According to a report published by government watchdog Treasury Inspector General for Tax Administration, the IRS faces a number of obstacles that may upset the July 2014 implementation of FATCA, including software design issues, low staffing levels, and budgetary constraints. Additionally, the agency said that the IRS has been unable to "fully utilize the initial system" to manage the program, which came at a price tag of $8.6 million.
"The Foreign Account Tax Compliance Act can effectively improve U.S. tax administration involving offshore accounts by utilizing FATCA computer applications that are developed and implemented in a timely and effective manner," said J. Russell George, Treasury Inspector General for Tax Administration. "Improved system development, management controls, and testing are needed to ensure the system works as intended to improve tax compliance."
While the agency has noted that several alterations still need to be made, it has defended its progress and responded to technology concerns by arguing that "the need to redesign the system in 2012 was due to significant and necessary regulatory changes."
With less than a year until the offshore tax evasion program is set to go fully into effect, the IRS is still working to create a close network for foreign participants who will agree to account sharing agreements. Between 200,000 and 400,000 foreign banks, investment funds, and insurers are expected to register with the IRS to comply with the new tax law and many of the agreements signed with certain countries are reciprocal agreements.