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William Byrnes (Texas A&M) tax & compliance articles

Archive for April, 2014

Analysis of the new FATCA W-8IMY released today

Posted by William Byrnes on April 30, 2014


free chapter download here —> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671   Number of Pages in PDF File: 58

On April 30, 2014 the IRS released the new Form W-8IMY (“Form W-8IMY”), formally replacing its 2006 predecessor W-8IMY. This new Form W-8IMY has 28 parts whereas the previous August 2013 FATCA draft W-8IMY only contained 26.  The new 2014 Form W-8IMY is vastly different from the seven-part 2006 predecessor form.  (Analysis of the New W-8BEN-E released April 2 is available at https://profwilliambyrnes.com/2014/04/02/irs-releases-final-fatca-form-w-8ben-e/)

Below is a summary for the W-8IMY.  For a full compliance analysis of the new form W-8IMY and the other potentially required withholding forms drafted by the > Lexis FATCA experts <, see >LexisNexis® Guide to FATCA Compliance< Chapter 11 Withholding And Qualified Intermediary, § 11.08 Applicable Withholding Forms, [5] Analysis of Form W-8IMY.

Form W-8IMY is submitted generally by a payment recipient (the “filer”) with non-beneficial owner status, i.e. an intermediary.  Such intermediary can be a U.S. branch, a qualified intermediary, a non-qualified intermediary, foreign partnership, foreign grantor or a foreign simple trust.  Form W-8IMY requires a tax identification number.

Part I of the Form adds FATCA classification.   Part I of the form requires general information, the Chapter 3 QI status, and the Chapter 4 FATCA classification of the filer.

Question 4 of Part I requests the QI status:

If the filer is a Qualified Intermediary, then the filer must complete Part III Qualified Intermediary.  If the filer is a Nonqualified Intermediary, then the filer must complete Part IV Nonqualified Intermediary.

Territory Financial Institutions complete Part V. U.S. Branches complete Part VI.

Withholding Foreign Partnership or Withholding Foreign Trusts complete Part VII.

Nonwithholding Foreign Partnership, Nonwithholding Foreign Simple Trust, and Nonwithholding foreign grantor trusts must complete Part VIII.

Question 5 requests the FATCA classification of the filer. The classification indicated determines which one of the Parts IX through XXVII must be completed.

Part II of this form is to be completed if the entity is a disregarded entity or a branch receiving payment as an intermediary. Part II only applies to branches of an FFI outside the FFI’s country of residence.

Chapter 3 Status Certifications  Parts III – VIII

Parts III – VIII of this form address the QI Status of the entity. Part III is to be completed if the entity is a QI, and requires the entity to certify that it is a QI and has provided appropriate documentation. Part IV is to be completed if the entity is a Nonqualified Intermediary (NQI), and requires the entity to certify that it is a NQI not acting for its own account.

Part V is to be completed if the entity is a Territory Financial Institution. Part VI is to be completed by a U.S. branch only if the branch certifies on the form that it is the U.S. branch of a U.S. bank or insurance company, and that the payments made are not effectively connected to a U.S. trade or business. Part VII is to be completed if the entity is a Foreign Withholding Partnership (WP) or a Withholding Foreign Trust (WT). Part VIII is to be completed if the entity is either a Nonwithholding Foreign Partnership, Simple Trust, or Grantor Trust.

Chapter 4 Status Certifications Parts IX – XXVI

Parts IX – XXVI of this form address the FATCA Status of the entity. These classifications include the new classification of a Restricted Distributor (Part XVI), but do not include the new classification of a Reporting NFFE.

Statement of Certification

Part XXVIII requires certification, under penalty of perjury, by the payee or a person authorized to sign on the payee’s behalf. Finally, the form contains the following language: “I agree that I will submit a new form within 30 days if any certification made on this form becomes incorrect.”

Structure of New Form Form W-8IMY

  • Part I Identification of Entity
  • Part II Disregarded Entity or Branch Receiving Payment.

