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NTA National Taxpayer Advocate Defensor nacional de el contribuyente

NTA Addresses Overlap Reporting

On 1/8/25, the National Taxpayer Advocate (NTA) published its 2024 Annual Report to Congress and  identified taxpayers’ problems and provided suggestions to further protect taxpayer rights and ease taxpayer burden.  “By law, the National Taxpayer Advocate’s report must identify the ten most serious problems taxpayers face in their dealings with the IRS and make administrative and legislative recommendations to address those problems.”  Included in the NTA 2024 Annual Report is the 2025 Purple Book  which presents a summary of legislative recommendations that the NTA believes will strengthen taxpayer rights and improve tax administration. An important legislative NTA recommendation for particular attention to Congress includes the elimination of redundant and overlapping reporting obligations under the Bank Secrecy Act (BSA) and  FATCA in order to improve the filing process.

NTA Legislative Recommendation #7:   Eliminate Duplicative Reporting Requirements Imposed by the Bank Secrecy Act and the Foreign Account Tax Compliance Act

What is the Issue?

U.S. taxpayers possessing foreign accounts and assets are required to adhere to two distinct sets of information reporting obligations—one directed towards the IRS and the other towards the Financial Crimes Enforcement Network (FinCEN). A considerable portion of the information requested by these two divisions of the Treasury Department is redundant. Consequently, individuals are compelled to fill out separate forms for each entity and face substantial penalties for failing to report accounts or assets on either form, even in instances where they owe minimal or no tax.

What NTA is Recommending?

Alleviate the burden on taxpayers and reduce governmental expenses associated with processing and storing identical information by abolishing redundant reporting obligations for those with foreign accounts and assets.

What is the Current Legislation?

The BSA, primarily located in Title 31 of the U.S. Code, mandates that U.S. citizens and residents disclose foreign accounts to FinCEN when the total value of these accounts surpasses $10,000 at any point during the calendar year. Individuals fulfill this obligation by submitting FinCEN Report 114, known as the Report of Foreign Bank and Financial Accounts (FBAR).

FATCA introduced § 6038D to the Internal Revenue Code (Title 26). This provision requires U.S. citizens, residents, and certain non-residents to report foreign assets that exceed designated thresholds to the IRS. Compliance necessitates the filing of IRS Form 8938, titled Statement of Specified Foreign Financial Assets, alongside their annual income tax return. IRC § 6038D empowers the IRS to issue regulations or guidance that may provide exceptions from FATCA reporting, particularly in cases where such reporting would result in duplicative disclosures.

What is the NTA Rationale for Change?

Numerous U.S. taxpayers, especially those residing abroad, encounter heightened compliance challenges and costs due to the significant overlap between FATCA and FBAR reporting requirements. The existing duplicative reporting framework is also inefficient for the government, as noted by the Government Accountability Office (GAO). The NTA Report states that the two bureaus within the same cabinet department, specifically the Treasury, should align their information collection processes to alleviate the considerable burdens imposed by the current reporting framework on taxpayers and acknowledges that certain complexities can only be resolved through legislative action. The reporting requirements under FATCA and FBAR serve distinct purposes; although there is considerable overlap, they differ in terms of their applicability, the assets that must be reported, and the nature of the information collected.

The NTA Report:

  • Understands that there are difficulties the IRS encounters when reconciling Title 31 requirements with FinCEN guidance, which diverges from Title 26 regulations.
  • Agrees with the GAO’s evaluation that legislative amendments to the FATCA and FBAR statutes are essential to eliminate redundant reporting obligations and the collection of duplicate information, while still allowing each agency to access the necessary data.
  • It has proposed that Congress revise Titles 26 and 31 to remove FATCA reporting requirements when a foreign financial account is accurately reported on an FBAR.
  • Has suggested that Congress establish a limited exception from FATCA reporting for financial accounts located in the country where a U.S. taxpayer is a bona fide resident, commonly referred to as a “same-country” exception. If these recommendations are implemented, they would alleviate compliance burdens for U.S. taxpayers who currently face the challenge of navigating a complex and duplicative reporting system, or who incur higher fees to have tax professionals manage it on their behalf. This could also lead to a reduction in government resources needed to process and store the same information multiple times.
  • Has recommended to revise IRC § 6038D and 31 U.S.C. § 5314 to eliminate the redundant reporting of assets on IRS Form 8938 when a foreign financial account is accurately reported on an FBAR, while ensuring continued access to information for each agency.
  • Modify IRC § 6038D to exclude accounts held by a financial institution.

Know this

The NTA Report states that while FATCA reporting is focused on identifying income from foreign sources and curbing taxpayer noncompliance, FBAR reporting is focused on identifying money laundering and other financial crimes. The reporting requirements imposed by FATCA have led certain foreign financial institutions to refuse services to U.S. expatriates, thereby complicating the process for U.S. citizens to establish bank accounts in various nations. Introducing an exception for bona fide residents of a foreign country could alleviate these burdens without significantly compromising the objectives of FATCA. This is due to the fact that individuals who open bank accounts in their country of residence are generally more inclined to require these accounts for legitimate reasons and are less likely to engage in tax evasion compared to those who open accounts in countries with which they have minimal ties.

Do you have foreign financial accounts?

Are you familiar with your FBAR and FATCA reporting requirements?

Who is your international tax advisor? ©