International Data Exchange Service Is Open for Business

On January 12, 2015, the IRS officially opened its International Data Exchange Service (IDES). IDES is the web application that financial institutions and foreign tax authorities will use to report information on financial accounts held by U.S. persons or U.S.-owned foreign entities in order to comply with the Foreign Account Tax Compliance Act (FATCA).

FATCA requires foreign financial institutions to report to the IRS information on accounts held by U.S. taxpayers or be subject to hefty withholding requirements. The information provided should enable the IRS to better uncover efforts by some taxpayers to avoid U.S. taxation of their income by using foreign bank and investment accounts and to encourage compliance with U.S. tax laws.

In order to facilitate international cooperation, the U.S. has reached information-sharing agreements with many foreign governments. Consequently, the IRS will also use IDES to report information to the tax authorities of foreign governments on their residents' accounts in U.S. financial institutions.

Please contact an Eide Bailly tax professional if you have any questions about FATCA or other tax issues affecting banks.