GAO: Offshore Remittances Underwithheld


Despite the IRS’s eight-year-old qualified intermediary (QI) program, billions of dollars in U.S.-source income continue to flow overseas without proper tax withholding, the Government Accountability Office said. QIs are foreign financial institutions that contract with the IRS to provide withholding of U.S. tax and administer treaty provisions. However, they figure in a relatively small portion of U.S. money going offshore—only about 12.5% of the $293 billion that left the country in 2003, according to the most recent data available, the GAO said. Income flowing through U.S. financial institutions or other “withholding agents” may be more vulnerable to offshore tax evasion by U.S. taxpayers, since, unlike QIs, those institutions don’t always require direct documentary verification of account owners’ identities, the GAO said.

But despite their more stringent identification requirements and smaller volume, QIs handled more money with unknown tax jurisdictions ($11.3 billion) than did U.S. withholding agents ($7.8 billion). The average withholding rate by both conduits combined was 2.7%. IRS officials were unable to explain why that rate was so much lower than the statutory withholding rate, barring any exemption or treaty reduction, of 30%. They said the unknown jurisdictions for QI accounts could be a byproduct of a feature intended to make them more attractive—accounts may be pooled for reporting to the IRS rather than listed individually.

SPONSORED REPORT

Revenue recognition: A complex effort

Implementing the new standard requires careful judgment. Learn how to make significant accounting judgments and document them and collaborate with peers for consistent application.

TECHNOLOGY Q&A

How to create maps in Excel 2016

Microsoft Excel 2016 has two new mapping capabilities. J. Carlton Collins, CPA, demonstrates how to make masterful 2D and 3D maps in Excel 2016.

QUIZ

News quiz: Economy and health care changes top CPAs’ list

CPA decision-makers’ economic outlook and the House Republicans’ proposed tax changes as part of replacing the Patient Protection and Affordable Care Act received attention recently. See how much you know with this short quiz.