Under the Foreign Account Tax Compliance Act (FATCA), certain taxpayers must file Form 8938, “Statement of Specified Foreign Financial Assets.” Meanwhile, foreign financial institutions (FFIs) need to file Form 8966, “FATCA Report.”
Recently, the Treasury Inspector General for Tax Administration (TIGTA) released the results of an audit to evaluate the Internal Revenue Service (IRS)’s efforts to use information collected from these tax forms to improve taxpayer compliance.
According to the audit, the IRS established “Campaign 896 – Offshore Private Banking” to address noncompliance related to taxpayers’ failure to report income generated from and information reporting associated with offshore bank accounts. The agency also created “Campaign 975 – FATCA Filing Accuracy”, which seeks to identify FFIs that maintain specified foreign financial accounts for US individuals, but failed to submit Form 8966.
“Due to resource limitations, the IRS has significantly departed from its original comprehensive FATCA Compliance Roadmap in favor of a more limited compliance effort,” the TIGTA said. The two campaigns were viewed as a significant part of the IRS’s endeavors to improve compliance.
A chart in the audit report provides insight into problems confronting the IRS, including:
- Cost (2010-2020): $574 million.
- Results: 847 letters sent, $0 assessments from letters. (There was $14 million collected from other noncompliance activity.)
- Over 330,000 US taxpayers with accounts over $50,000 (2016-2019)
- Potential penalties: $3.3 billion
Hopefully, you are not one of the 330,000 US taxpayers who failed to file! If you are, be sure to contact your Moore Doeren Mayhew advisor today for assistance.