SB/SE Memo Specifies When FATCA Research Is Required

Expiration Date: 08/16/2023
Affected IRMs:5.1.11, 5.1.18, 5.8.5, 5.9.4, 5.14.2, 5.15.1, 5.16.1, 5.20.12, 5.21.2, 5.21.3, and 25.1.3.2

Date: August 16, 2021

MEMORANDUM FOR
DIRECTOR, FIELD COLLECTION
DIRECTOR, SPECIALTY COLLECTION — INSOLVENCY
DIRECTOR, SPECIALTY COLLECTION —OFFER IN COMPROMISE
DIRECTOR, OFFICE OF FRAUD ENFORCEMENT

FROM:
Kareem Williams
Director, Collection Policy

SUBJECT:
Foreign Account Tax Compliance Act (FATCA) research and use in Field and Specialty Collection programs

Purpose: The purpose of this memorandum is to provide guidance to Field Collection, Specialty Collection Insolvency/OIC personnel, and Office of Fraud Enforcement employees when FATCA research is required.

FATCA research should be conducted within the Collection, Specialty Collection and Office of Fraud Enforcement functions in balance due and delinquent return investigations which meet the prescribed threshold, or cases below the threshold amount which contain an international or ATAT component, or domestic cases where the taxpayer frequently travels outside the U.S. or employs subterfuge to conceal assets. In addition, collection personnel have the discretion to utilize FATCA data in other cases when it may advance the resolution of the case. Please refer to the Ask Collection Policy FATCA homepage for examples of cases where FATCA research may be appropriate. This guidance remains in effect until the impacted IRMs are revised or August 3, 2023.

Background: The Foreign Account Tax Compliance Act (FATCA) requires U.S. taxpayers to report certain interests in foreign financial assets on Form 8938, Statement of Specified Foreign Financial Assets as an attachment to their Form 1040.

FATCA also requires foreign financial institutions (FFIs) and certain non-financial foreign entities to report interest in non-U.S. financial accounts or assets held by U.S. account holders on Form 8966, FATCA Report. Information contained in Form 8966 may be subject to IRC 6105, Confidentiality of information arising under treaty obligations. In some instances, treaty restrictions may limit or prohibit the IRS from using the information contained in the Form 8966, FATCA report.

Procedural Change: See Attachment 1 for the procedural changes.

Effective Date/Effect on Other Documents: This guidance is effective immediately and will be incorporated into IRMs 5.1.11, 5.1.18, 5.8.5, 5.9.4, 5.14.2, 5.15.1, 5.16.1, 5.20.12, 5.21.2, 5.21.3 and 25.1.3.2. The memorandum expires two years from the date of issuance of this memorandum.

Contacts: Employees should ask their management chain for guidance as to any issues not specifically addressed in this memo. Management officials may contact the appropriate Collection Policy office.

• Delinquent Return Investigations: Eric Slayback, Program Manager-CRA.

• Locating Taxpayers and Their Assets: Jana McDaniel, Program Manager-GSC; Joseph Monsour, Sr. Program Analyst

• Offer in Compromise: Diana Estey, Program Manager-OIC; Thomas B. Moore, Sr. Program Analyst

• Insolvency: Tiffany Lentz, Program Manager-Insolvency; Maria Valerio, Sr. Program Analyst

• Partial Payment Installment Agreements: Eric Slayback, Program Manager-CRA

• Currently Not Collectible: Eric Slayback, Program Manager-CRA

• International: Jana McDaniel, Program Manager-GSC; Shannon Hennessey, Sr. Program Analyst

• Abusive Tax Avoidance Transactions: Jana McDaniel, Program Manager-GSC; Eric Smith, Sr. Program Analyst

• Office of Fraud Enforcement: Katie Fox, Program Manager–OFE; Thaddeus Madden, Sr. Program Analyst

Attachment 1: Interim Guidance SBSE-05-0821-0015

Distribution:
Director Collection
Director, Headquarters Collection
IRS.gov (https://www.IRS.gov)

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Attachment 1, Interim Guidance: SBSE-05-0821-0015

The following changes are hereby effective August 16, 2021, for the IRM sections names below.

IRM 5.1.18.21
(08-16-2021)
New Section 5.1.18.21, FATCA Research

FATCA data is an additional resource that is required to be used in the same manner as any other income or locator source when evaluating a taxpayer's ability to pay and when identifying potential sources of collection, subject to applicable treaty disclosure restrictions. FATCA research should be conducted in balance due and delinquent return investigations which meet the prescribed threshold, or cases below the threshold amount which contain an international or ATAT component, or domestic cases where the taxpayer frequently travels outside the U.S. or employs subterfuge to conceal assets.

