Recommendation: Congress should consider amending the Internal Revenue Code, Bank Secrecy Act of 1970, and other statutes, as needed, to address overlap in foreign financial asset reporting requirements for the purposes of tax compliance and detection, and prevention of financial crimes, such as by aligning the types of assets to be reported and asset reporting thresholds, and ensuring appropriate access to the reported information.
Agency: Congress
Status: Open
Comments: No legislative action enacted as of January 2020. Congress has not amended the Internal Revenue Code, Bank Secrecy Act of 1970 and other statutes as needed to address overlap in foreign financial asset reporting requirements, as GAO suggested in April 2019. GAO continues to believe that if Congress were to modify these various statutes, the reporting burden created by navigating multiple reporting requirements will be reduced. Modifying these statutes will also allow for the use foreign financial asset information collected under the Foreign Account Tax Compliance Act to prevent and detect financial crimes.
Recommendation: The Commissioner of Internal Revenue should develop a plan to mitigate risks with compliance activities due to the lack of accurate and complete Taxpayer Identification Numbers of U.S. account holders collected from FFIs. (Recommendation 1)
Agency: Department of the Treasury: Internal Revenue Service
Status: Open
Comments: The Internal Revenue Service (IRS) has taken several steps to improve collection of accurate and complete taxpayer identification numbers (TINs) from foreign financial institutions (FFIs). For example, in December 2019, IRS officials said they began identifying 2017 records submitted by FFIs without valid TIN fields or corresponding dates of birth for account holders. IRS also launched a campaign to identify FFIs that did not file a Form 8966 with IRS. While these steps can improve the quality of account data submitted by FFIs, IRS still faces ongoing risks that receiving inaccurate or incomplete TINs pose to efforts to identify and combat taxpayer and FFI noncompliance. Additionally, IRS has not yet developed a plan that elaborates on these risks and identifies steps to mitigate them, as we recommended in April 2019. Without such a strategy, IRS may fail to identify opportunities to adjust compliance programs to better enforce FFI reporting of valid TINs and identify U.S. persons who are not complying with FATCA reporting requirements.
Recommendation: The Commissioner of Internal Revenue should ensure that appropriate business units conducting compliance enforcement and research have access to consistent and complete data collected from individuals' electronic and paper filings of Form 8938 and elements of parent individual tax returns. As part of this effort, the Commissioner should ensure that IRS provides clear guidance to the business units for accessing such data in IRS's Compliance Data Warehouse. (Recommendation 2)
Agency: Department of the Treasury: Internal Revenue Service
Status: Open
Comments: The Internal Revenue Service (IRS) has taken several steps to address this recommendation. According to IRS Information Technology division officials, as of December 2019, they deliver paper and electronically filed Form 8938 data to IRS's Research, Applied Analytics, and Statistics organization on a monthly basis, and makes such data available in the Compliance Data Warehouse (CDW) for use by agency officials. According to Large Business and International (LB&I) Division officials, IRS's enforcement functions also have access to this data. One outcome of this access, according to LB&I officials, is the use of FATCA data in the development of compliance examination leads. However, IRS has not yet developed clear guidance for business units to access relevant data from Forms 8938 and elements of parent individual tax returns in CDW, as we recommended. Without such guidance, CDW users may be less likely to effectively leverage CDW data for examination purposes.
Recommendation: The Commissioner of Internal Revenue should employ a comprehensive plan for managing efforts to leverage FATCA data in agency compliance efforts. The plan should document and track activities over time to
• ensure individuals and FFIs comply with FATCA reporting requirements;
• assess and mitigate data quality risks from FFIs;
• improve the quality, management, and accessibility of FATCA data for compliance, research, and other purposes; and
• establish, monitor, and evaluate compliance efforts involving FATCA data intended to improve voluntary compliance and address noncompliance with FATCA reporting requirements. (Recommendation 3)
Agency: Department of the Treasury: Internal Revenue Service
Status: Open
Comments: In September 2019, IRS's Deputy Commissioner for Services and Enforcement said that IRS disagreed with our April 2019 recommendation. The Deputy Commissioner said that resources that would be dedicated to update a comprehensive plan unique to FATCA-such as the FATCA Compliance Roadmap-are better spent on enforcement activities. The Deputy Commissioner also said that IRS's strategy for FATCA compliance will instead be part of IRS's Large Business & International (LB&I) Division's overall portfolio management strategy. Implementing enforcement activities could increase taxpayers' and foreign financial institutions' (FFIs) compliance with FATCA reporting requirements. While IRS does not have to revise and reemploy its FATCA Compliance Roadmap, it can employ a comprehensive plan as part of LB&I's portfolio management strategy to evaluate FATCA enforcement activities already in place, and determine the extent to which these activities improve voluntary compliance and address noncompliance with FATCA reporting requirements. Without such a plan, IRS risks not maximizing efforts to manage and address the myriad of challenges it faces in effectively ensuring taxpayer compliance.
