US · Journal
A FATCA Letter From Your Foreign Bank: What a US Resident Should Do
Your bank wants a W-9. If the account was never on an FBAR, the letter starts a clock — and the domestic streamlined track has a trap the guides miss.
Your bank wants a W-9. If the account was never on an FBAR, the letter starts a clock — and the domestic streamlined track has a trap the guides miss.
A FATCA letter is your bank asking you to document your tax status, not the IRS opening an enquiry. Answer it truthfully and by the date on the letter — a US person signs a Form W-9. The part that matters is what happens next: once you confirm your status, the account becomes reportable, and if it was never on an FBAR or a Form 8938, you want your correction under way before that report reaches the IRS.
Almost everything written about these letters is addressed to Americans living abroad. If you live in the United States and hold an account overseas — an inherited account in your home country, a pension from a stint abroad, a brokerage account you opened before you moved — your position is materially different, and the differences are the ones that decide the outcome.
Under the Foreign Account Tax Compliance Act, non-US financial institutions must identify accounts held by US persons and report them. The letter is the identification step. Your bank has found something in your file that suggests a US connection and is asking you to confirm or deny it, usually on a self-certification form or on a W-9 or W-8BEN.
It is not an audit. It is not a notice. It is not evidence that the IRS has you in mind. Banks send these in batches — on onboarding, on periodic re-documentation, and whenever a file shows what the rules call US indicia: a US place of birth, a US address or telephone number, a standing instruction to a US account, or a power of attorney held by someone with a US address. Most recipients are entirely compliant and the letter is a formality.
Equally, it is not nothing. Your reply is what moves the account from undocumented to documented and reportable, and the bank reports it whether you reply or not. Ignoring the letter does not keep the account quiet; it usually gets the account restricted or closed while the reporting happens anyway.
If you are a US citizen, a green-card holder, or a resident under the substantial presence test, you are a US person and the form is a W-9. Do not send a W-8BEN to buy time. That form certifies foreign status under penalty of perjury, and a false certification to a financial institution is a far worse problem than the one you are trying to postpone.
If the deadline is tight and you need advice first, write to the bank and ask for a short extension while you take professional advice. Banks grant these routinely. What they will not do is leave an undocumented account open indefinitely.
Two instincts to resist. Do not close the account, and do not move the money to another foreign bank. Neither erases a reporting history, and the second simply buys you a second FATCA letter.
This is the part the general guides leave out, and it is the reason the letter is useful rather than merely alarming. There is a sequence, it has slack in it, and you are at the front of it.
Where your bank sits in a Model 2 jurisdiction, or reports directly, it files the FATCA report with the IRS on Form 8966 — due, per the IRS instructions for the form, "on or before March 31 of the year following the end of the calendar year" the report covers. Where your bank sits in a Model 1 jurisdiction, the instructions are explicit that "Reporting Model 1 FFIs do not file Form 8966 directly to the IRS": the bank reports to its own tax authority, which then exchanges the data with the IRS. That adds a further leg, and a further lag.
Against that, the streamlined procedures close on a specific event. The IRS states that a taxpayer under a civil examination of their returns for any taxable year "will not be eligible to use the streamlined procedures," and that a taxpayer under investigation by IRS Criminal Investigation is also ineligible. The door is open until it is shut, and it shuts on the IRS's initiative, not yours.
So the letter arrives at the one moment when you still hold the initiative. That is worth something, and it does not last.
There are two streamlined tracks and your residence picks which. The foreign track requires you to meet a non-residency test: for a US citizen or lawful permanent resident, that means that in at least one of the most recent three years for which the return due date has passed, you had no US abode and you were physically outside the United States for at least 330 full days. If you live in the United States, you fail that test, and you are on the Streamlined Domestic Offshore Procedures.
The two tracks ask for the same filings — amended returns for the most recent three years for which the due date has passed, and FBARs for the most recent six years — but they do not carry the same cost. The foreign track imposes no offshore penalty. The domestic track does. The IRS domestic page sets it out: "The Title 26 miscellaneous offshore penalty is equal to 5 percent of the highest aggregate balance/value of the taxpayer's foreign financial assets that are subject to the miscellaneous offshore penalty." The certification is Form 14654, not the Form 14653 the expat guides keep naming. We walk through the difference in SDOP or SFOP after moving back to the US.
The penalty base is narrower than people assume. An asset enters it only if it should have been reported on an FBAR and was not, or should have been reported on a Form 8938 and was not, or was properly reported but its income was not. And the base is built from year-end values, not peak balances — the highest of those year-end aggregates across the covered periods. How the SDOP penalty base is measured works through the arithmetic.
This is the single most consequential fact for a US resident, and it is absent from essentially every article on FATCA letters.
The domestic procedures accept amended returns only. The IRS page states, in terms, that "You may not file delinquent income tax returns" under these procedures, and eligibility requires that you "have previously filed a U.S. tax return (if required) for each of the most recent 3 years."
The practical effect is a hard fork:
A related point for the many people whose returns were filed but whose FBARs never were: not every case is a streamlined case. Filed your returns but never filed an FBAR covers when the simpler delinquent-FBAR route is the right one, and when it is not.
Two further gates. You need a valid taxpayer identification number — the IRS is clear that without an SSN or ITIN "your tax return will not be processed under the streamlined procedures." And you must certify that the conduct was non-willful, with facts behind it rather than an assertion. What non-willful actually means is the place to start, and why SDOP submissions get rejected shows what a thin certification costs.
Be clear-eyed about this, because some of what is written about FATCA letters oversells it badly.
Streamlined is not an amnesty and it is not immunity. The IRS states that returns submitted under the procedures "will not be subject to IRS audit automatically, but they may be selected for audit," and that such returns "may be subject to IRS examination, additional civil penalties, and even criminal liability." It confers no protection from criminal prosecution. Where there is a real prospect that the conduct was willful, the IRS directs taxpayers to the Criminal Investigation Voluntary Disclosure Practice instead — a different programme with different terms, compared in streamlined or voluntary disclosure. That assessment belongs with a professional before anything is filed, not after.
Nor should anyone promise you a timetable. The IRS publishes no processing time for a streamlined submission, and any firm that quotes you one is inventing it.
Green-card holders and substantial-presence residents are the likeliest recipients of a foreign-bank letter, because the account in question is usually a perfectly ordinary account in the country they came from. The non-residency test works differently for them: an individual who is neither a US citizen nor a lawful permanent resident meets it by having failed the substantial presence test of section 7701(b)(3) in one of the relevant years — a single test, with no abode limb and no day count of its own.
Worth knowing, too, that the account you have held since childhood is as reportable as one opened yesterday.
Two separate obligations, routinely confused, and the letter is a good moment to check both.
You can easily owe one and not the other. Form 8938 versus the FBAR sets the two side by side.
Our US team prepares streamlined submissions for US residents, including the Form 14654 penalty computation and the non-willfulness certification, and every filing is reviewed and signed by a licensed CPA or Enrolled Agent before it goes anywhere. If a letter has landed and you are not sure where you stand, book a consultation — our pricing for disclosure work is fixed and quoted up front. If your position is the mirror image of this one and you are reading from abroad, your bank asking whether you are a US person is the article for you.
This article is general guidance, not advice on your circumstances. Whether a particular failure was non-willful is a question of fact, and it should be assessed by a licensed professional before any submission is made.