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IRS Says Foreign Income Tax Compliance Improving

by Mike Godfrey, Tax-News.com, Washington

16 March 2016


The Internal Revenue Service (IRS) has recently noted a strong and sustained growth in US taxpayers complying with their foreign financial account reporting requirements.

"Taxpayers here and abroad need to take their offshore tax and filing obligations seriously," said IRS Commissioner John Koskinen. "Improving offshore compliance has been a top priority of the IRS for several years, and we are seeing very positive results."

For example, US persons are required to file Form 114, Report of Foreign Bank and Financial Accounts (FBAR), annually to the Treasury Department if they have a financial interest in or signature authority over certain financial accounts, including bank and securities accounts, in a foreign country, if the aggregate value of these financial accounts exceeds USD10,000 at any time during a calendar year.

In 2015, the US Financial Crimes Enforcement Network (FinCEN) received a record high 1,163,229 FBARs, up more than eight percent from the prior year. In fact, FBAR filings have grown on average by 17 percent per year during the last five years, according to FinCEN data.

In addition, under the Foreign Account Tax Compliance Act (FATCA), certain US taxpayers holding financial assets outside the United States must also report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. Reporting thresholds are higher than for the FBAR, the lowest being USD50,000, and vary based on whether a taxpayer files a joint income tax return or lives abroad.

The IRS confirmed that more than 300,000 Forms 8938 were received with tax returns in the 2014 tax year, around the same as the previous year and up from about 200,000 for the 2011 tax year, the first year of the Form.

TAGS: compliance | Foreign Account Tax Compliance Act (FATCA) | tax | investment | tax compliance | FATCA | banking | financial services | Internal Revenue Service (IRS) | tax authority | offshore | United States | services | Compliance | Tax

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