What is FATCA?
The Foreign Account Tax Compliance Act, better known as FATCA, was passed in 2010 as part of the HIRE act. Starting July 1, 2014 foreign financial institutions (FFI) will be required by the US government, under FATCA, to report information regarding accounts of all US citizens (living in the US and abroad), US "persons," green card holders and individuals holding certain US investments to the IRS. This law requires foreign financial institutions such as local banks, stock brokers, hedge funds, insurance companies, trusts, etc. - to report directly to the IRS all their clients who are "US persons.” FFIs that do not become compliant will be subject to a 30% withholding on their US investments when they are cashed in, which will directly impact FFI clients with US holdings.
FATCA also requires US citizens who have foreign financial assets in excess of $50,000 (higher for bona fide residents overseas – $200,000 for single filers and $400,000 for joint filers – see the IRS website for more details) to report those assets every year on a new Form 8938 to be filed with the 1040 tax return. Instructions for form 8938 were published in December 2011 and can be found on the IRS website.
Many Americans residing overseas are reporting banking lock-out. Many foreign financial institutions have simply chosen to eliminate their US citizens and US person client basis in order to minimize their exposure to FATCA reporting requirements, withholding fees and potential penalties.
The US Treasury has entered into Intergovernmental Agreements (IGAs) with a limited number of countries which will facilitate the transfer of information. The IGA agreements do include a non-discriminatory clause that is aimed at helping to alleviate issues of lock-out of banking services US citizens and US persons.
To learn more about FATCA and how it might impact you, you can consult the IRS website or speak to your tax advisor for more information.
(Updated April 2014)
FATCA Position Papers - These documents outline ACA's position and recommendations on FATCA.
Communications - Here you can read more about the communications we or our supporters have issued on FATCA.
Current Regulations/General Information
Last Updated July 11, 2014