just paperwork; it’s a global web of reporting rules that ties your financial life to the IRS, no matter where you call home.

Ready to find out what FATCA actually means for you? Let’s dive in.

FATCA basics: What it does and who it affects

When Congress passed the Hiring Incentives to Restore Employment (HIRE) Act in 2010, tucked inside was a little-known piece of legislation called FATCA—the Foreign Account Tax Compliance Act. It sounded technical (because it was), but the mission was crystal clear: make it harder for U.S. taxpayers to hide income in offshore accounts.

Today, FATCA has grown into a massive global initiative. Thanks to a web of intergovernmental agreements (IGAs), foreign financial institutions (FFIs) around the world are now required to report U.S. account holders directly to the U.S. Internal Revenue Service (IRS)—sometimes even before you get around to filing your own tax return. (No pressure.)

If you’re a U.S. citizen, green card holder, or resident alien with foreign financial accounts, FATCA could very much apply to you. And it’s not just about secret bank vaults in Switzerland anymore—ordinary accounts in Canada, Europe, and Southeast Asia are often caught in the net too.

Under FATCA, FFIs must:

• Report account balances and account information for all U.S. persons
• Register for a Global Intermediary Identification Number (GIIN) to stay compliant
• Perform extra due diligence to verify account ownership and tax residence status

Meanwhile, on the IRS side, this treasure trove of automatically exchanged information helps uncover undeclared income and ensure income tax compliance. It’s part of a wider government strategy to clamp down on offshore tax evasion and strengthen international tax law initiatives.

Who has to file under FATCA?

Short answer? More people than you might think.

FATCA filing requirements apply to a wide range of U.S. taxpayers—not just those living stateside. If you’re a U.S. citizen, green card holder, or resident alien living abroad, there’s a good chance FATCA has its eye on you. Even some non-resident aliens are swept in, depending on their connection to U.S. financial interests.

Here’s how it works:

• If you own specified foreign financial assets (think foreign bank accounts, brokerage accounts, mutual funds, and certain investments held through foreign entities) over a certain threshold, you need to file.
• Thresholds vary based on your tax residence and filing status. For example: If you’re a single expat, you must file if your foreign assets total more than $200,000 at the end of the year—or $300,000 at any time during the year.

To meet your FATCA obligations, you’ll typically need to file Form 8938 alongside your regular income tax return. (Yes, even if you owe no actual tax.)

This is important to remember:

• FATCA doesn’t just look at individuals. If you own interests in foreign entities or are involved with non-financial foreign entities (NFFEs), additional reporting may be required depending on ownership and control.
• The Department of the Treasury and tax authorities around the world use automatic exchange of information to monitor accounts, cross-check reporting, and flag discrepancies.

Translation: If your name—or even your signature authority—is linked to money abroad, FATCA wants a closer look. And if you skip filing? That’s when the IRS gets extra interested.

What are Specified Foreign Financial Assets?

Not all foreign assets are created equal—at least, not in the eyes of FATCA.

Specified foreign financial assets include things like:

• Foreign bank accounts (checking, savings, you name it)
• Foreign mutual funds (even if they’re small)
• Foreign stocks (held outside a U.S. brokerage)
• Foreign trusts and foreign pensions

In short: if it feels like money or an investment and it’s sitting abroad, there’s a good chance it needs to be reported.

What’s not included?

• Foreign real estate—but (and this is a big but) only if you hold the property directly. If you own real estate through a foreign entity (like a corporation or partnership), guess what? That does become reportable.

FATCA vs. FBAR: Don’t mix them up

It’s easy to confuse what gets reported under FATCA (Form 8938) versus the FBAR (FinCEN Form 114), especially because they both deal with foreign assets. Here’s the quick cheat sheet:

• FATCA cares about the value of all your specified financial assets combined.
• FBAR is more narrowly focused on foreign bank accounts where the total value exceeds $10,000 at any point during the year.

If you’re unsure whether your assets trigger a filing requirement, it’s a smart move to check the official U.S. tax resources at IRS.gov and Treasury.gov. These sites (and a great CPA!) can help make sure you’re compliant with all the rules.