Chapter 3 Status Certifications

  • Part III Qualified Intermediary
  • Part IV Nonqualified Intermediary
  • Part V Territory Financial Institution
  • Part VI Certain U.S. Branches
  • Part VII Withholding Foreign Partnership (WP) or Withholding Foreign Trust (WT)
  • Part VIII Nonwithholding Foreign Partnership, Simple Trust, or Grantor Trust

Chapter 4 Status Certifications

  • Part IX Nonparticipating FFI with Exempt Beneficial Owners
  • Part X Sponsored FFI That Has Not Obtained a GIIN
  • Part XI Owner-Documented FFI
  • Part XII Certified Deemed-Compliant Nonregistering Local Bank
  • Part XIII Certified Deemed-Compliant FFI with Only Low-Value Accounts
  • Part XIV Certified Deemed-Compliant Sponsored, Closely Held Investment Vehicle
  • Part XV Certified Deemed-Compliant Limited Life Debt Investment Entity
  • Part XVI Restricted Distributor
  • Part XVII Foreign Central Bank of Issue
  • Part XVIII Nonreporting IGA FFI
  • Part XIX Exempt Retirement Plans
  • Part XX Excepted Nonfinancial Group Entity
  • Part XXI Excepted Nonfinancial Start-Up Company
  • Part XXII Excepted Nonfinancial Entity in Liquidation or Bankruptcy
  • Part XXIII Publicly Traded NFFE or NFFE Affiliate of a Publicly Traded Corporation
  • Part XXIV Excepted Territory NFFE
  • Part XXV Active NFFE
  • Part XXVI Passive NFFE
  • Part XXVII Sponsored Direct Reporting NFFE

Sworn Certification

  • Part XXVIII Certification

book coverPractical Compliance Aspects of FATCA and GATCA

For in-depth analysis of the practical compliance aspects of financial service business providing for exchange of information of information about foreign residents with their national competent authority or with the IRS (FATCA), see Lexis Guide to FATCA Compliance, 2nd Edition just published!

The LexisNexis® Guide to FATCA Compliance (2nd Edition) comprises 34 Chapters grouped in three parts: compliance program (Chapters 1–4), analysis of FATCA regulations (Chapters 5–16) and analysis of Intergovernmental Agreements (IGAs) and local law compliance requirements (Chapters 17–34), including  information exchange protocols and systems.  The 34 chapters include many practical examples to assist a compliance officer contextualize the regulations, IGA provisions, and national rules enacted pursuant to an IGA.  Chapters include by example an in-depth analysis of the categorization of trusts pursuant to the Regulations and IGAs, operational specificity of the mechanisms of information capture, management and exchange by firms and between countries, and insights as to the application of FATCA and the IGAs for BRIC and European country chapters.

If you are interested in discussing the Master or Doctorate degree in the areas of financial services or international taxation, please contact me https://profwilliambyrnes.com/online-tax-degree/

Posted in FATCA | Tagged: , , , , , | 3 Comments »

Do I Owe an Obama Care “Individual Shared Responsibility Payment” with my next tax return?

Posted by William Byrnes on April 30, 2014


The IRS, in its Health Care Tax Tip 2014-04, addressed the question of whether a taxpayer owes an Obama Care Tax Penalty (or “Fee” or as it is formally known an “Individual Shared Responsibility Payment”) to be paid with the 2014 tax return filed by April 15, 2015.  What ever it is referred to, being a penalty, a fee, or a payment, it is mandatory and was fairly imposed by Congress, with a supra majority Senate vote.  

So … the question is: Do I owe it?  And if so, how much do I owe? 

The short answer is that for any month in 2014 that a taxpayer or any of a taxpayer’s dependents do n0t maintain health care coverage and do not qualify for an exemption from having health care coverage, then the taxpayer will owe an “individual shared responsibility payment” with your 2014 tax return filed in 2015 (exemption is the same as exception, and in tax it is said that there is always an exception to a rule, and an exception to the exception).  

What is the “less than three-month gap” exemption / exception?

The exception is if a taxpayer went without health care coverage for less than three consecutive months during the year, then the taxpayer may qualify for the short coverage gap exemption and will not have to make a payment for those months. However, if a taxpayer has more than one short coverage gap during a year, the short coverage gap exemption only applies to the first.  So by example, the taxpayer has health care coverage January 1, 2014 until February 28, and May 1 until August 30, and then again from November 15 through December 31, 2014.  The first health care coverage gap that falls within the exception is March 1 until April 30 because it is less than three consecutive months.  The second gap in coverage is also less than three consecutive months, being September 1 through November 15 – but the exception has already been used for the year so it does not fall within it.

How much does a taxpayer owe?

