International Tax Monitor Quotes Scott Michel: Obama Proposal to Require FATCA Reporting to Account Holders

Bloomberg BNA's International Tax Monitor spoke with Scott D. Michel, concerning President Obama's proposal to require banks, under the Foreign Account Tax Compliance Act (FATCA), to provide account holders with a copy of the documentation submitted to the IRS. Practitioners believe that such a disclosure will further indicate to account holders that FATCA has largely ended bank secrecy as to the IRS. For the complete article, please click on the link above to view a PDF.

Excerpt taken from the article.

"It will be their wake-up call, possibly close to their final one," Scott Michel, a member of Caplin & Drysdale, told Bloomberg BNA Feb. 3.

Included in President Barack Obama's fiscal year 2016 budget, released Feb. 2, the provision calls for account holders to get a copy of any FATCA reporting that banks send to the Internal Revenue Service.

... FATCA requires foreign financial institutions to report U.S.-owned accounts to the IRS or possibly face a 30 percent withholding tax on their U.S.-source income.

Michel said giving account holders copies of the reporting is "an idea that's beneficial to tax administration" because it is similar to reporting that banks are already sending taxpayers on the Form 1099. Taxpayers will be able to conform their tax filings to the information that the government has received and is expecting, he said.

With the FATCA reporting in hand, however, taxpayers are more likely to be penalized if they omit foreign reporting information from a tax return, he said. Similar to Form 1099 reporting discrepancies, "it will tilt the penalty balance far toward the government," he said.