FATCA - Foreign Account Tax Compliance Act
Foreign Account Tax Compliance Act (FATCA) is a product of United States' efforts to combat offshore tax evasion. U.S. expats of all income levels with foreign accounts and assets need to be conscious of its impact. FATCA brings about two notable changes that affect all expats:
• U.S. taxpayers with foreign accounts and assets might need to file Form 8938: Statement of Specified Foreign Financial Assets with their returns.
• Financial institutions must report information about U.S. citizens who have accounts with the institutions.
File Form 8938 with your return. It was first required in 2011. You must file Form 8938 each year it applies to you. Form 8938 is the same as an FBAR in many ways. However, it requires you to disclose certain "nonaccount" assets like:
• Business and trust ownership
• Certain contractual investments with foreign parties
If you reside outside the U.S. and have a bank account or investment account in a foreign financial institution, you are generally required to include Form 8938 with your U.S. federal income tax return if you meet the following thresholds:
• You are filing a return other than a joint return and the total value of your specified foreign assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year; or
• You are filing a joint return and the value of your specified foreign asset is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the year.