IRS: Banks Get More Time to Certify Accounts Under FATCA
Jan. 19 — Foreign financial institutions will have more time to certify whether their pre-existing accounts are owned by U.S. taxpayers under the Foreign Account Tax Compliance Act, the IRS said in Notice 2016-8.
The Jan. 19 notice answers many significant questions raised by taxpayers on compliance with the law. FATCA requires foreign banks to tell the Internal Revenue Service about their U.S.-owned accounts or face a 30 percent withholding tax on their U.S.-source income in some cases.
According to the guidance, some foreign financial institutions won’t have to submit pre-existing account certifications until they give the U.S. their first periodic certification that they are complying with the law—what the IRS called a “deferral of the submission date.” The agency said this applies to participating financial institutions and those who are reporting to the U.S. under a Model 2 intergovernmental agreement.
Specifically, the notice said, the compliance certification must be submitted on or before July 1 of the calendar year following the certification period, instead of no later than six months following the end of the certification period.
“Therefore, the preexisting account certification will be due to the IRS by July 1, 2018, for a participating FFI or reporting Model 2 FFI that has an FFI agreement with an effective date of June 30, 2014, instead of by August 29, 2016,” the agency said.
Changes Planned to Regulations
The IRS said in the notice that it plans to amend existing regulations under Chapter 3 and Chapter 4 with these and other changes, but taxpayers can rely on the notice in the interim.
In one change, the IRS said, for calendar year 2015, a participating FFI, reporting Model 2 FFI or registered deemed-compliant FFI isn’t required to report gross proceeds paid to or with respect to an account held by a nonparticipating FFI.
In addition, the agency said it plans to allow withholding agents to rely on electronic Forms W-8 and W-9 collected by intermediaries and flow-through entities—a big issue where many taxpayers have asked for lenience.
Notice 2016-8 is scheduled for publication in Internal Revenue Bulletin 2016-6, dated Feb. 8.
