What FATCA asks of foreign banks
FATCA has two sides. One applies to foreign financial institutions, which are expected to identify accounts held by US persons and report them, either to the IRS directly or to their own government under an intergovernmental agreement that passes the information on. Institutions that do not participate can face withholding on certain US-source payments, so most banks comply. This is the reason foreign banks ask customers to certify their tax status, and the reason some limit services for US citizens and residents. The information reported can include balances and income, so the IRS may already know about accounts a taxpayer has not reported.
What FATCA asks of you
The other side applies to individuals. A US person whose foreign financial assets exceed a threshold must report them on a form attached to the income tax return, and the threshold depends on filing status and on whether you live in the United States or abroad. This filing is separate from the FBAR, which goes to FinCEN rather than the IRS, and many people must file both. Missing the FATCA form can lead to penalties and can keep the IRS's time to assess the related return open. US citizens living abroad, green card holders, and people who recently became US tax residents are the groups most often caught off guard.
Sorting out the past
If you have foreign accounts or assets that were not reported, the right approach depends on how it happened and whether income from those assets was also left off your returns. Streamlined filing procedures have been available to taxpayers whose failures were not willful, and other routes have existed for people who missed only the informational forms; whether a route remains open and fits your facts should be checked at the time. Before filing anything, we review account histories, the income each account produced, your residency and citizenship timeline, and what you knew. People with dual citizenship, or who are thinking about renouncing US citizenship, have additional issues to consider.
