AICPA Recommends the IRS Simplify Offshore Tax Disclosure Requirements for American Expatriates
The AICPA (American Institute of CPAs) is the world’s largest member association representing the accounting profession. AICPA has more than 412,000 members in 144 countries across the globe. In a letter to the IRS dated August 15, 2016, AICPA expressed its frustration with certain duplicative offshore reporting requirements and other aspects of the U.S. Tax Code that unnecessarily complicate the compliance process for expatriates and others with financial interests overseas.
While AICPA recognizes that the IRS and U.S. government needs to take steps to address potential offshore tax evasion, the organization believes that IRS and U.S. government efforts to address this behavior are overboard and great an unnecessary burden. The attempts to combat offshore tax fraud needlessly impose significant tax and financial regulatory compliance burden on American expats who are living abroad and keeping foreign financial accounts to accommodate common financial activities.
What Reports Are Americans Living Abroad Currently Required to File?
Americans living abroad are currently required to file an array of tax returns and other informational reports. These reports are often duplicative and impose a significant compliance burden on expats and other affected taxpayers. Reports that taxpayers living abroad are frequently required to file include:
- To satisfy an FBAR obligation, FinCEN Form 114, Report of Foreign Bank and Financial Accounts must be filed annually.
- To satisfy a Foreign Account Tax Compliance Act (FATCA) obligation a taxpayer must file Form 8938, Statement of Specified Foreign Financial Assets
- If the taxpayer has received foreign gifts or is associated with a foreign trust he or she will likely have to file Forms 3520/3520A, Annual Return To Report Transactions With Foreign Trusts, and Receipt of Certain Foreign Gifts and Annual Information Return of Foreign Trust With a U.S. Owner.
These reports are often duplicative containing information that is substantially similar to each informational report. AIPCA recognizes the hardships experienced by expats and others when complying with these duties. To mitigate the compliance burden faced by many American taxpayers living abroad, AICPA has issued a number of recommendations to streamline the process for expats and others with foreign accounts and other offshore assets.
AICPA Proposes Relief Plan to Ease Offshore Account and Tax Compliance Burden
AICPA has made the following recommendations to selectively eliminate duplicate reporting requirements and simplify the tax compliance process by relieving them of the requirement to file the following forms related to specified foreign financial accounts.
The relief would be available to taxpayers who are living abroad and who have opened and maintained a foreign financial account in their country of foreign residence. To qualify for relief, the foreign financial institution (FFI) selected by the taxpayer must be fully in compliance with revenant FATCA or international government agreement (IGA) provisions deemed “in effect” or “in force” in the nation. The taxpayer is required to provide this qualifying FFI with an accurately completed Form W-9, Request for Taxpayer Identification Number and Certification or an appropriate equivalent form. The taxpayer must also make a full and comprehensive disclosure of all accounts on his or her U.S. income tax return.
When these conditions are met, AICPA recommends for offshore account compliance relief to be made available to the taxpayer. In the recommendation’s current form, the taxpayer would be permitted to file a simplified informational return designed to minimize duplicative information and the compliance burden.
If You’re an Expat Unsure How To Comply with FATCA, FBAR, and other Offshore Tax Obligations, Contact a U.S. CPA Today
Unfortunately, the tax relief proposed by AICOPA is still only a wish list. Therefore, American expats and U.S. taxpayers with foreign accounts and interests must still satisfy the current enforcement regime. For many expats, this means they will be required to make multiple disclosure filings. Many expats will have to file multiple informational returns to satisfy FBAR, FATCA, and other disclosure requirements despite the fact that affected accounts have been already been disclosed in some fashion.
If you are struggling to comply with the multitude of informational returns and reports you must file with IRS, FinCEN, and other government agencies to maintain tax compliance, Ted Kleinman can help. At U.S. Tax Help, U.S. CPA Ted works with expats and other U.S. taxpayers who have foreign disclosure and international tax services for U.S. citizens. Ted can take the guesswork and anxiety out of tax compliance for Americans living at home or abroad. To schedule a confidential consultation, call Ted at U.S. Tax Help at (541) 923-0903 today.