Tax & Accounting Blog

IRS IRPAC Recommends Additional Postponement of FATCA Implementation

1099, Blog, Nonresident Alien Taxation Webcasts, ONESOURCE, Tax Information Reporting, Trust Tax, W-8 & W-9 Foreign Reporting December 19, 2013

A woman walks out of the Internal Revenue Service building in New YorkIn a report delivered at the annual Public Meeting of the IRS Information Reporting Program Advisory Committee (IRPAC), the IRPAC recommended that the IRS postpone the requirement to impose FATCA withholding until January 1, 2015. IRPAC also recommended an extension of the validity period of Forms W-8 that otherwise would expire on December 31, 2013, so that such Forms W-8 and documentary evidence would be treated as valid until December 31, 2014.

IRS Notice 2013-43 provided a postponement until July 1, 2014, but IRPAC made its recommendation for an additional six-month postponement due to the delay in the issuance of final guidance, forms and instructions needed for the implementation of FATCA (the Foreign Account Tax Compliance Act).

Similar requests were made recently in a joint letter to the IRS from the American Bankers Association, The Clearing House Association, the Institute of International Bankers and the Securities Industry and Financial Markets Association (SIFMA).

The IRPAC report noted that withholding agents have devoted substantial resources to the design of systems based on the FATCA final regulations issued earlier this year and the drafts of new forms which the IRS has issued for comment. However, the IRS is planning to issue additional regulations for FATCA guidance, plus amendments to the regulations under Chapters 3 and 61 of the Internal Revenue Code, and still needs to issue final new Forms W-8, 1042-S and 1042 as well as instructions for those forms. IRPAC pointed out that withholding agents cannot make the necessary changes to on-boarding procedures or changes to their systems for withholding and information report until the final versions of regulations, forms and instructions are released.

IRPAC also pointed out that the previously announced extension of the validity period of Forms W-8 from December 31, 2013, to June 30, 2014, is relevant for obligations or accounts that are considered preexisting obligations under the FATCA regulations, but the extension is of limited benefit because withholding agents would need to solicit a new Form W-8 before July 1, 2014, and a new Form W-8 received before July 1, 2014, would generally not include status information for FATCA compliance purposes. Withholding agents would need to resolicit Forms W-8 for many preexisting accounts after July 1 and before December 31, 2014.