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IRS, Treasury Department Scale Back FATCA Requirements

Foreign financial institutions could be weighed down by FATCA.

The Foreign Account Tax Compliance Act has come under fire from some critics who claim the regulations are too much for foreign financial institutions (FFIs), ex-patriots and dual citizens to comply with.

However, the U.S. Treasury Department and Internal Revenue Service are now working to lessen the burden by proposing rules that would more clearly explain the procedure for FFIs to identify American accounts and report information, as well as clarifying the witholding requirements.

Under the proposal, the groups said administrative burdens would be lessened by basing the due diligence requirements on accounts' value and risk profiles and allowing FFIs to use information they normally collect for most cases.

"When taxpayers overseas avoid paying what they owe, other Americans have to bear a disproportionate share of the tax burden," said acting assistant secretary for tax policy Emily S. McMahon, in a statement. "FATCA is an important part of the U.S. government's effort to address that issue, and these regulations implement FATCA in a way that is targeted and efficient."

In an interview with Bloomberg, Denise Hintzke, Deloitte Tax's global leader for foreign account tax compliance, said the changes were evidence that the Treasury is listening to implementing feedback from people in the industry.