The IRS’ taxpayer advocate is urging the tax service to simplify rules for Americans living overseas.
Currently, foreign bank accounts must be reported both to the Treasury, in a Report of Foreign Bank and Financial Accounts (FBAR), and to the IRS, on Form 8938 under the Foreign Account Tax Compliance Act (FATCA). (The FBAR, officially called Financial Crimes Enforcement Network Report 114, must be filed on accounts holding at least $10,000.)
Advocates for taxpayers abroad argue that the two forms have duplicative requirements and that FATCA rules, in an attempt to stop taxpayers from hiding money overseas, have made it difficult for Americans living abroad to maintain legitimate bank accounts.
The National Taxpayer Advocate, an independent IRS unit, recently suggested fixing this problem by merging certain duplicative requirements of the FBAR and IRS Form 8938.
Specifically, the advocate recommended April 13 that the Internal Revenue Service merge the rules for reporting bank accounts on Form 8938, the Statement of Specified Foreign Financial Assets, and that it change the FATCA rules for identifying and reporting accounts of Americans abroad, where the accounts are in the country where the taxpayer resides.
The National Taxpayer Advocate notes in its recommendation concerns about the “overlap and duplicative disclosure requirements” of the FBAR and the Form 8938, which must be filed with annual federal income tax returns.
The two forms are “significantly duplicative, which increases confusion and adds to the compliance burden for taxpayers,” the National Taxpayer Advocate states.