If a taxpayer (or any dependents) do not maintain health care coverage and do not qualify for an exemption, then the taxpayer must make an individual shared responsibility payment with the 2014 tax return.  In general, this health care coverage penalty is either a percentage of the taxpayer’s income or a flat dollar amount, whichever is greater.  High income taxpayers will pay a higher penalty.  A taxpayer will owe 1/12th of this penalty for each month of the taxpayer or taxpayer’s dependents gap in coverage.  The annual payment amount for 2014 is the greater of:

  • one percent (1%) of the household income that is above the tax return threshold for the taxpayer’s filing status, such as Married Filing Jointly or single, or
  • a family’s flat dollar amount, which is $95 per adult and $47.50 per child, limited to a maximum of $285.

This individual shared responsibility payment is capped at the cost of the national average premium for the bronze level health plan available through the Marketplace in 2014.  The taxpayer will pay the due amount with the 2014 federal income tax return filed in 2015.  For example, a single adult under age 65 with household income less than $19,650 (but more than $10,150) would pay the $95 flat rate.  However, a single adult under age 65 with household income greater than $19,650 would pay an annual payment based on the one percent rate.  

Why greater than $19,650?  The filing threshold for a single adult in 2014 is 10,150, subtract that from $19,650, leaving a base amount of $9, 500.  Multiply 1% to that base amount and the penalty is $95, the same as the flat rate.

So, from the beginning of this year (January 1, 2014) a taxpayer and the family must either have “qualifying” health insurance coverage throughout the year, qualify for an exemption from coverage, or make the above payment when filing the 2014 federal income tax return in 2015.

What qualifies as “qualifying health insurance coverage”?

Qualifying coverage includes coverage provided by an employer, health insurance purchased in the Health Insurance Marketplace, most government-sponsored coverage, and coverage purchased directly from an insurance company.  However, qualifying coverage does not include coverage that may provide limited benefits, such as coverage only for vision care or dental care, workers’ compensation, or coverage that only covers a specific disease or condition.

What are the exemptions to obtaining or maintaining required health care coverage?

A taxpayer may be exempt from the requirement to maintain qualified coverage if:

  • Have no affordable coverage options because the minimum amount a taxpayer must pay for the annual premiums is more than eight percent (8%) of household income,
  • Have a gap in coverage for less than three consecutive months (see abo0ve), or
  • Qualify for an exemption for one of several other reasons, including having a hardship that prevents the taxpayer from obtaining coverage, or belonging to a group explicitly exempt from the requirement.
  • A special hardship exemption applies to taxpayers who purchase their insurance through the Marketplace during the initial enrollment period for 2014 but due to the enrollment process have a coverage gap at the beginning of 2014.

tax-facts-online_medium

Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This brand-new resource provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

Our brand-new Tax Facts title is exciting in many ways,” says Rick Kravitz, Vice President & Managing Director of Summit Professional Network’s Professional Publishing Division. “First of all, it fills a huge gap in the resources available to today’s advisors. Small business is a big market, and this book enables advisors to get up-and-running right away, with proven guidance that will help them serve their clients’ needs. Secondly, it addresses the biggest questions facing all taxpayers and provides absolutely reliable answers that help advisors solve today’s biggest problems with confidence.”

Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.  The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community,” added Rick Kravitz.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

 

If you are interested in discussing the Master or Doctorate degree in the areas of financial services or international taxation, please contact me https://profwilliambyrnes.com/online-tax-degree/

Posted in Taxation | Tagged: , , , , | Leave a Comment »

IRS Reports 131 Million Tax Returns Filed but Many Amended Returns Expected

Posted by William Byrnes on April 29, 2014


The IRS reported in its 2014-56 NewsWire that 131 million tax returns were filed by the deadline of April 15 for the tax year of 2013.  88% of these tax returns were e-filed of which 35% (almost 46 million returns) were filed by taxpayers from home computers.

But the IRS disclosed that it expects nearly 5 million of these taxpayers to file amendments to their returns by filing Form 1040X during 2014.  Generally, for a credit or refund, taxpayers must file Form 1040X within 3 years, including extensions, after the date they filed their original return or within 2 years after the date they paid the tax, whichever is later. For most people, this means that returns for tax-year 2011 or later can still be amended.

Thus far, the IRS has released 94,809,000 refunds averaging $2,686 each.  In all, the IRS has had to return almost $255 billion to taxpayers in the form of refunds of access tax withholdings.

