The Foreign Account Tax Compliance Act was signed into law in March 2010. FATCA requires foreign financial institutions to report to the IRS income earned by U.S. taxpayers on accounts with their institution. The foreign financial institution may also be required to withhold tax on income from an account.

Taxpayers with foreign financial accounts with a total value of more than $10,000 during a calendar year must file a Foreign Bank Account Report (FBAR or FinCEN Form 114) with the U.S. Treasury by June 30 each year, providing various information with respect to each foreign account.

New IRS reporting requirements for foreign assets, introduced in 2011, require taxpayers to show where income on their foreign assets is included in their annual income tax return. Compliance reporting is expected of U.S. taxpayers with foreign accounts, offshore assets or other non-U.S. holdings, including holdings of an ownership interest in a foreign business.

These reporting requirements apply to U.S. citizens and residents, as well as entities, including corporations, limited liability companies and partnerships, as well as trusts and estates. Noncompliance can result in tax, interest and penalties, as well as possible criminal charges.