One of the most frustrating aspects of tax season is that rules change, forms are altered and intricate details obtain new wrinkles that make it very difficult for the tax filer to get a grasp on his or her tax situation. The Internal Revenue Service changes rules all the time in an effort to make the tax system more efficient — but all that change can leave filers confused.
A new rule is taking full effect in 2014, and it could cause some turmoil and controversy for some Americans. The rule is called the Foreign Account Tax Compliance Act (FATCA), and it basically acts as a way to deter people from hiding their money in offshore bank accounts.
What FATCA does is create partnerships with the IRS and foreign financial institutions so that the IRS can investigate and pursue people who place their U.S.-garnered funds and place them in overseas accounts. A novel idea, yes — but the execution of this idea doesn’t seem to be going too well, according to a watchdog organization. The report accuses the IRS of being unprepared for the implementation of FATCA; that the IRS doesn’t have the necessary employees; that budget constraints have caused issues; and that numerous improvements need to be made to ensure FATCA is properly utilized and enforced.
Whether this is true or not, the mere fact that a major new rule is coming into play will inherently cause confusion — both for taxpayers and the IRS. Mistakes will be made, and that could cause a tax filer to feel stressed or anxious over the outcome of his or her filing. If the IRS makes a mistake, you need to consult an experienced tax attorney to ensure your rights are being upheld and to protect yourself from unfair tax penalties.
Source: Reuters, “U.S. IRS not fully ready for law against offshore tax evasion -watchdog,” Dec. 5, 2013