Same Sex Couples Amending Returns

The IRS alerted same-sex couples to consider filing amended returns for past years.  A same sex couple, legally married in a state or foreign country that recognizes their marriage, is now considered married for tax purposes. This is true regardless of whether or not the couple lives in a jurisdiction that recognizes same-sex marriage.

For returns originally filed before Sept. 16, 2013, legally married same sex couples have the option of filing amended return to change their filing status to married filing separately or married filing jointly. But they are not required to change their filing status on a prior return, even if they amend that return for another reason. In either case, their amended return must be consistent with the filing status they have chosen.

If a taxpayer still owes tax for the year 2013, then read https://profwilliambyrnes.com/2014/04/15/4-tax-tips-if-you-cant-pay-the-full-amount-of-taxes-on-time/

Posted in Taxation | Tagged: , , , , , | Leave a Comment »

5 Tax Facts for Early Retirement Plan Withdrawals

Posted by William Byrnes on April 28, 2014


In Tax Tip 2014-35, the IRS addressed the issue of potential tax penalties for withdrawing money before retirement age from a retirement account.

5 tax tips about early withdrawals from retirement plans:

1. An early withdrawal normally means taking money from a retirement plan before age 59½.

2. If a taxpayer makes a withdrawal from a plan, that withdrawal amount must be reported to the IRS on the annual tax return.  Income tax may be due as well as an additional 10 percent tax on the amount of the early withdrawal.  The taxpayer may need to file Form 5329, “Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts”, with the annual federal tax return.

3. The additional 10 percent tax does not apply to nontaxable withdrawals.  Nontaxable withdrawals include withdrawals of the cost to participate in the retirement plan.  The cost includes the taxpayer’s after-tax contributions before the contributions are contributed to the plan.

4. A “rollover” is a type of nontaxable withdrawal. Generally, a rollover is a distribution to the taxpayer of cash or other assets from one retirement plan that is then immediately contributed to another retirement plan.  The taxpayer has 60 days to complete the rollover to make it tax-free.

5. There are many exceptions to the additional 10 percent tax. Some of the exceptions for retirement plans are different from the rules for IRAs.

Exceptions to Tax on Early Distributions

Generally, the amounts an individual withdraws from an IRA or retirement plan before reaching age 59½ are called ”early” or ”premature” distributions. Individuals must pay an additional 10% early withdrawal tax and report the amount to the IRS for any early distributions, unless an exception applies.

The distribution will NOT be subject to the 10% additional early distribution tax in the following circumstances: Exception to 10% Additional Tax
Qualified Plans
(401(k), etc.)
IRA, SEP, SIMPLE IRA* and SARSEP Plans Internal Revenue Code Section(s)
Age
after participant/IRA owner reaches age 59½ yes yes 72(t)(2)(A)(i)
Automatic Enrollment
permissive withdrawals from a plan with auto enrollment features yes yes for SIMPLE IRAs and SARSEPs 414(w)(1)(B)
Corrective Distributions
corrective distributions (and associated earnings) of excess contributions, excess aggregate contributions and excess deferrals, made timely yes n/a 401(k)(8)(D),
401(m)(7)(A),
402(g)(2)(C)
Death
after death of the participant/IRA owner yes yes 72(t)(2)(A)(ii)
Disability
total and permanent disability of the participant/IRA owner yes yes 72(t)(2)(A)(iii)
Domestic Relations
to an alternate payee under a Qualified Domestic Relations Order yes n/a 72(t)(2)(C)
Education
qualified higher education expenses no yes 72(t)(2)(E)
Equal Payments
series of substantially equal payments yes yes 72(t)(2)(A)(iv)
ESOP
dividend pass through from an ESOP yes n/a 72(t)(2)(A)(vi)
Homebuyers
qualified first-time homebuyers, up to $10,000 no yes 72(t)(2)(F)
Levy
because of an IRS levy of the plan yes yes 72(t)(2)(A)(vii)
Medical
amount of unreimbursed medical expenses (>7.5% AGI; after 2012, 10% if under age 65) yes yes 72(t)(2)(B)
health insurance premiums paid while unemployed no yes 72(t)(2)(D)
Military
certain distributions to qualified military reservists called to active duty yes yes 72(t)(2)(G)
Returned IRA Contributions
if withdrawn by extended due date of return n/a yes 408(d)(4)
earnings on these returned contributions n/a no 408(d)(4)
Rollovers
in-plan Roth rollovers or eligible distributions contributed to another retirement plan or IRA within 60 days yes yes 402(c), 402A(d)(3), 403(a)(4), 403(b)(8), 408(d)(3), 408A(d)(3)
Separation from Service
the employee separates from service during or after the year the employee reaches age 55 (age 50 for public safety employees in a governmental defined benefit plan) yes no 72(t)(2)(A)(v),
72(t)(10)

NOTE: Governmental 457(b) distributions are not subject to the 10% additional tax except for distributions attributable to rollovers from another type of plan or IRA.

