In 2010, the United States passed the Foreign Account Tax Compliance Act (FATCA) as part of the Hiring Incentives to Restore Employment Act (HIRE Act). 

FATCA requires all non-U.S. financial institutions to report information on foreign assets held by U.S. account holders. If the foreign financial institution (FFI) does not comply with these information reporting requirements, it may be subject to withholding taxes on certain withholdable payments. 

The reporting requirements under FATCA are similar to Form 1099 reporting for U.S. companies. 

FATCA generally applies to any foreign financial institution. A financial institution is any entity that (i) accepts deposits in the ordinary course of a banking or similar business, (ii) holds financial assets for the account of others as a substantial portion of its business, or (iii) is engaged primarily in the business of investing, reinvesting, trading securities, trading partnership interests, commodities or similar financial instruments.1

Examples of foreign financial institutions include:

Example of US FATCA Reporting 

John Q Taxpayer is a U.S. citizen and resident of Florida. In June 2023, John opened a bank account in the Cayman Islands. John provided a Form W-9 (Request for Taxpayer Identification Number and Certification) to verify he was a U.S. tax resident. John transferred $150,000 to the foreign account and earned interest income totaling $1,750 during 2023. The Cayman Bank must report this information on its annual Form 8966 (FATCA Report). 

The bank reports the following information to the IRS:

  • John’s name, address, and taxpayer identification number (TIN)
  • The account number, year-end account balance, and currency code
  • The amount of interest income credited to the account

Notice how the information reported is similar to Form 1099 reporting for domestic companies. If John had a U.S. bank account with a U.S. financial institution, the bank would report John’s information and the interest income on Form 1099-INT (Interest Income). 

The IRS website contains more guidance and resources surrounding US FATCA.

  1. Treas. Reg. § 1.1471-5(e) ↩︎