FATCA (Foreign Account Tax Compliance Act)

FATCA, or the Foreign Account Tax Compliance Act, is a United States federal law that was enacted in 2010 as part of the Hiring Incentives to Restore Employment (HIRE) Act. FATCA was designed to combat tax evasion by U.S. taxpayers who hold financial assets in foreign countries.

Under FATCA, foreign financial institutions are required to report to the IRS on the financial accounts held by their U.S. account holders. This reporting is done through the use of the FATCA reporting form, which is designed to collect information about the account holder and the account itself.

The purpose of this reporting is to allow the IRS to identify U.S. taxpayers who are holding financial assets in foreign countries, and to ensure that those taxpayers are paying the appropriate amount of taxes on their foreign income. FATCA also requires foreign financial institutions to withhold a percentage of certain payments to U.S. account holders who do not comply with the reporting requirements.

FATCA has been controversial since its inception, with some critics arguing that it represents an infringement on the privacy rights of U.S. taxpayers who hold financial assets in foreign countries. Others argue that it places an undue burden on foreign financial institutions, who must comply with a complex and sometimes confusing set of reporting requirements.

Despite these concerns, FATCA remains an important tool in the fight against tax evasion, and its reporting requirements continue to be enforced by the IRS. For U.S. taxpayers who hold financial assets in foreign countries, it's important to understand the requirements of FATCA and to ensure that they are in compliance with the law.

Reference: https://www.indibeam.com/beam/what-is-fatca-foreign-account-tax-compliance-act