*25% instead of 10% if made within the first 2 years of participation

tax-facts-online_medium

Authoritative and easy-to-use, 2014 Tax Facts on Insurance & Employee Benefits shows you how the tax law and regulations are relevant to your insurance, employee benefits, and financial planning practices.  Often complex tax law and regulations are explained in clear, understandable language.  Pertinent planning points are provided throughout.  Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This brand-new resource provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

“Our brand-new Tax Facts title is exciting in many ways,” says Rick Kravitz, Vice President & Managing Director of Summit Professional Network’s Professional Publishing Division. “First of all, it fills a huge gap in the resources available to today’s advisors. Small business is a big market, and this book enables advisors to get up-and-running right away, with proven guidance that will help them serve their clients’ needs. Secondly, it addresses the biggest questions facing all taxpayers and provides absolutely reliable answers that help advisors solve today’s biggest problems with confidence.”

Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.  The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community,” added Rick Kravitz.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

 

Posted in Retirement Planning | Tagged: , , , | 1 Comment »

IRS releases new FATCA FAQs

Posted by William Byrnes on April 24, 2014


On Thursday, April 24 the IRS released 10 new FATCA FAQs embedded within a previous release of FAQs, as well as reordering the FAQs.  For the subscribers of Lexis Guide to FATCA Compliance, below I have highlighted in RED the additional FAQs for your quick review and highlighted your attention to the amended FAQ sections.  For additional FATCA Updates for subscribers, see my link to FATCA Critical Updates and Analysis

By example, the IRS answered the oft heard question of late because of the new 30% withholding requirement that begins July 1: “How will Certified-Deemed Compliant FFIs, Owner-documented FFIs, or Excepted FFIs certify to U.S. withholding agents that they are not subject to Chapter 4 withholding given that they are not required to register with the IRS?” 

book coverOperational Compliance Guide for FATCA .. a Lexis solution for compliance officers

The LexisNexis® Guide to FATCA Compliance (2nd Edition) comprises 34 Chapters grouped in three parts: compliance program (Chapters 1–4), analysis of FATCA regulations (Chapters 5–16) and analysis of Intergovernmental Agreements (IGAs) and local law compliance challenges (Chapters 17–34), including intergovernmental agreements as well as the OECD’s TRACE initiative for global automatic information exchange protocols and systems. The 34 chapters include many practical examples to assist a compliance officer contextualize the regulations, IGA provisions, and national rules enacted pursuant to an IGA.  Chapters include by example an in-depth analysis of the categorization of trusts pursuant to the Regulations and IGAs, operational specificity of the mechanisms of information capture, management and exchange by firms and between countries.

FATCA – FAQs General

Qualified Intermediaries/Withholding Foreign Partnerships/Withholding Foreign Trusts

# Questions Answers
Q1. How does a Financial Institution that is not currently a Qualified Intermediary (“QI”), a Withholding Foreign Partnership (“WP”), or a Withholding Foreign Trust (“WT”) register to become one?

The process to become a QI, WP or WT has not been modified by the provisions of FATCA.

The application for Qualified Intermediary status can be found here: QI Application

Information on acquiring Withholding Foreign Partnership, or Withholding Foreign Trust status can be found here: WP/WT Application

Q2. How do FIs that are currently QIs, WPs and WTs renew their agreements?

Existing QIs, WPs and WTs are required to renew their QI agreements through the FATCA registration website as part of their FATCA registration process.

All QI, WP, or WT agreements that would otherwise expire on December 31, 2013 will be automatically extended until June 30, 2014.  (Notice 2013-43; 2013-31 IRB 113).

Q3. I am not currently a QI/WP/WT.  Can I use the LB&I registration portal to register for FATCA and become a new QI/WP/WT?

No.

QI/WP /WT status can only obtained by completing and submitting a Form 14345 (“QI Intermediary Application”) and Form SS-4 (“Application for Employer Identification Number”) directly to the QI Program.   Interested QIs/WPs/WT should submit the required paperwork to the QI program and separately use the FATCA registration portal to obtain a GIIN for FATCA purposes.    FFIs can not become a new QI/WP/WT through the FATCA portal.