FATCA vs CRS: Global reporting systems compared

You might think FATCA sounds intense—and it is—but it’s not the only game in town. Meet its international cousin: CRS, short for Common Reporting Standard.

Here’s the key difference:

• FATCA is U.S.-specific and based on citizenship. If you’re a U.S. citizen, a green card holder, or otherwise considered a U.S. taxpayer, FATCA follows you everywhere—even if you haven’t set foot on U.S. soil in years.
• CRS is residency-based. Over 100 jurisdictions have adopted CRS, and it focuses on where you live, not where you’re from.

In practice?

Both FATCA and CRS require financial institutions to report information about certain reportable accounts to tax authorities—and those authorities often share the information across borders under automatic exchange of information agreements.

How FATCA impacts U.S. expats and dual citizens

If you’re a U.S. citizen living abroad—or even just accidentally American—FATCA can feel like the tax world’s version of a clingy ex. It follows you. It asks questions. And it gets your bank involved.

For expats, dual citizens, and Accidental Americans, FATCA has introduced some frustrating real-world consequences. The most common?

• Foreign bank account closures (some financial institutions simply don’t want the hassle)
• Extra documentation and identity checks
• Invasive reviews of accounts involving power of attorney, especially when multiple nationalities are involved

In many cases, non-U.S. banks and financial services providers must comply with FATCA reporting obligations—even if doing so conflicts with local privacy laws. This has created tension in some non-U.S. jurisdictions, where individuals are being asked to disclose their U.S. status or risk losing access to their accounts altogether.

Add to that the potential for withholding tax penalties if banks don’t comply, and it’s easy to see why FATCA regulations have become such a hot topic among the globally mobile.

Long story short: Even if you haven’t lived in the U.S. for decades, FATCA can still affect your ability to bank, invest, and plan your financial future with peace of mind.

FATCA reporting requirements: What to know

If you meet the asset threshold under FATCA rules, you’ll need to file Form 8938 along with your federal tax return—no skipping it, no “oh, I didn’t know!” excuses. (The IRS has heard them all.)

Here’s the quick version:

• Form 8938 reports your specified foreign financial assets if their total value crosses certain thresholds (e.g., $200,000 for single filers living abroad).
• You might have to file both FATCA (Form 8938) and FBAR (Report of Foreign Bank and Financial Accounts)—they’re separate forms, with separate rules, but sometimes overlapping information.

And if you forget? Penalties can get steep:

• Up to $10,000 for the initial failure to file
• Additional penalties for continued noncompliance
• In extreme cases, even criminal charges if noncompliance looks intentional

The IRS isn’t flying blind here. Thanks to FATCA agreements with foreign countries around the world—and access to GIIN (Global Intermediary Identification Number) registries—they have a global information network ready to flag any missing pieces.

What if you haven’t complied with FATCA?

First things first: breathe. If you realize you’ve missed a FATCA filing (or two, or three…), you’re not alone—and you’re not doomed.

The IRS understands that many non-willful taxpayers simply didn’t know about their obligations. That’s why they offer Streamlined Filing Compliance Procedures, a special amnesty program that lets you catch up without facing the harshest penalties.

Here’s what you’ll typically need to do:

• File any missing income tax returns and Form 8938 forms for the relevant years
• Include a reasonable explanation for why you failed to file on time
• Certify that your noncompliance wasn’t intentional

It’s highly recommended (read: almost essential) to work with an expat tax professional if you’re going through this process. They can help you avoid common mistakes, make sure you’re submitting everything correctly, and guide you through the IRS’s maze of forms and programs—like the voluntary disclosure program, if your situation is more complex.

FATCA isn’t going anywhere—but you can stay ahead

FATCA may sound complicated, but it really comes down to this: if you have foreign assets, the IRS wants a postcard.(And they don’t take late ones lightly.)

Staying compliant is non-negotiable—but it doesn’t have to be stressful. At Bright!Tax, we specialize in helping U.S. expats untangle FATCA filings, streamline paperwork, and sleep easier at night.

Let’s make FATCA one less thing on your plate. Reach out today and let’s tackle it together.

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