Recommendation: The Commissioner of Internal Revenue should assess factors contributing to unnecessary Form 8938 reporting and take steps, as appropriate, to address the issue. Depending on the results of the assessment, potential options may include:
• identifying and implementing steps to further clarify IRS Form 8938 instructions and related guidance on IRS's website on determining what foreign financial assets to report, and how to calculate and report asset values subject to reporting thresholds; and
• conducting additional outreach to educate taxpayers on required reporting thresholds, including notifying taxpayers that may have unnecessarily filed an IRS Form 8938 to reduce such filings. (Recommendation 4)
Agency: Department of the Treasury: Internal Revenue Service
Status: Open
Comments: As of February 2020, IRS officials said the agency is in the process of obtaining 2017 and 2018 tax data to analyze the number of unnecessary filings of Form 8938. Completing this data analysis and identifying the full range of factors contributing to unnecessary Form 8938 reporting will allow IRS to better address such factors. These efforts, in turn, will reduce the risk that taxpayers file-and IRS processes-forms that taxpayers were not required to submit to IRS.
Recommendation: The Secretary of the Treasury should lead efforts, in coordination with the Secretary of State and Commissioner of Social Security, to establish a formal means to collaboratively address ongoing issues—including issues accessing financial services and employment and obtaining SSNs—that U.S. persons living abroad encounter from implementation of FATCA reporting requirements. (Recommendation 5)
Agency: Department of the Treasury
Status: Open
Comments: The Department of the Treasury (Treasury) has taken some steps to implement GAO's April 2019 recommendation. Specifically, Treasury proposed changes to the Internal Revenue Service (IRS) relief procedures to abate assessments for certain expatriating taxpayers and is working with IRS and the Department of State (State) to publicize the procedures. In addition, Treasury led efforts with IRS, State, and the Social Security Administration (SSA) to develop frequently asked questions that combine relevant guidance for individuals to obtain a Social Security number, renounce U.S. citizenship, and comply with U.S. tax obligations. However, as of December 2019, Treasury lacked a collaborative interagency mechanism to address ongoing issues U.S. persons living abroad continue to encounter from implementation of Foreign Account Tax Compliance Act (FATCA) reporting requirements. In November 2019, Treasury said it was not the appropriate agency to lead these coordination efforts. However, GAO continues to believe that because Treasury is ultimately responsible for effectively administering FATCA, it is in a better position than State or SSA to establish an effective collaborative mechanism. Doing so will help agencies address the ongoing issues Americans living abroad experience from FATCA.
Recommendation: The Secretary of State, in coordination with the Secretary of the Treasury and Commissioner of Social Security, should establish a formal means to collaboratively address ongoing issues—including issues accessing financial services and employment and obtaining SSNs—that U.S. persons living abroad encounter from implementation of FATCA reporting requirements. (Recommendation 6)
Agency: Department of State
Status: Open
Comments: The Department of State (State) has taken several steps to implement GAO's April 2019 recommendation. In September 2019, State worked with the Department of the Treasury (Treasury), the Internal Revenue Service (IRS), and Social Security Administration (SSA) to develop and post online frequently asked questions on how to obtain a Social Security number, renounce U.S. citizenship, and comply with U.S. tax obligations. Additionally, State officials participated in an October 2019 webinar hosted by IRS regarding newly approved tax relief procedures for certain former citizens who have renounced U.S. citizenship and seek to be federal tax compliant. State also established procedures with SSA for its embassies and consulates abroad to help U.S. citizens apply for a Social Security number during the passport application process without SSA permission, thus removing a significant barrier in serving U.S. citizens abroad. However, as of December 2019, State lacked a collaborative interagency mechanism with Treasury to address ongoing FATCA implementation issues related to access to foreign financial services and denial of employment and promotion opportunities overseas. Treasury is responsible for leading efforts to establish such a mechanism; however, State's participation in such a mechanism on a continuing basis will help agencies address remaining issues Americans living abroad experience from FATCA.
Recommendation: The Commissioner of Social Security, in coordination with the Secretaries of State and Treasury, should establish a formal means to collaboratively address ongoing issues—including issues accessing financial services and employment and obtaining SSNs—that U.S. persons living abroad encounter from implementation of FATCA reporting requirements. (Recommendation 7)
Agency: Social Security Administration
Status: Open
Comments: The Social Security Administration (SSA) has taken or plans to take steps to implement GAO's April 2019 recommendation. SSA worked with the Department of the Treasury (Treasury), the Internal Revenue Service, and the Department of State (State) to develop and post online frequently asked questions on how to obtain a Social Security number, renounce U.S. citizenship, and comply with U.S. tax obligations. Additionally, in October 2019, SSA said it plans to conduct outreach events for U.S persons living abroad who need Social Security numbers. However, as of December 2019, SSA lacked a collaborative interagency mechanism with Treasury and State to address ongoing FATCA implementation issues, such as recurring issues U.S. persons may have obtaining Social Security numbers. Treasury is responsible for leading efforts to establish such a mechanism; however, SSA's participation in such a mechanism on a continuing basis will help agencies address remaining issues Americans living abroad experience from FATCA.
