IRS Implementing FATCA Compliance, TIGTA Audit Concludes
Posted by William Byrnes on October 14, 2015
A TIGTA audit was initiated to assess the IRS’s progress in implementing the FATCA. TIGTA found that the IRS has taken steps to provide information to affected stakeholders that explains the FATCA requirements and expectations.
However, TIGTA identified improvements that are required to ensure compliance and to measure performance for foreign financial institutions. TIGTA also identified some limitations with the processing of paper Forms 8938. Specifically:
- Transcribed data are not validated to ensure accuracy.
- Data on Form 8938 continuation statements (used to report additional foreign accounts or other foreign assets) are not transcribed.
- Losses reported by taxpayers cannot be input as negative amounts.
If these issues are not properly addressed, it could limit management’s ability to make informed decisions and achieve the IRS’s compliance objectives related to the FATCA.
TIGTA recommended that the IRS:
- update the compliance activities in the FATCA Compliance Roadmap for identifying noncompliance by foreign financial institutions;
- initiate a periodic quality review process for the processing of paper Forms 8938 to ensure the accuracy of the data being transcribed; and
- ensure that the transcription issues identified in this report are addressed.
The IRS agreed with the first two recommendations but disagreed with some programming changes related to the third recommendation due to budgetary constraints, limited resources, and competing priorities. The accuracy of the data obtained from Forms 8938 is a critical component for the success of the IRS’s compliance activities with implementing the FATCA. As such, TIGTA believes that the IRS should make these programming changes a priority.
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