As we have noted often, the Treasury Department has been expanding its efforts related to funds held by Americans in foreign bank accounts. The concern, of course, is that many taxpayers haven't reported those funds as income, which means that there may be taxes owed.
In these tight fiscal times, the government seeks to shore up revenues any way it can. Finding non-compliant foreign bank accounts and holding the holders of them accountable has become a significant initiative. The next big initiative in this regard looms in the form of the Foreign Account Tax Compliance Act, or FATCA, but there are some who say the IRS isn't ready for it.
The main flag waver in this regard is the Treasury Inspector General for Tax Administration. The IG has issued several reports in recent weeks. The latest regarding FATCA came out last Thursday.
FATCA became law in 2010 and is due to be fully effective as of July 2014. Under its provisions, foreign financial institutions will need to report any accounts held by Americans that carry balances of $50,000 or more.
According to TIGTA, as many as 400,000 registrations are expected once the law is effective. But the IG says that even though the IRS has been ramping up its systems and has spent about $8.5 million doing it, the agency is not ready. It says staffing needs haven't been filled and budget issues have held up some work.
As a result of the issues, the head of the American Bar Association tax section says TIGTA seems to be suggesting that FATCA should be delayed. Indeed, four bank lobbying groups have called for a six-month suspension.
It's not clear whether those calls and the TIGTA report will result in any delays. Meanwhile, those with questions about possible repercussions would be wise to consult with an experienced attorney to understand their options.
Source: Reuters.com, "U.S. IRS not fully ready for law against offshore tax evasion -watchdog," Patrick Temple-West, Dec. 5, 2013