US expats swamped by a welter of financial reporting forms from the Internal Revenue Service (IRS) and US Treasury may have an easier time in future if the organisations take up suggestions to merge requests for duplicate information.
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In a bid to tackle offshore tax evasion, the US government has requires US taxpayers at home and abroad to report their financial affairs.
Any US taxpayer with an offshore bank account with a balance of $10,000 must file a Report of Foreign Bank and Financial Accounts (FBAR) form with the Treasury.
Meanwhile, expats should file annual federal income tax returns declaring any overseas assets that they control under Foreign Account Tax Compliance Act (FATCA) rules.
This includes bank accounts or investments held with foreign financial institutions with balances of $50,000 or more for US tax residents, but with a $200,000 limit for US expats.
The National Tax Advocate, an independent ombudsman working as part of the IRS, has reported that the demands for information are burdensome and duplicated for taxpayers.
The advocate recommends the FBAR and FATCA information requests should be merged into one document, while FATCA should ignore reporting bank accounts in the country where a US expat is living.
“The forms duplicate requests for information and the disclosure requirements overlap,” said the report. “Ordinary taxpayers tell us this is confusing and wastes time putting the same information on two sets of forms.”
The change is administrative and does not need any legislation altered or repealed by Congress.
Expat lobbyists American Citizens Abroad spearheaded the campaign to get the advocate to review the information requests on the grounds US expats were facing problems with opening bank accounts overseas due to FBAR and FATCA compliance issues with foreign financial institutions.
“The exemption for expats with a bank account in the country where they live is a simple change that will make life easier for thousands of citizens,” said a spokesman for the group.
The advocate also mentioned that some large financial institutions, such as HSBC, ING and Deutsche Bank are actively closing accounts belonging to Americans to avoid FATCA compliance.
FATCA came into force in July 2014, and requires foreign financial firms to report account and personal information about US customers. This information is cross-checked against federal tax filings by the IRS.
President Obama has backed the act through Congress bad expects the law to raise more than $10 billion in additional tax revenue for the government.
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