August 2010

The Foreign Account Tax Compliance Act

From Journal of Accountancy.

A key component of the federal government’s push for heightened tax compliance among U.S. taxpayers with foreign accounts and assets is the Foreign Account Tax Compliance Act (FATCA). In an interview in February this year with the JofA, IRS Commissioner Doug Shulman called the then-pending legislation “the next big thing” in international tax compliance and enforcement (“Tax From the Top: Q&A With IRS Commissioner Doug Shulman,” JofA, April 2010, page 16). Barely a month later, FATCA was law, part of the Hiring Incentives to Restore Employment (HIRE) Act.

Despite its supporting role as a revenue offset for HIRE’s employment stimulus incentives and relatively little public discussion of it to date, FATCA’s potential effect on U.S. taxpayers with foreign accounts and assets is hard to overstate. U.S. taxpayers and their CPAs will quickly realize that, as a result of FATCA, the costs of reporting their foreign activities to the IRS have increased, as there are additional disclosures. In addition, once the various provisions become effective, the penalties associated with foreign noncompliance will increase, and the statute of limitations within which the IRS can audit a taxpayer will double. FATCA is generally effective for tax years beginning after March 18, 2010, the day the HIRE Act was enacted.

Full article.