IRS Coordinates Due Diligence Timelines for Requirements Related to Foreign Account Tax Compliance Act
By Diane Freda
The Internal Revenue Service announced Oct. 24 it would significantly reduce the administrative burden of completing due diligence requirements for U.S. withholding agents and foreign financial institutions under the Foreign Account Tax Compliance Act, by aligning the time frames placed on withholding agents to identify the U.S. accounts to be reported to IRS.
Withholding agents, including participating foreign financial institutions and registered FFIs deemed compliant, generally will be required to implement new account-opening procedures by Jan. 1, 2014, IRS said in Announcement 2012-42.
However, under the proposed FATCA rules, U.S. withholding agents and participating foreign financial institutions have different requirements, and those different requirements have different timelines.
Global institutions are trying to implement uniform procedures to comply with FATCA but have found it extremely challenging because of the varying timelines.
In addition, stakeholders have complained to IRS that the status of entity account holders may change during 2013 as FFIs enter into agreements with IRS. Withholding agents that put in place new account-opening procedures by Jan. 1, 2013, could be required to duplicate their efforts to verify an FFI’s status as a participating, deemed-compliant, or nonparticipating FFI.
Transitional Relief Will Apply
However, the new guidance greatly alleviates the pressure that both withholding agents and IRS have been facing, by granting additional time to satisfy some of the requirements, as well as by placing all withholding agents on the same timeline with respect to most of them…Tweet this!