Text or WhatsApp (808) 600-9260

FATCA

FATCA involves foreign asset reporting by certain U.S. taxpayers and account reporting by foreign financial institutions. Form 8938 and intergovernmental agreements are part of FATCA's reporting framework.

What FATCA refers to

The IRS summary describes FATCA as a law that requires certain U.S. taxpayers to report foreign financial assets and foreign financial institutions to report information about certain accounts to the IRS.[4]

Taxpayer reporting under FATCA uses Form 8938, attached to an annual tax return when applicable. Form 8938 filing depends on a person's status, whether the aggregate value of specified foreign financial assets exceeds the applicable threshold, and any exception.[1][4]

Where the term appears

FATCA also sets reporting rules for foreign financial institutions, or FFIs. FFIs report information about accounts held by U.S. taxpayers and certain foreign entities with substantial U.S. ownership. Treasury describes direct IRS registration or compliance through intergovernmental agreements treated as in effect in a jurisdiction.[4][5]

FATCA reporting by participating FFIs covers accounts of specified U.S. persons, and Form W-9 is used to identify those account holders. Form W-9 also includes a FATCA exemption code, so the term can arise in account holder identification and payment documentation.[6]

Conditions and exceptions

Form 8938 instructions state that a specified person with an interest in specified foreign financial assets files when their value is above the applicable threshold, unless an exception applies. A person who is not required to file an income tax return does not file Form 8938, even if asset values exceed the threshold.[1]

Assets listed by the instructions include foreign financial accounts and certain investment holdings outside financial accounts, such as stock issued by a foreign corporation or an interest in a foreign entity. An interest in a foreign trust or estate counts only when the person knows or has reason to know of it from readily accessible information; receiving a distribution is treated as knowledge.[1]

FATCA-related Form 8938 reporting and FBAR filing are separate requirements. Filing Form 8938 does not remove an FBAR filing requirement when the reader is otherwise required to file it. FinCEN describes the FBAR threshold as aggregate foreign account value above $10,000 at any time during a calendar year for a U.S. person with a financial interest or signature authority.[1][2]

FATCA distinguishes taxpayer reporting from FFI reporting. For taxpayers, the Form 8938 instructions govern reported assets and thresholds.

Questions and answers

Which IRS form is associated with FATCA asset reporting?

The IRS summary associates certain U.S. taxpayer reporting of foreign financial assets with Form 8938. The Form 8938 instructions say to attach it to an annual return when filing is required.[1][4]

Does Form 8938 replace an FBAR?

No. The Form 8938 instructions state that filing it does not remove an FBAR requirement that otherwise applies. FinCEN describes an FBAR filing threshold based on aggregate foreign account value exceeding $10,000 at any time during the calendar year.[1][2]

Do foreign financial institutions have FATCA reporting responsibilities?

Foreign financial institutions report certain account information about U.S. account holders, either directly to the IRS or through their local tax authority under a Model 1 agreement. Treasury also describes direct registration or compliance through an intergovernmental agreement treated as in effect in the jurisdiction.[4][5]

Does every U.S. citizen file Form 8938?

The instructions make Form 8938 filing conditional on specified-person status, an interest in specified foreign financial assets, the applicable threshold, and any exception. They also say a person who does not have to file an income tax return does not file Form 8938.[1]

When does a foreign trust interest count as a specified asset?

The instructions say a foreign trust or estate interest is included when the person knows or has reason to know of it based on readily accessible information. Receipt of a distribution means the person is considered to know of the interest.[1]

  • Foreign entity: Form 8938 instructions treat interests in foreign corporations and partnerships, and in trusts and estates, as specified foreign financial assets in some cases.
  • Intergovernmental agreement: An intergovernmental agreement appears in FATCA rules for foreign financial institutions. Form 8938 instructions also use the term for certain foreign accounts.
  • Participating foreign financial institution: The IRS describes a participating foreign financial institution as an FFI that reports U.S. account holders who are specified U.S. persons under FATCA.

Talk to Richard

Sources and data notes
  1. Internal Revenue Service, Instructions for Form 8938. https://www.irs.gov/instructions/i8938. Retrieved .
  2. FinCEN, Report foreign bank and financial accounts. https://www.fincen.gov/report-foreign-bank-and-financial-accounts. Retrieved .
  3. U.S. Government, 31 CFR 1010.350. https://ecfr.io/Title-31/Section-1010.350. Retrieved .
  4. Internal Revenue Service, FATCA summary. https://www.irs.gov/businesses/corporations/summary-of-key-fatca-provisions. Retrieved .
  5. U.S. Department of the Treasury, FATCA: agreements by jurisdiction. https://home.treasury.gov/policy-issues/tax-policy/foreign-account-tax-compliance-act. Retrieved .
  6. Internal Revenue Service, 26 CFR 1.1471-4. https://www.irs.gov/instructions/iw9. Retrieved .

Dates in this block record when each source was read for this page.