Reporting Foreign Accounts to IRS:

Extent of Duplication Not Currently Known, but Requirements Can Be Clarified

GAO-12-403: Published: Feb 28, 2012. Publicly Released: Mar 29, 2012.

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What GAO Found

Some of the information requested on the Form 8938 and FBAR is duplicative. Both forms ask for the same or similar information on the filer, foreign financial accounts, and financial institutions where accounts are held. Form 8938 asks for additional information not required by the FBAR, such as other foreign financial assets and income. Since the Form 8938 is a new requirement beginning after 2011, data are not yet available to determine the number of filers subject to these duplicative reporting requirements.

A variety of tax commentators, taxpayer representatives, and individuals stated that these duplicative reporting requirements have created confusion. They report being unclear about what and how information should be reported on both forms. Neither form provides filers any explanation as to why duplicative reporting is necessary, where the duplication occurs, or how the information being requested is the same or different.

Without data on Form 8938 filers, the benefits and costs of taking actions to reduce duplicative reporting cannot be determined. When Form 8938 filing data becomes available, Treasury’s Office of Tax Policy, IRS, and FinCEN would have the information needed to assess whether cost-effective steps could be taken, including allowing filers who would normally have to submit both forms to substitute the information reported on one to meet the requirements of the other.

Why GAO Did This Study

This letter formally transmits the briefing we gave on February 1, 2012. We gave this briefing in response to a Congressional request that we assess potential duplicative foreign-account reporting requirements under the Foreign Account Tax Compliance Act (FATCA) for the Internal Revenue Service (IRS) Form 8938 and under the Bank Secrecy Act (BSA) for the Foreign Bank Account Report (FBAR).

The objectives of the briefing were to (1) determine to what extent, if any, the reporting requirements on the FATCA Form 8938 and FBAR are duplicative; (2) assess the potential effects that any duplicative reporting requirements have on filers; and (3) identify and assess opportunities, if any, to cost-effectively reduce or eliminate the burden that any duplicative reporting creates while maintaining the usefulness of the information for tax-administration and law-enforcement purposes.

What GAO Recommends

We are recommending that the Secretary of the Treasury direct the Office of Tax Policy, IRS, and FinCEN to (1) revise both the Form 8938 and FBAR instructions and related guidance to explain the extent to which duplication exists (for example, instances where account-related information requested on the two forms is the same or different) and the circumstances in which filers are, or are not, expected to comply with both reporting requirements; and (2) as data become available, determine whether the benefits of implementing a less-duplicative reporting process exceed the costs and if so, implement that process.

For more information, contact James R. White at (202) 512-9110 or whitej@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: The Department of the Treasury is considering this recommendation but has not taken action to implement it.

    Recommendation: The Secretary of the Treasury should direct the Office of Tax Policy, IRS, and FinCEN to revise both the Form 8938 and FBAR instructions and related guidance to explain the extent to which duplication exists (for example, instances where financial account-related information requested on the two forms is the same or different) and the circumstances in which filers are, or are not, expected to comply with both reporting requirements

    Agency Affected: Department of the Treasury

  2. Status: Open

    Comments: Data are being collected for analyzing the related benefits and costs of a less duplicative reporting process. No date has been set for implementating the recommendation.

    Recommendation: As data becomes available, the Secretary of the Treasury should direct the Office of Tax Policy, IRS, and FinCEN to determine whether the benefits of implementing a less duplicative reporting process exceed the costs and if so, implement that process.

    Agency Affected: Department of the Treasury

 

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