Applications for QI/WP/WT status can be made to:

IRS-Foreign Intermediary Program
Attn:  QI/WP/WT Applications
290 Broadway, 12th floor
New York City, New York 10007

Note:  Form 14345 (“QI Intermediary Application”) should be used for WPs and WTs in addition to QIs.

Q4. Must an FI become a QI/WP/WT in order to register under FATCA? An FI is not required to obtain QI/WP or WT status to register under FATCA.  If at the time of FATCA registration, the FI does not have in effect a withholding agreement with the IRS to be treated as a QI, WP or WT, the FI will indicate “Not applicable” in box 6 and will continue with the registration process.
Q5. If an FFI has a QI/WP/WT agreement in place, does the Responsible Party for purposes of the QI/WP/WT Agreement also have to the serve as the FFI’s Responsible Officer? No, the FFI’s Responsible Party for purposes of a QI/WP/WT Agreement does not have to be the Responsible Officer chosen by the FFI for purposes of certification under the regulations or for FATCA Registration purposes.
Q6. If a member of the Expanded Affiliated Group is a Qualified Intermediary/Withholding Trust/Withholding Partnership, does the Lead Financial Institution renew the Qualified Intermediary/Withholding Trust/Withholding Partnership agreement on behalf of the member or does the member renew its own agreement? Each Member FI with a Qualified Intermediary/Withholding Trust/Withholding Partnership (“QI/WP/WT”) agreement will renew its own agreement on the registration system.  When a Member is completing its registration it will be asked about whether it maintains and seeks to renew a QI/WP/WT agreement with the Service.  If the Member indicates it has one of these agreements and would like to renew the agreement, the Member will do so in Part 3 of the registration system in addition to claiming status as a participating FFI or registered-deemed compliant FFI (and obtaining its required GIINs). 

IGA Registration

# Questions Answers
Q1. Please provide a link that lists the jurisdictions treated as having in effect a Model 1 or Model 2 IGA. The U.S. Department of Treasury’s list of jurisdictions that are treated as having an intergovernmental agreement in effect can be found by clicking on the following link: IGA LIST
Q2. How do Foreign Financial Institutions in Model 1 jurisdictions register on the FATCA registration website?

Financial Institutions that are treated as Reporting Financial Institutions under a Model 1 IGA (see the list of jurisdictions treated as having an IGA in effect at IGA LIST) should register as Registered Deemed-Compliant Foreign Financial Institutions.

More information on registration can be found in the FATCA Registration Online User Guide:User Guide Link (See Section 2.4 “Special Rules for Registration”)

Q3. How do Foreign Financial Institutions in Model 2 jurisdictions register on the FATCA registration website?

Financial Institutions that are treated as Reporting Financial Institutions under a Model 2 IGA (see the list of jurisdictions treated as having an IGA in effect at IGA LIST) should register as Participating Foreign Financial Institutions.

More information on registration can be found in the FATCA Registration Online User Guide:User Guide Link (See Section 2.4 “Special Rules for Registration”)

Q4. We are an FFI in a country that has not signed an IGA, and the local laws of our country do not allow us to report U.S. accounts or withhold tax. What is our FATCA classification?

Unless the Treasury website provides that your country is treated as having an IGA in effect, then, because of its local law restrictions, this FFI should register as a Limited FFI provided it meets the definition shown directly below. SeeFATCA – Archive   for a list of countries treated as having an IGA in effect.

A Limited FFI means an FFI that, due to local law restrictions, cannot comply with the terms of an FFI Agreement, or otherwise be treated as a PFFI or RDCFFI, and that is agreeing to satisfy certain obligations for its treatment as a Limited FFI.

Q5. In a Model 1 IGA jurisdiction, does the FFI need to fill out Question 10 about Responsible Officers? Yes, if an FFI treated as a reporting Model 1 FFI wishes to have a GIIN, a Responsible Officer must be designated in Part 1, line 10 of Form 8957.     Please see the FAQs on Responsible Officers for further information. 

