The Foreign Account Tax Compliance Act (FATCA) is a law that requires certain U.S. taxpayers holding financial assets outside the country to report those assets to the IRS on Form 8938. The main goal of FATCA is to stop tax evasion by U.S. citizens living at home or abroad. FATCA applies to individual citizens, residents, and non-resident aliens. Under FATCA, both individuals and financial institutions need to disclose information related to FATCA. The following are some key points about FATCA:

• FATCA requires U.S. citizens to file annual reports on any foreign account holdings and pay any taxes owed on them.
• The tax revenues brought in by FATCA pay for the business incentives introduced in the 2010 HIRE Act.
• Form 8938 is used to report any foreign account holdings and there are serious penalties for not reporting them.
• FATCA created new information reporting and withholding for payments made to certain foreign financial institutions and foreign entities.
• Failing to file a FATCA report when required could result in severe penalties.

To make the whole thing work, each participating country signs an intergovernmental agreement (IGA) that incorporates FATCA into their local laws. Financial institutions (FIs) are required to identify their U.S. accounts. FATCA reporting requirements include:

• Individual U.S. taxpayers may need to file FATCA Form 8938.
• Institutions need to disclose information about U.S. citizens with accounts overseas.

FATCA is not administered by the IRS; it is run by a different agency within the US Treasury Department—the Financial Crimes Enforcement Network, or FinCEN.