FATCA for Individuals: Your Reporting Obligations
FATCA for individuals means US persons must report foreign financial assets on Form 8938. Here is who is affected and how it differs from the FBAR.
Few pieces of legislation have reshaped the lives of internationally mobile Americans as quietly and as thoroughly as FATCA. It is the reason a US citizen in London is asked to certify their tax status to open a basic savings account, and the reason a green-card holder in Dubai must file an extra form with the IRS each year for assets that have nothing to do with the United States.
FATCA for individuals is often misunderstood. People assume it is only a bank's problem, or that it is the same thing as the FBAR. Both assumptions can be expensive. FATCA imposes its own personal reporting obligation, with its own form, its own thresholds, and its own penalties, that sits alongside, not instead of, other filings.
This guide explains what FATCA requires of individuals, who is caught, how it differs from the FBAR, and the practical pitfalls we see most often. It is general guidance, not advice on your specific position.
What FATCA actually is
The Foreign Account Tax Compliance Act has two faces. The face most people encounter is the obligation it places on foreign financial institutions to identify their US account holders and report them, either to the IRS directly or, more commonly, to their local tax authority under an intergovernmental agreement that passes the data on. This is why banks worldwide ask US persons to complete certification forms.
The second face, and the subject of this guide, is the obligation it places on individuals. Certain US persons must report their "specified foreign financial assets" directly to the IRS on Form 8938, the Statement of Specified Foreign Financial Assets, filed with their annual income-tax return. Both faces work together: the institution reports, the individual reports, and the two data sets are designed to be cross-checked.
Who counts as a "US person"
The reach of FATCA flows from the broad US definition of a taxable person. It captures US citizens wherever they live, lawful permanent residents (green-card holders), and individuals who meet the substantial-presence test for US tax residence. Citizenship-based taxation means a US citizen who has never lived in the United States as an adult is still fully within scope.
Two groups are routinely caught off guard. Accidental Americans, who acquired US citizenship by birth or parentage but have lived their lives elsewhere, remain US persons until they formally expatriate. And green-card holders who have moved away often assume their US obligations lapsed when they left; they generally do not, until the status is properly relinquished.
What you must report on Form 8938
Form 8938 covers specified foreign financial assets. This is broad. It includes foreign bank and brokerage accounts, foreign stock or securities held outside an account, interests in foreign entities, foreign partnership interests, and certain foreign-issued financial instruments and contracts. Interests in foreign trusts and foreign estates can also fall within it.
There are important exclusions. Directly held foreign real estate is generally not a specified foreign financial asset, although an interest in a foreign entity that holds real estate can be. Directly held tangible assets such as art, jewellery, or physical precious metals held outside an account are generally outside Form 8938, though the boundaries reward care.
The obligation is triggered only when the total value of your specified foreign financial assets exceeds reporting thresholds. Those thresholds differ depending on filing status and, critically, on whether you live inside or outside the United States, with substantially higher thresholds for those living abroad. Because the exact figures are set by the IRS and can change, we confirm the current thresholds rather than quote them from memory.
FATCA Form 8938 versus the FBAR
This is the single most common source of confusion, so it deserves a clear treatment. The FBAR, FinCEN Form 114, is a separate filing under the Bank Secrecy Act, made to FinCEN rather than to the IRS, and it long predates FATCA.
They overlap heavily but are not the same. The FBAR reports foreign financial accounts; the FATCA Form 8938 reports a broader category of foreign financial assets, including some held outside accounts. They have different thresholds, different definitions, different filing venues, and different deadlines, even though both are tied to the calendar of your US filings.
The practical rule we give clients is blunt: filing one does not satisfy the other. Many US persons abroad must file both, reporting much the same accounts twice in different formats. Treating them as interchangeable is a frequent and avoidable error.
Penalties and why people get caught
The penalties for failing to file Form 8938 are significant and escalate, with substantial fixed penalties for non-filing and the prospect of further penalties where non-compliance continues after notice. There are also serious knock-on consequences: an unfiled or incomplete Form 8938 can keep the statute of limitations open on the whole return, meaning the IRS can examine years that would otherwise have closed.
People get caught for structural reasons, not bad luck. Because foreign institutions report US account holders under FATCA, the IRS increasingly receives third-party data that it can match against individual filings. A mismatch, an institution reporting an account the individual never disclosed, is exactly what the system is built to surface.
For those who discover they should have been filing and were not, there are established correction routes for non-wilful failures, including streamlined procedures aimed at taxpayers whose non-compliance was not deliberate. Choosing the right route, and doing so before contact from the IRS, materially changes the outcome.
Practical pitfalls we see
Several recur. Clients assume a non-income-producing account, such as a dormant current account, need not be reported; value, not income, drives the obligation. They overlook jointly held accounts and assets held through foreign entities and trusts. They forget that pensions and certain insurance and investment products abroad can be specified foreign financial assets. And they conflate the lower domestic thresholds with the higher overseas thresholds, or the reverse, miscounting their obligation in either direction.
The unifying lesson is that FATCA rewards a complete, contemporaneous inventory of foreign holdings, reviewed each year, rather than a reconstruction under pressure.
How HPT helps
We help US persons living and investing internationally understand whether FATCA applies to them, build a clear inventory of specified foreign financial assets, coordinate Form 8938 and FBAR reporting with their US tax preparer, and, where past filings were missed, assess the appropriate correction route before exposure widens. We work alongside qualified US tax counsel where formal US advice is required.
If you hold assets outside the United States and want certainty about your reporting position, we are glad to help you map it.
This is general information, not advice. It describes rules as we understand them at the date of publication, and those rules differ by jurisdiction and change often. Nothing here takes account of your circumstances, and nothing here creates a professional relationship between us. Advice requires a written engagement letter. Before you act, take advice from a qualified professional in the jurisdiction concerned. Read the full disclaimer.
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