Michael Danilack, Deputy Commissioner of LB&I, spoke about IRS international enforcement efforts on March 18th, 2014 at the 2nd Annual International Tax Enforcement Conference in Washington, D.C. The Deputy Commissioner spoke about recent organizational changes within the Service as well as areas in which the IRS is currently focusing its enforcement efforts.
In recent years, the IRS has significantly reorganized its international departments. The intent has been to bring all resources in the area under Mr. Danilack’s jurisdiction in an effort to promote quality and consistency, especially in the areas of transfer pricing and withholding. For example, in September 2013 a new position, Director of International Strategy, was formed, with Diana Wollman taking the role. Additionally, in 2012 the Advance Pricing and Mutual Agreement program (APMA) and Transfer Pricing Practice (TPP) were formed and united under the Director of Transfer Pricing Operations. Also, in early 2013 the Foreign Payments Practice was formed with a focus on administering and enforcing several international withholding areas, including FDAP withholding and the Foreign Account Tax Compliance Act (FATCA). In addition, in recent years the IRS has formed international practice networks to provide international employees with resources for broadening and sharpening their expertise. Mr. Danilack has stated that he intends to eventually make most of these materials public.
The Service has made these organizational changes, in part, to facilitate its enforcement efforts. Mr. Danilack also spoke about current focus areas in enforcement. For example, the Service is examining the creditability of foreign taxes claimed for purposes of the Foreign Tax Credit and will continue to be closely reviewing transfer pricing compliance, having recently put out a Transfer Pricing Audit Roadmap for its agents. The IRS is also focusing on withholding and information reporting compliance for persons making U.S. source income payments to foreign persons, as well as 1120F compliance for foreign corporations. In an effort to bolster enforcement in these and other areas, the IRS will be enhancing its exchange of information agreements with other countries.
Additionally, work on offshore bank account reporting compliance continues with the deadline for FATCA implementation looming. Mr. Danilack indicated that the Service will begin to focus on FATCA compliance as it continues to focus on off-shore noncompliance, including the failure to file FBARs and pay taxes on foreign accounts. alliantNational can attest to the Service’s continuing focus in this area, as we have been increasingly engaged in helping individuals come into compliance in this area.