FATCA data should be analyzed when received and documented in the ICS history. Any discrepancies between the information reported on Form 433-A/B and the FATCA data report should be investigated by the employee. The Form 8966 provides the Revenue Officer with the name, address and TIN of the entity and taxpayer. It provides the type of account and the account balance. The data found on the FATCA report can be used to make a collection determination and addressed with the taxpayer or their representative to come to an agreeable resolution, if possible. If an agreed resolution cannot be met, the FATCA data can be utilized in support of enforced collection actions, as basis to reject pending installment agreements, and proposed offers in comprise (OIC's). More information can be found in IRM 5.8.1, 5.10.1, 5.11.1 and 5.14.9.7.

How to Request Form 8938 FATCA Data

IDRS command code RTVUE will indicate that a taxpayer has filed Form 8938. The “CC CD” indicator (or Computer Condition Code) will include an “H” to indicate that Form 8938 was filed. If Form 8938 has been filed, ESTAB the return or use the Employee User Portal (EUP) to view the foreign account or asset listed on the form. Information derived from Form 8938 is considered return information provided by the taxpayer and its disclosure requirements are consistent with general case processing.

How to Request Research for Form 8966 FATCA Report

An employee in the Field Collection or Specialty Collection programs may request Form 8966 FATCA Report data research on their assigned taxpayer case by sending an encrypted email request to their Super User (listed at: FATCA Super Users-Collection) with a completed FATCA Information Request for Collection Employees. The form is available at: FATCA Information Request-Collection.

Prior to requesting Form 8966 FATCA Report data, employees must complete course number 73086-302, FATCA Data Use for Revenue Officers, or course number 77969, FATCA Data for Revenue Officers, which will assist you in determining applicable treaty restrictions on the use and disclosure of the information. Course completion must be recorded in the requesting employee's Learning History in the Integrated Talent Management (ITM) system.

Mandatory contact of AEOI — Civil Litigation or Criminal Fraud Referral Approval from Automatic Exchange of Information (AEOI) must be secured prior to submission of any suit recommendation or criminal fraud referral containing any Form 8966 FATCA Report information. The AEOI office may request consent from the host country to use the Form 8966, FATCA Report, or coordinate with the Office of Associate Chief Counsel (International) in connection with civil litigation or a criminal proceeding. Please see IRM 4.60.1.10.4 for additional information.

IRM 5.1.11.2.3.1(4), Delinquent Return Investigations — In IMF High-Income Non-Filer (HINF) delinquent-return investigations with unreported income in a single tax year exceeding #* * *#, data should be used from Form 8938, Statement of Specified Foreign Financial Assets, and — unless treaty disclosure rules prohibit use — Form 8966, FATCA Report. Refer to proposed IRM 5.1.18.21, FATCA Research, for procedures to research Form 8938, Statement of Specified Foreign Financial Assets, and to request Form 8966 FATCA Report.

IRM 5.8.5, Financial Analysis — FATCA data research is another locator tool that can be utilized to determine and verify the taxpayer's Reasonable Collection Potential during an OIC investigation. This research should be completed when there are indications the taxpayer has/has had an interest in a foreign bank account, owns/has owned foreign assets, or is living/has lived outside the United States. Requests for FATCA information must be-completed on any IMF offer being recommended for acceptance with a liability over #* * *#, or where the taxpayer has a foreign address or interest in a foreign bank account.

SCOIC employees should refer to the OIC SharePoint site for the list of FATCA Super Users and the FATCA Information Request Form for OIC. Also reference the proposed IRM 5.1.18.21, FATCA Research, for procedures to research Form 8938, Statement of Specified Foreign Financial Assets and to request Form 8966, FATCA Report.

IRM 5.9.4.12.3(1) & (2), Fraud Awareness & Bankruptcy Fraud Indicators — Insolvency employees, who have information concerning a debtor's assets, must be able to identify major indicators of bankruptcy fraud such as undisclosed foreign assets held in the taxpayer's name or business name such as those found on a Form 8966, FATCA report.

Refer to proposed IRM 5.1.18.21, FATCA Research, for procedures to research Form 8938, Statement of Specified Foreign Financial Assets and to request Form 8966, FATCA Report.

IRM 5.14.2.2.1 (3), Partial Payment Installment Agreement Requirements — For IMF accounts with a UBA above #* * *#, or if there is significant equity that cannot be liquidated, the following minimum verification is required:

• Real property records

• Department of Motor Vehicles (DMV)

• Personal property

• FATCA data research refers to proposed IRM 5.1.18.21, FATCA Research, for procedures to research Form 8938, Statement of Specified Foreign Financial Assets and to request Form 8966, FATCA Report.

IRM 5.15.1.6 (3), Internal Sources and Online Research — The following information will be added to the table in this IRM section.

Foreign Account Tax Compliance Act (FATCA) Report

FATCA data research should be completed when there are indications the taxpayer has/had an interest in a foreign bank account, owns/has owned foreign assets, or is living/has lived outside the United States. Check IDRS command code RTVUE to determine if the taxpayer has filed Form 8938. The “CC CD” indicator (or Computer Condition Code) will include an “H” to indicate that Form 8938 was filed. If Form 8938 has been filed, ESTAB the return or use the Employee User Portal (EUP) to view the foreign account or asset listed on the form.

