Taxpayer Advocate Request Easing Foreign Reporting Requirements For US Taxpayers Abroad

The National Taxpayer Advocate suggested to the Internal Revenue Service to reduce the duplicate foreign asset reporting requirements created by the Foreign Account Tax Compliance Act. The Taxpayer Advocate Service (TAS) is your voice at the IRS. Our job is to ensure that every taxpayer is treated fairly, and that you know and understand your rights.
April 13, 2015 the National Taxpayer Advocate stated in Recommendations for Published Guidance under IRC §§ 60380 and 1471: Eliminate Duplicative Reporting of Assets on the FATCA Form 8938 if the Asset is Reported or Reflected on the FBAR (FinCEN Report 114) and Exclude Financial Accounts Maintained by a Financial Institution in the Country of  Which the U.S. Person is a Bona Fide Resident from FATCA Reporting:

1. That taxpayers shouldn’t have to report assets on the Form 8938, Statement of Specified Foreign Financial Assets, if those assets are already reported or reflected on a Financial Crimes Enforcement Network Form 114, Report of Foreign Bank and Financial Accounts (FBAR).

2. The IRS should amend the FATCA regulations to ease reporting for banks in countries where U.S. account holders are bona fide residents.

• Those banks shouldn’t be required to report those accounts under FATCA if the institutions are organized under the laws of that country.

• Those accounts also shouldn’t be among the specified foreign financial assets required to be reported on the Form 8938.

Recommendations

• Amend Temporary Regulation §1.6038D-7T(a) to eliminate duplicative reporting of assets on Form 8938 if the asset is reported or reflected on a timely-filed FinCEN Report 114;

• Amend Treasury Regulation § 1, 1471-5(b)(2) to specifically exclude from the definition of financial account subject to reporting by foreign financial institutions financial accounts maintained by a financial institution organized under the laws of the country of which the U,S, person is a bona fide resident; and

• Amend Temporary Regulation § 1 ,6038D-7T to exclude from the specified foreign financial assets required to be reported on the Form 8938 financial accounts maintained by a financial institution organized under the laws of the country of which the U.S. persson is a bona fide resident.

Reasons for Change

For several years, the National Taxpayer Advocate and other stakeholders have expressed concerns about the overlap and duplicative disclosure requirements of the FinCEN Report 114, Report of Foreign Bank and Financial Accounts (FBAR), and the Form 8938, Statement of Specified Foreign Financial Assets, which must be filed with annual federal income tax return. The FinCEN Report 114 and the Form 8938 are significantly duplicative, which increases confusion and adds to the compliance burden for taxpayers.
Organizations representing U,S’, taxpayers abroad and the press have voiced concerns about unintended consequences of new FATCA rules for foreign financial institutions, which make it harder for U,S, taxpayers living abroad to open and maintain legitimate bank accounts overseas. Some foreign financial institutions reported. However, FinCEN Report 114 (FBAR) is not included on the list of those information returns.
The IRS can significantly alleviate reporting burden for U.S. persons who are bona fide residents in foreign countries and facilitate their legitimate need for local banking services in their countries of residence by revising regulations under IRC §§ 6038D and 1471 to eliminate the requirement toreport specified foreign financial assets on the Form 8938 if such persons timely on the FinCEN Report 114 (FBAR), and to exclude financial accounts maintained by a financial institution organized under the laws of the county of which the U.S.’ persons are bona fide residents from FATCA reporting.
Proposed regulatory changes will not inhibit the IRS’s ability to obtain information about financial accounts maintained by foreign financial institutions outside of the U.S. person’s country of bona fide residency.