As we have made clear many times on this blog, compliance with the Foreign Account Tax Compliance Act has been anything but simple. This has been true since passage of the act in 2010. When implemented, FATCA contained a number of effective dates that were not applicable until 2014. However, it was still necessary for a specific tax returns to comply with certain provisions under the act back in 2011.
There are serious consequences that result from noncompliance. For example, there are requirements in place for foreign banks to reveal information regarding Americans with accounts over $50,000. The failure to reveal such details can result in withholding on transactions at 30 percent. Purported noncompliance also may prevent these banks from participating in U.S. markets.
The slow progress the IRS has made in implementing FATCA regulations also has created complications. While certain information explaining expectations and requirements is available, there is also a need for the agency to provide necessary documentation to stakeholders to ensure timely implementation of compliance activities. Concerning FATCA, a Treasury Inspector General audit identified problems concerning the processing of paper Form 8938 (a form filed by taxpayers with specific foreign financial assets that also meet a specific threshold). These difficulties could lead to the compromising of any analysis of allegedly inaccurate and incomplete filings of this form.
While the IRS apparently agreed with the report’s recommendations regarding updating of compliance activities and implementing a periodic quality review process, the agency did not agree with the need for specific changes concerning Form 8938.
There has been a significant amount of confusion regarding FATCA implementation, and this may have created the need for the Treasury Inspector General audit. But the need for such a report also demonstrates the great need for taxpayers to consult with attorneys who know how to interpret the regulations, and who wrestle with FATCA compliance issues on a daily basis. When it comes to FATCA, it would be a tremendous mistake to not seek advice and counsel regarding the meaning of these provisions.
Forbes, “IRS Has Gone Wild Over FATCA, But Watchdog Warns Of Compliance Glitches,” Robert W. Wood, Oct. 29, 2015