In 2010, Barack Obama signed "FATCA" (which has since been widely derided as a disaster) into law. FATCA essentially forces all banks in the world to help the US identify Americans who have money outside the US. It works to some degree, but it also is easy to circumvent (i.e. not using US identification when opening the account, etc)

Nonetheless FATCA still provides some level of information about Americans whose finances are outside the country.

So my question is, how was this done historically - not only before FATCA per se, but before computers, rapid communication, and technology ? How did the US government in the 1950s ensure Americans living in Australia were properly reporting their income and paying their taxes?


It wasn't as effective as FATCA, but the IRS did have resources at its disposal. Since each individual is required to file an annual tax return regardless of his place of residence, the first line of defense was to check (using Social Security numbers) for those who failed to file altogether . At some point the Code was amended to require all passport applicants to provide their Social Security number as well as their country of residence. That, obviously, allowed the IRS to check which nonresident US citizens failed to file.

There were also tax information exchange treaties between the US and various countries, which also provided a pipeline of information on transactions, even for those taxpayers who did file tax returns, but failed to include all relevant information.

The requirement that foreign financial accounts be disclosed (under penalty of perjury) was in place before FATCA.

Obviously, these (and other) measures weren't quite enough to crack the wall of secrecy thrown by Swiss (and other) banks, so more effective measures needed to be employed...


Tips and audits were used. Angry ex-spouses and girlfriends and former employees were particularly common sources of information. News reports or first hand accounts were also sometimes forwarded by State Department employees to the IRS.

Information returns (like the 1099 in which a taxpayer's income or revenue is reported by a third party to the IRS), in general, didn't exist until this innovation was suggested by economist Milton Freedman and then implemented first with withholding of income by U.S. employers in 1943 and started to use computers in 1961. Information returns were later expanded to non-wage income, possibly in the 1954 Act.

  • 1
    Can you explain what you mean by "information return" ? Also do you have any sources? Mar 28 '19 at 19:17
  • @CodyBugstein Updated. "any sources?" Mostly oral accounts.
    – ohwilleke
    Mar 28 '19 at 19:36

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