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Draft 2015 FATCA Form 8966 instructions reflect form’s new check boxes and lines

December 16, 2015

Draft 2015 Instructions for Form 8966.

IRS has published a draft version of the instructions to the 2015 Form 8966 (FATCA Report), which certain foreign financial institutions (FFIs) and others use to report information with respect to U.S. accounts under the Foreign Account Tax Compliance Act (FATCA). The instructions reflect the fact that 2015 Form 8966 contains several new check boxes and lines.

Background on FATCA. The Hiring Incentives to Restore Employment Act of 2010 (P.L. 111-147) added Chapter 4 (Code Sec. 1471 through Code Sec. 1474, FATCA) to the Code. In general, Chapter 4 requires withholding agents to deduct and withhold 30% on certain payments made to an FFI, unless the FFI has entered into an FFI agreement with the U.S. to, among other things, report certain information with respect to U.S. accounts. Chapter 4 also imposes withholding, documentation, and reporting requirements on withholding agents, with respect to certain payments made to certain non-financial foreign entities (NFFEs).

What’s new in the draft 2015 Form 8966 instructions? IRS issued final 2015 Form 8966 in October 2014. The new draft 2015 Form 8966 instructions have been revised to reflect the changes that were made to the 2015 Form 8966, as discussed below.

1. The draft instructions point out that under the top section of the 2015 Form 8966, a check box has been added for the filer that has no accounts to report. As explained in more detail below, this new check box is optional for most filers, but not “direct reporting NFFEs” and “sponsoring entities” filing on behalf of a “sponsored direct reporting NFFE.”
The term “direct reporting NFFE” refers to an NFFE that has elected to report its substantial U.S. owners to IRS under Reg. § 1.1472-1(c)(3). The term “sponsoring entity” is defined as an entity seeking to perform the due diligence, withholding, and reporting obligations on behalf of one or more sponsored entities under Reg. § 1.1471-5(f)(1)(i)(F). A sponsored entity may include a direct reporting NFFE; such an NFFE is referred to as a “sponsored direct reporting NFFE.”
The draft instructions provide that a direct reporting NFFE, or a sponsoring entity reporting on behalf of a sponsored direct reporting NFFE that has no substantial U.S. owners to report during the calendar year, must check such box and should only complete Part I of the form.
2. Part I, line 1b, of the form requests the filer’s 2-digit category code. For calendar year 2015, this line is optional for most filers, other than direct reporting NFFEs and sponsored entities filing on behalf of sponsored direct reporting NFFEs. The draft instructions state that a direct reporting NFFE filing Form 8966 for calendar year 2015 must enter code “06” in line 1b, while a sponsored entity filing Form 8966 for calendar year 2015 on behalf of a sponsored direct reporting NFFE must enter code “08” in line 1b. The draft instructions also contain a list of other filer category codes.
3. Under Part II, line 1b, of the form, two new check boxes have been added to indicate whether the account holder or payee is an individual versus an entity.
4. In Part II, line 5, of the form, the check box for direct reporting NFFE has been removed. As such, a filer that is a direct reporting NFFE or sponsoring entity filing on behalf of a direct reporting NFFE should enter the applicable filer category code at the top of the form, as discussed in item (2), above.
5. In Part IV, line 3b, of the form, a check box has been added for accounts closed during the year. Part IV, line 3b is completed only by filers that are FFIs and is optional for 2015.

References: For withholdable payments to FFIs and other foreign entities, see FTC 2d/FIN ¶  O-13079  et seq.; United States Tax Reporter ¶  14,714.

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