Taxpayer Advocate Asks I.R.S. to Simplify Foreign Asset Reporting
On April 13, the Office of the National Taxpayer Advocate (“N.T.A.”) urged the Internal Revenue Service (“I.R.S.”) to reduce foreign asset reporting requirements magnified by the Foreign Account Tax Compliance Act (“F.A.T.C.A.”). The N.T.A. is an independent organization within the I.R.S. that aids taxpayers in resolving issues with the I.R.S. It identifies issues and suggests changes to the I.R.S. and Congress to aid both the I.R.S. and all taxpayers.
Currently, U.S. persons with foreign bank accounts file two reports relating to such accounts: one report for the I.R.S. and the other report for the Treasury Department. In a recommendation to the I.R.S., the N.T.A. said on April 13 that taxpayers shouldn’t have to report assets on Form 8938, Statement of Foreign Financial Assets, if those assets are already reported or reflected on a Financial Crimes Enforcement Network (“FinCEN”) Report 114, Report of Foreign Bank and Financial Accounts (“F.B.A.R.”).
Form 8938 has been expanded to reflect changes under F.A.T.C.A., which requires foreign financial institutions to report U.S.-owned accounts to the I.R.S. or face, in some cases, a 30% withholding tax on their U.S.-source income.
In addition, the N.T.A. urged the I.R.S. to reduce the burden on taxpayers with accounts abroad who are bona fide residents of the foreign countries in which they live, suggesting that it should not require banks organized under the laws of those countries to report such accounts under F.A.T.C.A.