updated 2:57 PM CEST, Sep 21, 2023

National Taxpayer Advocate Collins, to Congress: 'Harmonize FBAR and FATCA reporting requirements'

Erin M. Collins, who was named last March to succeed Nina E. Olson as National Taxpayer Advocate (NTA)  at the U.S. Treasury, forcefully called this week for the harmonization of FBAR and FATCA reporting requirements for overseas taxpayers – which she noted the IRS had failed to do until now, in spite of previous NTA recommendations, as well as those of such other stakeholders as the Government Accountability Office – in her first annual report to Congress.

"Many U.S. taxpayers, particularly those living abroad, face increased compliance burdens and costs because the FATCA reporting obligations significantly overlap with the FBAR filing requirements," Collins's report states, in Recommendation No. 9 out of 66 that comprise what the NTA's office calls its "2021 Purple Book", consisting of a "Compilation of Legislative Recommendations to Strengthen Taxpayer Rights and Improve Tax Administration."

"Although FBARs are filed with FinCEN, the IRS has access to the information on those forms.

"We understand the IRS is concerned that FinCEN could change the FBAR, leaving the IRS without access to information about foreign accounts that are not required to be reported on a Form 8938," the report continues.

"However, this should not be a concern if only accounts actually reported on an FBAR may be omitted from a Form 8938, on which they would otherwise have to be reported."

Elsewhere in the trove of online documents that comprise her report to Congress, Collins summarized her findings by noting that "one over-riding theme" emerges from a study of the report's findings, taken altogether: "To improve taxpayer service, the IRS needs more resources to hire employees, and more resources to modernize its information technology (IT) systems".

The National Taxpayer Advocate heads up the IRS's so-called Taxpayer Advocate Service (TAS), which is the IRS's official in-house ombudsman's office, and issues a major report to Congress on the IRS every year, usually in January.

As reported, Collins came to the NTA's office from KPMG’s Tax Controversy Services practice, where she most recently had been a managing director of its Western Area. Olson, her predecessor, had been National Taxpayer Advocate for 18 years. 

IRS's 'narriative response'
included for first time 

In a blog accompanying the annual burst of online documents, Collins noted that a "key change this year" was inclusion of "the IRS’s narrative response to each of the Most Serious Problems we identify".

She added: "For the past several years, we’ve included the responses in the Objectives Report to Congress in June of the following year. Our intent in including them in our annual report [now] is to help readers see the perspectives of both TAS and the IRS on the source and nature of key challenges, and potential solutions."

About the effects of the Covid-19 pandemic on the IRS, Collins said that "despite the challenges, [it] generally managed well," although there were some major problems, including refund delays due to Covid-19-related processing backlogs, underpayments of stimulus payments, missing or late notices and letters, and an overall lack of information about ongoing issues." 

In addition, the pandemic had "pulled back the curtain on significant limitations the IRS faces with technology and with its workforce", including "insufficient employee hiring and retention; inadequate telephone and in-person taxpayer service; limited functionality of online taxpayer accounts; and antiquated information technology." 

Of the 66 "legislative recommendations for consideration by Congress" included in her Purple Book, some of the ones most of interest to expats, in addition to the one about the need to harmonize FBAR and FATCA reporting requirements, and No. 2, "Revamp the IRS Budget Structure and Provide Sufficient Funding to Improve the Taxpayer Experience and Modernize the IRS's Information Technology Systems", would probably also include No. 10, "Adjust the Filing Threshold for Taxpayers Filing as Married Filing Separately, and Non-resident Alien Individuals".

'Many issues remain to be addressed'

Laura Snyder croppedLaura Snyder, pictured left, is the sole overseas member of a volunteer advisory organization known as the Taxpayer Advocacy Panel (TAP) that works – alongside the office of the National Taxpayer Advocate – to call the IRS's attention to issues that American taxpayers are struggling with, but which the agency for various reasons may have failed to realize were problematic. 

Asked for her opinion of the NTA's report, Snyder, who is based in Paris and who is a tireless campaigner on behalf of expat Americans even outside of her work for the TAP, said Collins's recommendations were "welcome and, if implemented, would represent meaningful improvements for overseas taxpayers".

"That said, many additional issues remain that need to be addressed as a matter of urgency," Snyder added.

"They include, among other issues: (1) the lack of access to online accounts with the IRS, a problem compounded by considerable delays in the delivery of postal mail from the IRS to overseas taxpayers; (2) the imminent closure of bank accounts of Americans overseas in the countries where they live, because they are unable to obtain either ITINs [Individual Taxpayer Identification Numbers] or Social Security numbers; and (3) the need each year to complete highly complex forms, often requiring expensive professional assistance, only to owe US$0 in U.S. tax.

"Again, these are only a few of the issues facing overseas taxpayers that also require urgent attention by the IRS."

The main page for reading this year's National Taxpayer Advocate's report and related documents may be accessed by clicking here.