FollowThe latest guidance for the enactment of the Foreign Account Tax Compliance Act (FATCA) was issued by the IRS on October 28, 2013. This will apply to foreign financial institutions (FFI) entering into an FFI agreement with the IRS or branches of FFI’s treated as reporting financial institutions under an applicable Model 2 intergovernmental agreement (IGA)
Under the terms of FATCA, withholding agents must withhold tax on payments to FFIs that refuse to report specific information to the IRS for their US accounts and also to some nonfinancial foreign entities.
Regulations issued in January integrated 2 types of model intergovernmental agreements (IGAs) into the reporting requirements. These include reciprocal agreements and non- reciprocal agreements called Model 1 IGAs and Model 2 IGAs. Model 2’s require FFI’s to report required information directly to the IRS rather than the FFI’s government.
General responsibilities of participating FFIs and FFIs and their branches are described on the notice. This includes updates to the regulations under chapters 4, 61 and related forms.
According to the notice, a payer, other than a US payer or US middleman that is a participating FFI (Model 1 IGA) will satisfy its reporting obligations with respect to a US payee (or presumed US payee) that is a nonexempt recipient if that FFI reports the account holder pursuant to the FFI or the applicable Model 1 IGA.
Form 1099 reporting requirements clarify:
- The definition of what is a passive NFFE
- The definition of US person to include a foreign insurance company that elects to be treated as a domestic corporation under Sec 953d
- The procedures for FFIs to register for participating FFI or reporting Model 2 FFI status
- A draft Model 2 agreement which the IRS will finalize by Dec 31
Kevin Thompson, CPA said “the Department of Treasury through the Internal Revenue Service have aggressively pursued these Foreign Financial Institution agreements to ensure that the US Treasury knows everything about US Citizens accounts in foreign countries.” He went on to say “if you have an account in a foreign country that meets the reporting requirements, the IRS will be aware of it and will verify that taxpayers are reporting this information. It will be costly to not comply.”
Thompson CPA has worked closely with all of its clients to ensure they are in compliance with these regulations. If you have questions about compliance, please contact us.
Kevin Thompson CPA at
kevin@kevinthompsoncpa.com or call him @ (310) 450-4625.
