Tuesday, April 10, 2012

GAO Briefing on Duplication in Form 8938 and FBAR (4/10/12)

US Government Accountability Office, Reporting Foreign Accounts to IRS: Extent of Duplication Not Currently Know but Requirements Can Be Clarified (February 2012), here.
The objectives of the briefing were to (1) determine to what extent, if any, the reporting requirements on the FATCA Form 8938 and FBAR are duplicative; (2) assess the potential effects that any duplicative reporting requirements have on filers; and (3) identify and assess opportunities, if any, to cost-effectively reduce or eliminate the burden that any duplicative reporting creates while maintaining the usefulness of the information for tax-administration and law-enforcement purposes. 
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In summary, some of the information requested on the Form 8938 and FBAR is duplicative, but the number of filers affected is not currently known. Since the Form 8938 and FBAR were developed to meet two different governmental needs — tax administration and law enforcement — some filers have to report the same or similar information twice, but through different mechanisms and at different times. This increases the compliance burden and adds complexity that can create confusion, potentially resulting in inaccurate or unnecessary reporting. Currently, the instructions and guidance for both forms lack any explanation of why and where duplication exists. Actions to reduce duplicate reporting requirements while maintaining the usefulness of the data for tax administration and law enforcement purposes would benefit filers. However, since the Form 8938 is a new requirement beginning after 2011, data are not yet available to determine the number of filers subject to these duplicative reporting requirements. Without these data, it is not known whether the benefits of reduced duplication would exceed the costs. When filing data become available, Treasury’s Office of Tax Policy, IRS, and FinCEN would have the information needed to assess whether cost-effective steps could be taken, including allowing filers who would normally have to submit both forms to substitute the information reported on one to meet the requirements of the other. Hence, we are recommending that the Secretary of the Treasury direct the Office of Tax olicy, IRS, and FinCEN to (1) revise both the Form 8938 and FBAR instructions and related guidance to explain the extent to which duplication exists (for example, instances where account-related information requested on the two forms is the same or different) and the circumstances in which filers are, or are not, expected to comply with both reporting requirements; and (2) as data become available, determine whether the benefits of implementing a less-duplicative reporting process exceed the costs and if so, implement that process.

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