WASHINGTON — The Internal Revenue Service today announced the exchange of financial account information with certain foreign tax administrations, meeting a key Sept. 30 milestone related to FATCA, the Foreign Account Tax Compliance Act.

To achieve this, the IRS successfully and timely developed the information system infrastructure, procedures, and data use and confidentiality safeguards to protect taxpayer data while facilitating reciprocal automatic exchange of tax information with certain foreign jurisdiction tax administrators as specified under the intergovernmental agreements (IGAs) implementing FATCA.

"Meeting the Sept. 30 deadline is a major milestone in IRS efforts to combat offshore tax evasion through FATCA and the intergovernmental agreements," said IRS Commissioner John Koskinen. "FATCA is an important tool against offshore tax evasion, and this is a significant step in the process. The IRS appreciates the assistance of our counterparts in other jurisdictions who have helped to make this possible."

This information exchange is part of the IRS's overall efforts to implement FATCA, enacted in 2010 by Congress to target non-compliance by U.S. taxpayers using foreign accounts or foreign entities. FATCA generally requires withholding agents to withhold on certain payments made to foreign financial institutions (FFIs) unless such FFIs agree to report to the IRS information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.

In response to the enactment of FATCA and other jurisdictions' interest in facilitating and participating in the exchange of financial account information, the U.S. government entered into a number of bilateral IGAs that set the groundwork for cooperation between the jurisdictions in this area. Certain IGAs not only enable the IRS to receive this information from FFIs, but enable more efficient exchange by allowing a foreign jurisdiction tax administration to gather the specified information and provide it to the IRS. And some IGAs also require the IRS to reciprocally exchange certain information about accounts maintained by residents of foreign jurisdictions in U.S. financial institutions with their jurisdictions' tax authorities.

Under these reciprocal IGAs, the first exchange had to take place by September 30, giving the IRS a deadline to put in place a process to facilitate this data exchange.

The information now available provides the United States and partner jurisdictions an improved means of verifying the tax compliance of taxpayers using offshore banking and investment facilities, and improves detection of those who may attempt to evade reporting the existence of offshore accounts and the income attributable to those accounts.

The IRS will only engage in reciprocal exchange with foreign jurisdictions that, among other requirements, meet the IRS's stringent safeguard, privacy, and technical standards. Before exchanging with a particular jurisdiction, the United States conducted detailed reviews of that jurisdiction's laws and infrastructure concerning the use and protection of taxpayer data, cyber-security capabilities, as well as security practices and procedures.

"This groundbreaking effort has fundamentally altered our relationship with tax authorities around the world, giving us all a much stronger hand in fighting illegal tax avoidance and leveling the playing field," Koskinen said.

Meeting this deadline reflects a significant international collaboration and partnership with dozens of jurisdictions around the world. The capacity for reciprocal automatic exchange builds on numerous accomplishments including the following:

  • Development of a consistent data reporting format, or schema, and the agreement to use this format by all jurisdictions;
  • Establishment of the details and procedures required to assure data confidentiality;
  • Creation of a data transmission system to meet high standards for encryption and security; and
  • Cooperation with foreign jurisdiction tax administrations to achieve the timely implementation of this exchange.

Koskinen noted the risks of hiding money offshore are growing and the potential rewards are shrinking.

Since 2009, tens of thousands of individuals have come forward voluntarily to disclose their foreign financial accounts, taking advantage of special opportunities to comply with the U.S. tax system and resolve their tax obligations. At the beginning of 2012, the IRS reopened the Offshore Voluntary Disclosure Program (OVDP), which is open until otherwise announced.

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Upcoming Tax Dates

April 10 — Employees who work for tips
If you received $20 or more in tips during March, report them to your employer. You can use Form 4070.

April 15 — Individuals *2017 Filing Deadline: 04-17, 2018*
File a 2017 income tax return (Form 1040, 1040A, or 1040EZ) and pay any tax due. If you want an automatic 6 month extension of time to file the return, file Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return. For more information, see Form 4868. Then, file Form 1040, 1040A, or 1040EZ by 10-15.

April 15 — Corporations *2017 Filing Deadline: 04-17, 2018*
File a 2017 calendar year income tax return (Form 1120) and pay any tax due. Details

April 15 — Individuals
If you are not paying your 2018 income tax through withholding (or will not pay in enough tax during the year that way), pay the first installment of your 2018 estimated tax. Use Form 1040ES.

April 15 — Household Employers
If you paid cash wages of $2,000 or more in 2017 to a household employee, you must file Schedule H Details

April 15 — Corporations
Deposit the first installment of estimated income tax for 2017 Details

April 15 — Social security, Medicare, and withheld income tax
If the monthly deposit rule applies, deposit the tax for payments in March.

April 15 — Household employers
If you paid cash wages of $$2,000 or more in 2017 to a household employee, you must file Schedule H (Form 1040). If you are required to file a federal income tax return (Form 1040), file Schedule H (Form 1040) with the return and report any household employment taxes. Report any federal unemployment (FUTA) tax on Schedule H (Form 1040) if you paid total cash wages of $1,000 or more in any calendar quarter of 2016 or 2017 to household employees. Also, report any income tax you withheld for your household employees.

April 30 — Social security, Medicare, and withheld income tax
File Form 941 for the first quarter of 2018. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter timely, properly, and in full, you have until 05-10 to file the return.

April 30 — Federal unemployment tax.
Deposit the tax owed through 03-if more than $500.

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