Wisdom

The Internal Revenue Service has taken some initial steps to implement the Foreign Account Tax Compliance Act, but it still has a long way to go, according to a new government report. Part of the HIRE Act of 2010, FATCA was enacted to improve tax compliance and bring in tax revenue from Americans with previously unreported foreign bank accounts and other assets. FATCA requires certain U.S. taxpayers to report overseas assets to the IRS and requires U.S. entities to withhold a portion of certain payments made to foreign financial institutions, or FFIs, that have not entered into an agreement with IRS to report certain information on the foreign bank’s U.S. accounts. FATCA aims to reduce tax evasion through greater transparency and accountability. Concerns have been raised over the obligation of banks and financial institutions in foreign countries to act as agents of the IRS by collecting taxes on behalf of the agency and providing the IRS with confidential financial data. Additional concerns over double taxation have arisen as well. For more on IRS implementation of FATCA, see the report from the Government Accountability Office.