Note: Revenue officers may request FATCA data research on their assigned taxpayer case. To find out how to access FATCA data, see IRM 5.1.18.21, FATCA Reports.

IRM 5.15.1.20 (5), Assets — When the taxpayer owns assets located outside of the United States, contact an International Collection or Collection Abusive Tax Avoidance Transaction (ATAT) group to determine the availability of any administrative or judicial tools described in IRM 5.21.3, Collection Tools for International Cases, including Foreign Account Tax Compliance Act (FATCA) data research which can be utilized to determine and verify the taxpayer's ability to pay.

IRM 5.16.1.2.1(6), Currently Not Collectible, Unable to Locate and Unable to Contact — Request a passport check in accordance with IRM 5.1.18.12, United States Passport Office, and a FATCA records search when the taxpayer travels outside the United States frequently or there is reason to believe the taxpayer travels outside the United States frequently. Review Form 8938, Statement of Specified Foreign Financial Assets when IDRS command code RTVUE indicates that a taxpayer has voluntarily provided this information with their Form 1040, U.S. Individual Income Tax Return. The command code indicator will include an “H” to indicate that Form 8938 was filed by the taxpayer. Refer to proposed IRM 5.1.18.21, FATCA Research, for procedures to request Form 8966, FATCA Report.

IRM 5.16.1.2.9(8), Currently Not Collectible — Hardship — Request a FATCA records search when the taxpayer travels outside the United States frequently or there is reason to believe the taxpayer travels outside the United States frequently. Review Form 8938, Statement of Specified Foreign Financial Assets when IDRS command code RTVUE indicates that a taxpayer has voluntarily provided this information with their Form 1040, U.S. Individual Income Tax Return. The command code indicator will include an “H” to indicate that Form 8938 was filed by the taxpayer. Refer to proposed IRM 5.1.18.21, FATCA Research, for procedures to request Form 8966, FATCA Report.

IRM 5.20.12.11, Abusive Tax Avoidance Transactions, Initial Contact and Research Actions Related to Abusive Tax Avoidance Transactions Cases. FATCA research must be conducted on all ATAT cases with an offshore component. Offshore components include:

• Foreign Bank and Financial Account Reports (FBAR), FinCEN 114 present on IRPTR

• Form 2555, Foreign Income Exclusion filed with the taxpayer's Form 1040

• Taxpayers with investments in foreign entities

• IDRS command code RTVUE indicates taxpayer filed Form 8938 (command code indicator includes an “H”)

• Taxpayers with investments in foreign entities

• Frequent travel outside the U.S.

• Transfers of funds to foreign financial institutions

• Taxpayer's financial records show charges for foreign currency conversion

• Taxpayer has foreign expenses on credit card statements

• Taxpayer's business includes foreign customers

• Taxpayer resides in the U.S. but is not a U.S. citizen

• Taxpayer is a dual-status citizen

Refer to proposed IRM 5.1.18.21, FATCA Research, for procedures to research Form 8938, Statement of Specified Foreign Financial Assets and to request Form 8966, FATCA Report.

IRM 5.21.2, Offshore Information Gathering Techniques. FATCA research must be conducted on all international cases assigned to Field Collection. An international case is defined for purposed of this section as:

• A taxpayer or business having a current address outside the U.S.

• A taxpayer who resides abroad or an entity located outside of the U.S. but uses a power of attorney's (POA) domestic address as their official address.

• A taxpayer who resides or entity located outside the US and who uses a mail forwarding service, a mail drop box, or PO Box.

  Note: An international address is any address that is not in one of the 50 states, District of Columbia, or U.S. Territories. All U.S. Territories are considered domestic taxpayers.

Refer to proposed IRM 5.1.18.21, FATCA Research, for procedures to research Form 8938, Statement of Specified Foreign Financial Assets and to request Form 8966, FATCA Report.

IRM 5.21.3, Collection Tools for International cases. Foreign Account Tax Compliance Act (FATCA) is intended to improve tax compliance by U.S. taxpayers holding accounts with foreign financial institutions or other foreign assets. FATCA increases transparency of offshore accounts through information reporting by foreign financial institutions and by certain U.S. taxpayers holding assets outside the United States. Certain U.S. taxpayers holding financial assets, including accounts, outside the United States are required to report those assets to the IRS. Foreign financial institutions will report to the IRS certain information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.

IRM 25.1.2.3 (2), Preparation of Form 2797 — Referral Report of Potential Criminal Fraud Cases — Approval from Automatic Exchange of Information must be secured prior to submission of any suit recommendation or criminal fraud referral containing any Form 8966 FATCA information. The AEOI office may request consent from the host country to use the Form 8966 FATCA report or coordinate with the Office of Associate Chief Counsel (International) in connection with civil litigation or a criminal proceeding. Please see IRM 4.60.1.10.4 for additional information.

ANY TEXT MARKED WITH A # IS FOR OFFICIAL USE ONLY