When the IRS issued summonses to credit card processing facilities in the United States, the resulting information revealed that as many as 1 million U.S. taxpayers may have signature authority over a foreign bank account. However, only 117,151 taxpayers had filed the requisite Report of Foreign Bank and Financial Accounts, commonly known as an FBAR.
That's a failure to file beyond all recognition. While overseas accounts may indeed contain the proceeds from criminal activity, that's not the only reason to seek shelter from U.S. tax authorities. "A lot of these funds that are flowing offshore are, in all likelihood, legitimate funds," said Don Temple, BSA/AML subject matter expert at Mantas, Fairfax, Va. "It's funds that aren't being taxed."
In response, FinCEN, the IRS and the Department of Justice plan a joint effort to combat the disparity between foreign accounts accessed through U.S. merchant banks and those reported to the IRS. By year end, FinCEN will propose revised forms for the FBAR, using plain language and an improved design.
For its part, the IRS may ask or require accountants, tax practitioners, and tax filing services to inform their clients of the FBAR filing requirement.