For U.S. citizens and green card holders living abroad, tax obligations don’t end when they leave the country. One of the most important laws they must comply with is the Foreign Account Tax Compliance Act (FATCA). Introduced in 2010, FATCA was designed to fight offshore tax evasion by requiring foreign banks to report accounts held by U.S. taxpayers.
If you’re an expat, FATCA can feel overwhelming. This guide breaks down everything you need to know about FATCA compliance, reporting requirements, penalties, and strategies to stay compliant while minimizing stress.
What Is FATCA and Why Does It Matter?
The Foreign Account Tax Compliance Act (FATCA) is a U.S. law that requires both individuals and foreign financial institutions to report financial assets held outside of the United States.
- For individuals (expats): FATCA requires reporting of certain foreign financial assets to the IRS through Form 8938.
- For financial institutions: Banks, investment firms, and insurance companies abroad must disclose accounts held by U.S. taxpayers to the IRS.
In short, FATCA closes loopholes that once allowed Americans to hide income overseas. For expats, this means stricter reporting rules, even if they already file their U.S. taxes.
Who Needs to Comply With FATCA?
Not every expat falls under FATCA’s reporting requirements. It depends on your tax residency, citizenship, and the value of your foreign assets.
Key Groups Affected:
- U.S. Citizens Living Abroad
- Green Card Holders (even if living overseas)
- Certain U.S. residents with financial accounts abroad
FATCA Reporting Thresholds for Expats
The IRS sets different thresholds for FATCA reporting depending on your filing status and where you live.
| Filing Status | Living in the U.S. | Living Abroad |
|---|---|---|
| Single | $50,000 on last day of tax year / $75,000 at any time | $200,000 on last day / $300,000 at any time |
| Married Filing Jointly | $100,000 on last day / $150,000 at any time | $400,000 on last day / $600,000 at any time |
| Married Filing Separately | $50,000 on last day / $75,000 at any time | $200,000 on last day / $300,000 at any time |
👉 If your foreign assets exceed these thresholds, you must file Form 8938 with your tax return.
FATCA vs. FBAR: What’s the Difference?
Many expats confuse FATCA reporting (Form 8938) with FBAR reporting (FinCEN Form 114). Both involve disclosing foreign financial accounts, but they’re not the same.
| Feature | FATCA (Form 8938) | FBAR (FinCEN 114) |
|---|---|---|
| Governing Body | IRS | FinCEN (Financial Crimes Enforcement Network) |
| Who Must File? | U.S. taxpayers with foreign assets exceeding thresholds | U.S. taxpayers with foreign accounts totaling over $10,000 |
| Filing Threshold | Starts at $50,000 (higher for expats) | $10,000 aggregate across all accounts |
| Where Filed | With annual tax return (Form 1040) | Electronically via FinCEN BSA e-filing system |
| Penalties | Up to $10,000 per violation; higher for willful | Up to $10,000 (non-willful), $100,000+ (willful) |
⚠️ Many expats must file both FATCA and FBAR.
What Types of Assets Are Reportable Under FATCA?
Not all foreign assets are subject to FATCA reporting. The IRS provides clear guidelines.
Assets That Must Be Reported:
- Savings, checking, and investment accounts at foreign banks
- Foreign stock or securities not held in a U.S. account
- Foreign retirement accounts (depending on the country and structure)
- Interests in foreign partnerships or trusts
Assets That Do Not Require FATCA Reporting:
- Foreign real estate held directly (not through a foreign corporation)
- Foreign social security–style benefits
- Certain accounts already reported under FBAR
✅ Tip: Always consult with an expat tax professional, as country-specific treaties may affect reporting.
FATCA Compliance Process for Expats
If you are an expat with foreign financial assets, here’s how to comply:
1. Determine If You Meet the Threshold
Check the IRS thresholds for your filing status and residency.
2. Gather Documentation
Collect account statements, investment reports, and details of foreign entities you own.
3. File Form 8938 With Your Tax Return
Include Form 8938 when you file your annual Form 1040.
4. File FBAR (if required)
If your foreign bank accounts exceed $10,000 in total, you must also file FBAR separately.
5. Stay Updated
Tax treaties and IRS rules may change. FATCA compliance is ongoing, not a one-time event.
Penalties for FATCA Non-Compliance
The IRS enforces FATCA strictly. Penalties can be severe, even for unintentional mistakes.
| Violation | Penalty |
|---|---|
| Failure to file Form 8938 | $10,000 per violation |
| Continued failure after IRS notice | Additional $10,000 per month (up to $50,000) |
| Understatement of income from undisclosed assets | 40% penalty on unpaid tax |
| Willful failure | Potential criminal charges |
👉 Ignoring FATCA is not worth the risk.
Common FATCA Challenges for Expats
While FATCA promotes transparency, it creates unique difficulties for expats.
1. Banking Restrictions
Some foreign banks refuse to work with U.S. citizens due to FATCA’s reporting burden.
2. Double Reporting (FATCA + FBAR)
Expats often need to file both FATCA and FBAR, which feels redundant.
3. Complex Asset Structures
Foreign pensions, trusts, and investments can be tricky to classify under FATCA rules.
4. Fear of Penalties
Many expats worry about unintentional mistakes leading to hefty fines.
Strategies to Stay FATCA Compliant
To make compliance easier and avoid unnecessary penalties, expats can adopt these strategies:
✔️ Keep Organized Records
Maintain clear documentation of all foreign financial accounts and investments.
✔️ Work With an Expat Tax Professional
Expat tax laws are complicated. Professionals ensure proper filing and identify deductions or credits.
✔️ Use Tax Treaties to Your Advantage
Many countries have tax treaties with the U.S. to prevent double taxation.
✔️ File On Time
IRS deadlines apply even if you live abroad. Expats typically receive an automatic 2-month extension (June 15), but penalties still accrue after that.
FATCA and Its Impact on Foreign Banks
FATCA doesn’t just affect U.S. citizens—it also impacts foreign banks.
- Over 110 countries have signed intergovernmental agreements (IGAs) with the U.S.
- Banks must identify accounts held by U.S. persons and report them annually.
- Some banks deny services to U.S. clients to avoid compliance costs.
This creates challenges for expats trying to open or maintain accounts abroad.
Example Scenarios for Expats
Here are some real-world scenarios to understand FATCA better:
| Scenario | Do You Need to File FATCA? |
|---|---|
| U.S. citizen in Germany with €50,000 in savings | Yes (Form 8938) |
| Married couple in Canada with joint assets worth $500,000 | Yes (Form 8938 + FBAR) |
| Green card holder in India with $15,000 in a checking account | Yes (FBAR only, not FATCA if under threshold) |
| U.S. expat in Australia with property valued at $250,000 but no foreign bank accounts | No (real estate not reportable under FATCA) |
FATCA Compliance Checklist for Expats
Here’s a quick checklist to simplify FATCA compliance:
- ✅ Confirm if your assets exceed reporting thresholds
- ✅ Gather foreign account statements and investment details
- ✅ File Form 8938 with your U.S. tax return
- ✅ File FBAR if accounts exceed $10,000
- ✅ Track deadlines (April 15 / June 15 extension)
- ✅ Seek professional help if uncertain
Final Thoughts
FATCA compliance is a major responsibility for U.S. expats. While the rules can be complex, understanding the requirements—and filing accurately—will protect you from penalties and stress.
By staying informed, keeping good records, and seeking expert help when needed, you can remain compliant and avoid costly mistakes. Remember: FATCA is not about punishing expats—it’s about ensuring transparency in global finance.
For expats, the best approach is proactive: understand the rules, file on time, and don’t ignore FATCA.