Table of contents:
What is a FATCA letter?
If you are a U.S. citizen or green card holder with a non-U.S. bank or financial account, you may receive a “FATCA letter” asking you to confirm your U.S. tax status. The request is part of the Foreign Account Tax Compliance Act (FATCA) — a U.S. law that requires foreign banks and financial institutions to identify and report U.S. account holders to the IRS. Over 130 countries now participate in FATCA, and their banks must collect written confirmation of each client’s U.S. tax status.
Here is an example of a letter from a non-U.S. bank asking to verify the tax status received by one of our clients in Switzerland:
Note: These letters usually request a complete Form W-9 (for U.S. persons) or Form W-8BEN (for non-U.S. persons).
Why is the bank sending this letter?
Your bank likely found something in your records that suggests a U.S. connection, for example, a power of attorney (PoA) or third-party authority in favour of a person with a U.S. address, or your birthplace is in the United States (which automatically makes you a U.S. citizen). In these cases, to avoid severe penalties, the bank is required to confirm your U.S. tax status and report your financial account to the IRS if you are a U.S. taxpayer.
What are your options?
Your options depend on whether or not you are a U.S. person.
- If you are a U.S. person (e.g., U.S. citizen, green card holder, or U.S. tax resident), follow these steps:
Complete Form W-9 and send it to the bank.
This is not proof of your compliance. This confirms your U.S. tax residency. The bank will use your completed W-9 form to prove their compliance with FATCA regulations.The bank will typically follow up by asking for proof of your compliance with the U.S. tax code.
If you are compliant, send them a copy of your tax compliance report downloaded from your IRS individual online account or business tax account.
If you are not currently compliant, the clock starts ticking:
Respond to the bank immediately. Let them know you are working on resolving your U.S. tax obligations. Ask to set up a timeline within which you will provide proof of compliance. Banks will generally give you a span of 30 to 45 days to file. They don’t want to lose a client, but they will want to see that you are not simply ignoring them.
Hire TFX to take care of filing through the Streamlined Procedures (SP) program, which allows you to catch up penalty-free. See the total cost here. The average processing time is about a month, giving you enough time to report back to your bank.
We will prepare a formal "Preparer certification letter" for your non-U.S. bank once your SP package is ready, confirming your tax compliance.
- If you are not a U.S. person, you must complete Form W-8BEN and send it to the bank.
This form certifies that you are not subject to U.S. tax withholding. It is typically requested by U.S. payers or platforms (e.g., Amazon, PayPal) or foreign banks involved in FATCA.
Notes:
TFX can help you prepare Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals). Simply create a TFX account and submit a completed tax questionnaire for our review.
If you receive U.S.-source income and are a resident of a country with a tax treaty with the U.S., Form W-8BEN may allow you to claim reduced tax withholding rates on U.S.-source income, like royalties or dividends. If your country of residence has no tax treaty with the U.S., Form W-8BEN will eliminate or reduce tax withholding on certain U.S. income, like bank interest or capital gains from the disposition of U.S. stocks.
What if you ignore the FATCA letter?
That is not advisable. Your bank account may be frozen or closed, and your information could still be reported to the IRS with a note that you were uncooperative. It is better to respond, get organized, and if needed, get help.