In August 2021, the Director of Collection Policy for the Internal Revenue Service (IRS) released a memorandum to staff requiring collection personnel to conduct certain research to identify potential collection sources, including foreign financial assets subject to FATCA reporting requirements.

What Is FATCA?

The Foreign Account Tax Compliance Act (FATCA) is designed to prevent tax evasion by U.S. taxpayers. It requires that U.S. taxpayers holding financial assets outside of the U.S. to report those assets to the IRS. The law also requires certain foreign financial institutions to report information about financial accounts held by U.S. taxpayers to the IRS.

Reporting thresholds vary depending on whether you live in the U.S. or abroad. Single filers who live abroad must submit Form 8938 if they have more than $200,000 of foreign financial assets at the end of the year. Single filers who live in the U.S must report assets on this form if they have more than $50,000 in foreign financial assets. For taxpayers filing jointly, these thresholds treble to $600,0000 for taxpayers who live abroad and $150,000 for taxpayers who live in the U.S.

What does the IRS memo mean for taxpayers who hold foreign assets?

The memo requires that IRS collection personnel conduct certain research regarding FATCA foreign financial assets when investigating a taxpayer's ability to pay in the same way collection personnel would access bank accounts, real estate records, and credit reports. The memo says that this information will be used to guide actions taken in  Offers In Compromise (OIC), bankruptcy cases, partial payment installment agreements, and other potential resolutions to collection matters.

Consult an Experienced Tax Attorney

If you hold foreign financial assets, you should consult with a tax attorney to determine whether you meet FATCA reporting requirements. Similarly, if you are involved in a collections matter with the IRS and hold foreign financial assets, you need the guidance of an experienced tax professional. If you need help, call Senior Partner, Tax Controversy Attorney, and former IRS attorney Brandon A. Keim at (602) 200-7399 or contact him online to discuss your options.