Update January 2023 – Part I of II
The Large Business and International (LB&I) Division of the IRS is responsible for tax administration activities for domestic and foreign businesses with U.S. reporting requirements and assets of at least $10 million, as well as the Global High Wealth and International Individual Compliance programs. LB&I addresses taxpayer noncompliance related to unreported income, undisclosed assets, and any other tax avoidance scheme. In this series, we discuss LB&I’s active compliance campaigns, focusing on individuals.
Expatriation of Individuals
U.S. citizens and long-term residents who expatriated on or after June 17, 2008, must fulfil their tax responsibilities to the United States. See IRC § 877A. This campaign addresses noncompliance through education, soft letters, and examinations.
FATCA Filing Accuracy
Under the Foreign Account Tax Compliance Act (FATCA), foreign financial institutions and certain non-financial foreign entities are required to report assets held by U.S. account holders and substantial U.S. owners. See I.R.C. §§ 1471-1474. This campaign addresses noncompliance by such entities. Consequences include termination of FATCA status.
FIRPTA Reporting Compliance for NRAs
Under the Foreign Investment in Real Property Tax Act (FIRPTA) of 1980, foreign persons are taxed on the dispositions of their U.S. real property interests. Transferees of U.S. real property interests from foreign persons are required to withhold 15% of the amount realized on the disposition. If the transferor is a foreign person and the transferee fails to withhold, the transferee may be liable for the 15% tax. The goal of this campaign is to increase voluntary compliance through issue-based examinations and education.
Foreign Earned Income Exclusion Campaign
Certain U.S. citizens or residents living abroad qualify for the foreign earned income exclusion and the foreign housing exclusion or deduction. See I.R.C § 911. This campaign targets taxpayers who wrongfully claimed the benefits. Noncompliance is addressed through methods including examinations.
Forms 1042/1042-S Compliance
Taxpayers who make payments of certain U.S.-source income to foreign persons must comply with withholding, deposit, and reporting requirements. See Forms 1042 (“Annual Withholding Tax Return for U.S. Source Income of Foreign Persons”) and 1042-S (“Foreign Person’s U.S. Source Income Subject to Withholding”). This campaign addresses noncompliance and errors through methods including examinations.
High Income Non-Filer
U.S. citizens and residents are subject to tax on worldwide income, even if they do not receive Forms W-2 (“Wage and Tax Statement”), Forms 1099 (information returns), or their foreign equivalents. This campaign will use examinations to bring into compliance taxpayers who have not filed tax returns .