Michael Cohn, in a recent article published in Accounting Today, states that the IRS has made progress on implementing the Foreign Account Tax Compliance Act (FATCA).
The FATCA was enacted in 2010, and states that, beginning with tax year 2011, individual taxpayers with foreign assets that meet a certain dollar amount must report the information to the IRS. This information must be attached on Form 8938, Statement of Specified Foreign Financial Assets, to the taxpayer’s annual individual 1040 tax return, or 1040 Non-resident tax return.
In a report from the Treasury Inspector General for Tax Administration (TIGTA), they found three noted limitations with the FATCA:
- Transcribed data are not validated to ensure accuracy.
- Data on Form 8938 continuation statements are not transcribed.
- Losses reported by taxpayers cannot be input as negative amounts.
The TIGTA then offered three recommendations to the IRS:
- Update the compliance activities in the FATCA Compliance Roadmap for identifying noncompliance by foreign financial institutions.
- Initiate a periodic quality review process for the processing of paper Forms 8938 to ensure the accuracy of the data being transcribed.
- Ensure that the transcription issues identified in this report are addressed.
For more information on the FATCA and its implementation, please read the referenced articles or contact Patrick Mutchler at (231) 726-5870 or pmutchler@brickleydelong.com.