Did you know that if you’re required to file Form 8938 as part of a FATCA filing requirement and don’t, you could be hit with a fine of $10,000? Simply put, it’s not something you want to overlook when filing your yearly taxes.

However, we know just how confusing FATCA filing requirements and compliance can be. Many US citizens with offshore accounts struggle with understanding the types of information that must be declared on the FATCA filing requirement. 

Fortunately, it doesn’t have to be as intimidating or confusing as it may initially seem. This guide will discuss all the key aspects that constitute a successful FATCA filing so you can feel confident when submitting yours.

What Is FATCA?

Before diving into FATCA filing requirement issues, it’s helpful to know what FATCA is. FATCA stands for Foreign Account Tax Compliance Act. It’s a set of rules that the US has put in place to require foreign financial institutions, such as banks and brokerages, to report information about financial accounts held by US citizens or residents to the IRS.

Why does the US government care if the accounts are outside the country? It was created as a way for them to make sure companies aren’t using offshore accounts to evade taxes. FATCA forces these institutions to verify customer information and report it to the IRS.

FATCA affects people worldwide who have financial ties with individuals in the USA, making them responsible for filing certain forms if they hold more than a certain value of investments or assets in foreign accounts.

For example, if you’re an expat living in Portugal with foreign financial assets and money in a Portuguese bank account, the US government wants to know about that. They typically only want to know about accounts with lots of cash, though. We’ll discuss the actual numbers below.

All in all, FATCA reporting helps prevent tax avoidance. That’s great, but however, it also creates an additional paperwork burden for US taxpayers abroad. That’s…not so great. This is why many Americans living abroad hire international tax specialists to help them with their yearly tax filings. Things can get complicated pretty quickly.

FATCA vs. FBAR

If you’ve ever tried to file your taxes on your own as an American living abroad, you might have seen something else called FBAR. While these two terms are similar, FBAR is different from FATCA compliance. For most Americans living abroad with little cash in foreign accounts, FBAR is more relevant.

FBAR stands for the Foreign Bank Account Report. It’s a requirement mandated by the US Treasury Department as part of a larger financial disclosure law. The point of the project? FBAR requires American citizens to disclose any foreign bank accounts that exceed $10,000 in total assets at any given time of the year.

This means that FBAR is different from FATCA in that FBAR only applies to banks outside of the US. At the same time, FATCA targets all non-U.S. financial institutions dealing with American citizens or residents, regardless of location.

FBAR is intended to ensure that individuals pay taxes on their income and other investments abroad. Failure to file FBARB may lead to some heavy penalties, so it’s important for Americans living overseas to be aware of this and make sure they stay compliant with FBAR regulations.

Are You Subject to FATCA Reporting?

If you’re a citizen of the United States, yes. However, it doesn’t stop there. A domestic partnership or corporation organized and registered in the US must also file. There are a few other entities that are required to comply with FATCA, too, though. This includes (but isn’t limited to):

• Any non-foreign estates
• The US government
• Certain visa holders (after a period of exemption)

As you can see, the requirements vary. This is why it’s so important to speak with a tax expert. They’ll be able to assess your situation and provide guidance. The filing requirements are so high that, in most cases, the average person doesn’t need to submit anything FATCA documents with their yearly annual tax returns.

What Are FATCA Filing Requirements?

Well, first of all, understand that FATCA requires foreign financial institutions to provide the Internal Revenue Service (IRS) with information about US taxpayers with accounts held outside of the US. So, even if you fail to report your financial information to the US government, your foreign bank will, and that’s how the government will know you failed to file the correct paperwork.

This means that FATCA requires US taxpayers worldwide to report and provide detailed information about their financial accounts every year to remain compliant. This is a time-consuming and complicated process that many of us have had to factor into our yearly tax processes, so make sure you take the time necessary to understand your FATCA filing requirements!

Aside from the filing requirements, what are the financial minimums you must meet to file? For example, you must comply with FBAR if you have at least $10,000 in total assets in a foreign bank account at any time of the year. The number is a lot higher for FATCA.

Americans Living Abroad

You have to file Form 8938 to comply with FATCA reporting if you meet one of the two following requirements:

1. Suppose you’re single or are filing as a single taxpayer. In that case, you have to submit the form if you had more than $200,000 of foreign financial assets at the end of the previous calendar year and you live abroad (note that this number decreases to $50,000 if you live in the United States but have foreign financial assets).
2. If you’re married and filing jointly, you must submit the form if your combined foreign financial assets were more than $400,000 on the last day of the previous tax year. Or if your total accounts reached $600,000 any time during the year.

To meet the second requirement, only one of you must live abroad. For example, let’s say your spouse is working in Spain, and you’re living in the United States. If you have combined assets in a foreign bank account that totaled $400,000 or more on December 31st, 2022, you’d have to submit Form 8938.

Americans Living in the US

Remember that FATCA compliance doesn’t apply to Americans living abroad. Many Americans live in the United States but have money in foreign bank accounts. The IRS still wants to know about the money in those accounts. 

You will also have to file Form 8938 if you meet one of the following requirements as an American living in the US with cash in accounts abroad:

• You’re single and filing as a single taxpayer, and the total value of your foreign financial assets is equal to or greater than $50,000 on the last day of the previous tax year.
• You’re single and filing as a single taxpayer, and the total value of your foreign financial assets reached $75,000 at any given point during the previous tax year.
• You’re married and filing jointly, and the total value of your foreign financial assets is equal to or greater than $100,000 on the last day of the previous tax year.
• You’re married and filing jointly, and the total value of your foreign financial assets reached $150,000 at any given point during the previous tax year.

As you can see, determining your filing requirements can be quite complicated. When in doubt, it’s best to submit the form if you can. This ensures you won’t be subject to any fines.

Form 1099

Now, how do you know if you need to file FATCA paperwork? If you receive Form 1099, it can be as simple as looking at the FATCA checkbox on the form.

Form 1099 is one of the most common forms sent to taxpayers annually. And in virtually every Form 1099, you’ll find a box at the bottom asking if you need to indicate your compliance with FATCA regulations. Sometimes this checkbox is already filled, but other times it’s left blank, and it’s up to you to remember to tick it before sending off your Form 1099 documents.

It may seem small, but never forgetting to fill out this FATCA filing requirement checkbox can go a long way in helping ensure that your Form 1099 filings are always accurate and on time. Again, if you’re unsure about your filing requirements, contact an international tax expert.

Foreign Real Estate

What about those who own foreign real estate? That’s a financial asset, sure, but does the IRS want to know about the equity tied up in those properties?

FATCA requirements for foreign real estate are complex. The simple rule is to consider whether the foreign property brings you foreign income or if you’re trying to justify deductions from US taxes. FATCA Form 8938 doesn’t list foreign real estate specifically, but any interest you have in a corporation or business abroad that owns real estate will have to be reported.

So, keep proper records of your overseas investments and determine whether they’re FATCA-eligible.

Get Help With FATCA Compliance

International Tax Consultants is your go-to source for all your multi-jurisdictional and international tax planning and analysis needs. We’re committed to helping US companies, individuals, businesses, and corporations with FATCA filing requirements and finding the best solutions to their taxation issues.

We understand this complex process can be overwhelming at times, which is why our team of experienced specialists is here to provide you with the assistance you need every step of the way.

Contact us today with questions or concerns about your international tax liabilities and responsibilities.

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