Foreign Account Tax Compliance – Improvement on Controls being Made
Improvements Are Needed to Strengthen Systems Development Controls for the Foreign Financial Institution Registration System.
The Internal Revenue Service  has taken steps to improve management controls for an information technology system that will help it implement the Foreign Account Tax Compliance Act (FATCA) to improve U.S. tax compliance involving foreign financial assets and offshore accounts.
Additional improvements are needed to strengthen system development controls for the new international information technology system, including the Foreign Financial Institution Registration System.
That is the principal conclusion of a report released publicly today by the Treasury Inspector General for Tax Administration (TIGTA).
The development of the Foreign Financial Institution Registration System is underway to enable the IRS to meet its goals and requirements established by the FATCA.
The expected benefits of this information technology project include the ability to:
1) effectively register Foreign Financial Institutions;
2) increase annual enforcement revenue; and
3) support the IRS’s new overall information reporting system for the FATCA. The successful development, deployment, and implementation of the Foreign Financial Institution Registration System should significantly improve taxpayer compliance internationally and thus enhance IRS tax administration.
The overall objective of TIGTA’s
The overall objective of TIGTA’s review was to determine whether the IRS’s systems development approach for the Foreign Financial Institution Registration System is mitigating risks through the application of information technology management controls aimed at successful development and delivery of requirements and capabilities in support of FATCA requirements, milestones, and goals.
TIGTA evaluated the IRS’s established management controls and processes over information technology program management, security control processes, testing documentation, requirements management, and fraud prevention controls.
Foreign Financial Institution Registration System
The IRS is developing the Foreign Financial Institution Registration System within its new Enterprise Life Cycle Iterative Path systems development and testing process.
The initial system release was substantially developed and nearing deployment when the IRS terminated the effort in November 2012.
Following new Department of the Treasury regulations, changes with Intergovernmental Agreements, and new processes needed to implement the FATCA, the IRS was unable to fully utilize the initial system.
The IRS modified and expanded the scope of the system requirements. The major redesign and initiation of a new development effort was necessary because the IRS did not sufficiently develop requirements for the initial Foreign Financial Institution Registration System as needed for new system development.