|US Increases Scrutiny of Foreign Assets|
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The Internal Revenue Service (IRS) is increasing its oversight of taxpayers with foreign financial assets, according to a report released by the Treasury Inspector General for Tax Administration (TIGTA).
The TIGTA found that the number of individuals filing a Report of Foreign Bank and Financial Accounts (FBAR) with the Department of the Treasury has increased annually from 2004 to 2009. Individuals doing business in the United States who have foreign financial accounts with an aggregate value of more than USD10,000 are required to file a FBAR.
The TIGTA also found that the number of FBAR-related examinations increased by 96% from 2004 to 2009, while the number of FBAR penalty assessments grew, in the same period, from USD4.2m to USD20.5m. The IRS, in collaboration with the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), has also revised the FBAR form and instructions and has conducted education and outreach efforts on the filing of FBARs.
However, the TIGTA pointed out that neither the IRS nor the FinCEN has an established method to estimate the potential population of required filers because the FBAR filing program is a self-reporting program. Persons filing abroad, it said, often open their financial accounts in jurisdictions with bank secrecy laws.
Under the Hiring Incentives to Restore Employment Act, which the President signed in March 2010, individual taxpayers with an aggregate balance of more than USD50,000 in foreign financial assets must now file new foreign financial-disclosure statements with their income tax returns. This new reporting requirement allows the IRS to verify the information, or lack of information, filed. The IRS is also developing procedures and guidance to implement this new reporting requirement.
“As a growing number of taxpayers now conduct foreign financial transactions, it is good news that the IRS is increasing its oversight of this area,” said J. Russell George, the TIGTA. “With the recently added disclosure requirements, the IRS must ensure the effective implementation of this provision.”
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Published on our website on Dec.1, 2010