Reporting Foreign Accounts to IRS: Extent of Duplication Not Currently Known, but Requirements Can Be Clarified
Highlights
What GAO Found
Some of the information requested on the Form 8938 and FBAR is duplicative. Both forms ask for the same or similar information on the filer, foreign financial accounts, and financial institutions where accounts are held. Form 8938 asks for additional information not required by the FBAR, such as other foreign financial assets and income. 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.
A variety of tax commentators, taxpayer representatives, and individuals stated that these duplicative reporting requirements have created confusion. They report being unclear about what and how information should be reported on both forms. Neither form provides filers any explanation as to why duplicative reporting is necessary, where the duplication occurs, or how the information being requested is the same or different.
Without data on Form 8938 filers, the benefits and costs of taking actions to reduce duplicative reporting cannot be determined. When Form 8938 filing data becomes 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.
Why GAO Did This Study
This letter formally transmits the briefing we gave on February 1, 2012. We gave this briefing in response to a Congressional request that we assess potential duplicative foreign-account reporting requirements under the Foreign Account Tax Compliance Act (FATCA) for the Internal Revenue Service (IRS) Form 8938 and under the Bank Secrecy Act (BSA) for the Foreign Bank Account Report (FBAR).
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.
Recommendations
We are recommending that the Secretary of the Treasury direct the Office of Tax Policy, 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.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of the Treasury | The Secretary of the Treasury should direct the Office of Tax Policy, IRS, and FinCEN to revise both the Form 8938 and FBAR instructions and related guidance to explain the extent to which duplication exists (for example, instances where financial 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 |
In February 2012, we reported that the forms and instructions for Internal Revenue Service (IRS) form 8938 (Statement of Foreign Financial Assets) and Department of Treasury form TDF 90-22.1 (Report of Foreign Bank and Financial Accounts) requested duplicative information. Although there were differences in the forms and they served different purposes, we found that the duplicative requirements could create confusion for filers resulting in increased burden and the potential for unnecessary or inaccurate reporting. To address this issue, we recommended that the instructions and related guidance for the forms be revised 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. In response to our recommendation, IRS updated the instructions for the form 8938 in November 2012 by providing a link to an IRS webpage that provides a side-by-side comparison of the reporting requirements for the two forms. IRS provided similar guidance on a webpage explaining FBAR reporting requirements.
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| Department of the Treasury | As data becomes available, the Secretary of the Treasury should direct the Office of Tax Policy, IRS, and FinCEN to determine whether the benefits of implementing a less duplicative reporting process exceed the costs and if so, implement that process. |
IRS has not conducted the recommended data analysis and told us in August 2016 that it has no plans to do so. The Treasury Department and IRS's position is that although certain information may be reported on both Form 8938 and FBAR, the information required by the forms is not identical in all cases, and reflects the different rules, key definitions (for example, "financial account"), and reporting requirements applicable to Form 8938 and FBAR reporting. We recognize that the information required is not identical in all cases, however, as our report identified and the Treasury Department and IRS acknowledge, some filers will be reporting duplicative information on both forms. Without analyzing and comparing data reported on the forms, the Treasury Department and IRS will not be able to determine the extent to which this occurs. Depending on the results of the analysis, they could be foregoing opportunities to adjust reporting requirements that could reduce government administrative costs and burdens for these filers.
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