IRS Asked to Simplify Foreign Asset Reporting for FATCA, FBAR

by Bruce Givner on May 1, 2015

On April 13, the National Taxpayer Advocate (NTA) office urged the Internal Revenue Service (IRS) to simplify the foreign asset reporting requirements that have been magnified by the Foreign Account Tax Compliance Act (FATCA). Specifically, the NTA office argued that taxpayers shouldn’t have to report assets of Form 8938, the Statement of Foreign Financial Assets, if those assets have already been reported or reflected on a Financial Crimes Enforcement Network Report 114, Report of Foreign bank and Financial Accounts (FBAR). The office recommended the changes be made under §1471 and §6038D. Under FATCA, which requires foreign financial institutions to report US-owned accounts to the IRS or face potentially a 30% withholding tax on their income from US sources, Form 8938 has been expanded.

The NTA further stated that the IRS should decrease the burden for taxpayers with accounts abroad who are true residents of the foreign countries in which they reside. The IRS should not require banks organized under the laws of those countries to report those accounts under FATCA, according to the NTA.

Finally, the NTA recommended that those accounts should not be among the specified foreign financial assets required to be reported on Form 8938. The office said that the “unintended consequences” of recent FATCA changes have added to years of concerns about overlap and duplication between the FBAR and Form 8938.

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