William Byrnes' Tax, Wealth, and Risk Intelligence

William Byrnes (Texas A&M) tax & compliance articles

IRS Isn’t Confident FATCA Will Work?

Posted by William Byrnes on August 24, 2015

Dr. Jack Manhire gets a tip of the hat for pointing out the following blog post on Federal Tax Crimes

  • The IRS might use a summons (presumably John Doe Summons) to obtain offshore creditIrs_logocard information to track and identify U.S. offshore account depositors through correspondent banks.
  • The IRS may reinstitute a broker initiative to issues summons to brokers to identify U.S. beneficial owners of foreign corporations with U.S. brokerage accounts.

What this information indicates to  me?

(1) The IRS is not so certain that FATCA reporting will be effective to catch the non-compliant taxpayers.

(2) The IRS estimates that many Americans with foreign accounts are noncompliant.

Given that the IRS has forced billions in spending in four years to bring about FATCA compliance, I find it disturbing that it may not think it is working.  Worse is that this tool was always at the IRS disposal, just like the credit card John Doe Summons, and it is a good tool.  So why not ask for funding to use it back in 2009 instead of FATCA?

It appears that the strategy for bringing non-compliant taxpayers into compliance is hodge podge, without thought to the ramifications of each, as a whole, and without addressing underlying problems, like taxpayer education and easy to file FBAR.  At least Treasury modified the FBAR date to coincide with the 1040 filing date.  But the forms are still uncoordinated with different questions, different filing procedures, different penalties.  Just not good administration techniques.

See Treasury’s Taxpayer Advocate discloses FATCA Imposes Unnecessary Burdens, Will Not Improve Compliance

3 Responses to “IRS Isn’t Confident FATCA Will Work?”

  1. oliviaxlarosa said

    FATCA was nothing more than a rider on the HIRE Act of 2010. It was not well-thought out at all. How could anyone think that creating a worldwide bureaucratic burden on government AND business would be cost effective or even meet its goal.

    Just create a Financial Transaction Tax and scrape off 1/10 of 1% of each brokerage or currency transfer. Give the money back to rebuild our infrastructure and create social good. The rich can never have enough money by their nature so we have to get it back from somewhere, and it sure as hell won’t be from them. There’s a pathology of avarice there that is incurable. It’s like a personality disorder.

    The Hiring Incentives to Restore Employment (HIRE) Act of 2010 (Pub.L. 111–147, 124 Stat. 71, enacted March 18, 2010, H.R. 2847) is a law in the 111th United States Congress to provide payroll tax breaks and incentives for businesses to hire unemployed workers


    Liked by 1 person

  2. Norman Diamond said

    Most US citizens and dual citizens who live in most of the world (i.e. who don’t live in the US) mostly owe $0.00 in income tax to the US because their countries of residence already took more income tax than the amounts the US would want. There are a few exceptions such as a co-founder of Facebook who lives in a country that doesn’t tax capital gains. Nonetheless the 99% are the 99%. The US uses FATCA to collect penalties for failing to file various forms, not to collect $0.00 in tax.

    Using the penalties to pay for road repairs and Medicare is rather telling. These are people who already paid taxes for services in the countries where they live, who are now forced to pay for US services that they can’t even use.

    Scraping 1/10 of 1% of each brokerage or currency transfer would tax people who aren’t even US or dual citizens. There are 190 other countries who would love to copy that idea. Let every country in the world scrape 1/10 of 1% of brokerage and currency transfers performed by US citizens who reside in the US.

    Maybe the US should stop copying Eritrea’s system of extraterritorial taxation and join the residence-based system used by the rest of the world instead.


  3. Prof Byrnes is correct – addressing the underlying problems could achieve a great deal. He mentions educating taxpayers. Educating taxpayers abroad is clearly a simple effective measure. The US Embassies & Consulates have been useless for my clients over 30 years practicing in Asia & the Middle East when asked for any kind of tax help. No one tells the person getting a green card or naturalizing about the worldwide tax system in place… they find out years later when they have left USA, moved abroad (many returning to their homeland) and then panic over the yrs of tax noncompliance!


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