(Bloomberg News) The Internal Revenue Service is focusing on the wealthiest Americans with money overseas as it develops regulations that will require foreign banks to give the government more information about those customers.
In new guidance released on Friday, the IRS said it will direct foreign banks to spend less time identifying and monitoring accounts of people with less than $50,000 and more effort focusing on U.S. account holders with more than $500,000 and with private banking relationships.
The information provided today should help financial institutions figure out the process of identifying U.S.-linked accounts, even though the IRS didn't answer every question that companies have raised, said Barbara Angus, a partner at Ernst & Young LLP in Washington.
"It has operational impacts on financial institutions, on all aspects of their business, on IT systems, on the account opening process," she said. "That kind of impact, again, is sort of why information is needed, and needed as soon as possible."
The requirements, passed by Congress last year, take effect in 2013. They force foreign banks to tell the IRS about U.S. account holders as part of the agency's effort to combat offshore tax evasion. Banks based outside the U.S. face 30% withholding on certain payments from inside the U.S. if they fail to share information with the IRS.
Implementing the Rules
An overall goal of the regulatory process is to get information to stakeholders as quickly as possible, according to a Treasury Department official who spoke on condition of anonymity to describe the agency's approach. The administration is working on the regulation and knows that financial institutions are anxious to know how to implement the rules by the effective date, the official said.
Financial institutions from around the world, including Allianz SE, Aegon NV and Commonwealth Bank of Australia, filed comments with the IRS after the agency released its first set of guidance on the law last August.
The rules are part of a broader effort by the U.S. government and the IRS to combat offshore tax evasion. Commissioner Douglas Shulman has made the issue one of his top priorities.
Voluntary Disclosure