The IRS introduced the FATCA (sometimes misspelled as FACTA) in 2010, which became effective in 2014. By now, most financial institutions like your bank will be FATCA compliant, meaning that they share information with the IRS (Internal Revenue Service which is the US tax collection department).

Many Americans have already experienced this. They received a letter from the bank, informing them about the new Foreign Account Tax Compliance Act legislation and the impact on their bank accounts. Unfortunately, the legislation has even led to many financial institutions (especially banks) refusing to serve US citizens. It is too costly for them to become compliant and share information with the IRS.

Mandatory information exchange with U.S. tax authorities

Financial institutions are required to determine whether accounts are held with them by U.S. taxpayers. Among other things, they look at place of birth, ID documents, and in some cases, a letter is sent to clients asking for additional information. If there is no response to the letter, they assume they are dealing with an American. The information is then always forwarded to the U.S. Internal Revenue Service.

It should be added that one can also be a US Person by having an American parent or having a Green Card. See our knowledge center for more information on whether or not one is a US Person.

Unfortunately, FATCA has resulted in many bank accounts of US citizens being closed. While certainly not a humorous topic, the following satire gives a good explanation of the tax system in America: FATCA explained in four minutes.

Who is affected by FATCA?

Important to note: FATCA legislation only applies if you are taxable in the United States.

The US Internal Revenue Service (the IRS) defines a US taxpayer as a US Person.

You are automatically a US taxpayer if you

This is regardless of whether you have ever lived or worked in the US.

What is FATCA? Ask Americans Overseas

The founders of Americans Overseas, we were born in the Netherlands and received our American citizenship through our (American) mother. When we first heard about this around 2013, we felt disbelief (this can’t be true), anger (why can they just do this), fear (will I get fines or problems now), and panic (what should I do). It is (unfortunately) true that there is a U.S. tax liability. There was no information for us from the local government, the consulate referred us to the IRS, and the IRS was impenetrable.

We therefore started this initiative to help people with good information about the tax system America , prevent unnecessary panic, and offer no obligation and free help if desired and needed we have a network of affordable professionals (accountants), who can help you further with your obligations.

Do you have questions about FATCA, your U.S. tax liability, data exchange with U.S. tax authorities or the tax system America? If so, please contact Americans Overseas.