Emerging tax issues cause due-diligence problems
From foreign accounts to health care, from marijuana businesses to captive insurance, emerging tax issues are presenting practitioners with thorny due-diligence problems. When it comes to issues like the Report of Foreign Bank and Financial Accounts (FBAR) and the Patient Protection and Affordable Care Act (PPACA), “ask more questions than you think you should,” advised Lee Martin, deputy director of the IRS’s Office of Professional Responsibility, in remarks to practitioners at the IRS Nationwide Forum on July 8 in Fort Washington, Md.
Martin reminded his listeners that several sections in Treasury Circular 230, Regulations Governing Practice Before the Internal Revenue Service (31 C.F.R. Part 10), require practitioners subject to its provisions to exercise due diligence when providing tax services.
The growth of foreign accounts subject to disclosure has exploded over the past decade, according to the deputy director, citing data from FinCEN showing that FBAR filings exceeded 1 million for the first time in calendar year 2014, compared with approximately 280,000 filings in 2005.
Subsequent discoveries of foreign accounts that were supposed to be reported prompt some taxpayers to blame the preparer, Martin observed. He recommended that practitioners document questions they ask clients and develop a strong understanding of the requirements of related laws, including the Bank Secrecy Act and Form 8938, Statement of Specified Foreign Financial Assets. Read more on the Journal of Accountancy.