Expanded Affiliated Groups

# Questions Answers
Q1 For registration purposes, can an EAG with a Lead FI and 2 Member FIs be divided into: (1) a group with a Lead FI and a member FI, and (2) a member FI that will register as a Single FI? Yes. An EAG may organize itself into subgroups, so long as all entities with a registration requirement are registered. An FI that acts as a Compliance FI for any members of the EAG is, however, required to register each such member as would a Lead FI for such members.
Q2. What is required for an entity to be a Lead FI? A Lead FI means a USFI, FFI, or a Compliance FI that will initiate the FATCA Registration process for each of its Member FIs that is a PFFI, RDCFFI, or Limited FFI and that is authorized to carry out most aspects of its Members’ FATCA Registrations. A Lead FI is not required to act as a Lead FI for all Member FIs within an EAG. Thus, an EAG may include more than one Lead FI that will carry out FATCA Registration for a group of its Member FIs. A Lead FI will be provided the rights to manage the online account for its Member FIs. However, an FFI seeking to act as a Lead FI cannot have Limited FFI status in its country of residence. See Rev. Proc. 2014-13 to review the FFI agreement for other requirements of a Lead FI that is also a participating FFI.
Q3. Can a Member FI complete its FATCA registration and obtain a GIIN if the Lead FI for that Member FI has not yet registered under FATCA?

No, a Member FI can only register after its Lead FI has registered.  When the Member FI does register, it should indicate in Part 1, line 1, that it is a member of an expanded affiliated group.

In Part 2 of the Lead FI’s registration, the Lead FI will add basic identifying information for each Member, and the system will create the Member FATCA accounts.  Each Member FI will then be required to log into the system and complete its registration.

Q4. Is a limited FFI who is a member of an Expanded Affiliated Group subject to Chapter 4 withholding?  Yes. A limited FFI (regardless of whether it is a member of an Expanded Affiliated Group) must identify itself to withholding agents as a nonparticipating FFI and, as a result, is subject to Chapter 4 withholding.  Thus, while limited FFIs are generally required to register, they will not be issued GIINs.

Sponsoring/Sponsored Entities

# Questions Answers
Q1. We are a Sponsoring Entity, and we would like to register our Sponsored Entities. How do we register our Sponsored Entities?

The Sponsoring Entity that agrees to perform the due diligence, withholding, and reporting obligations of one or more Sponsored Entities pursuant to Treas. Reg. §1.1471-5(f)(1)(i)(F) should register with the IRS via the FATCA registration website to be treated as a Sponsoring Entity. To allow a Sponsoring Entity to register its Sponsored Entities with the IRS, and, as previewed in Notice 2013-69, the IRS is developing a streamlined process for Sponsoring Entities to register Sponsored Entities on the FATCA registration website. Additional information about this process will be provided by the IRS at a later date.

While a Sponsoring Entity is required to register its Sponsored Entities for those entities to obtain GIINs, the temporary and proposed regulations provide a transitional rule that, for payments prior to January 1, 2016, permit a Sponsored Entity to provide the GIIN of its Sponsoring Entity on withholding certificates if it has not yet obtained a GIIN. Thus, a Sponsored Entity does not need to provide its own GIIN until January 1, 2016 and is not required to register before that date.

Responsible Officers and Points of Contact

# Questions Answers
Q1. What is a Point Of Contact (POC)? The Responsible Officer listed on line 10 of Form 8957 (or the online registration system) can authorize a POC to receive FATCA-related information regarding the FI, and to take other FATCA-related actions on behalf of the FI. While the POC must be an individual, the POC does not need to be an employee of the FI. For example, suppose that John Smith, Partner of X Law Firm, has been retained and been given the authority to help complete and submit the FATCA Registration on behalf of an FI. John Smith should be identified as the POC, and in the Business Title field for this POC, it should state Partner of X Law Firm.
Q2. Is the Responsible Officer required to be the same person for all lines on Form 8957 or the online registration (“FATCA Registration”)?

No, it is not required that the Responsible Officer (“RO”) be the same person for all lines on Form 8957 or the online registration.  It is possible, however, that the same person will have the required capacity to serve as the RO for all FATCA Registration purposes.

The term “RO” is used in several places in the FATCA Registration process.  In determining an appropriate RO for each circumstance, the Financial Institution (“FI”) or direct reporting NFFE should review the capacity requirements and select an individual who meets those requirements.  This will be a facts and circumstances determination.

Please note that the responsible officer used for registration purposes may differ from the certifying responsible officer of an FFI referenced in Treasury Regulation §1.1471-1(b)(116).  (See, however, below regarding “Delegation of RO Duties.”)

Below is a description of the required RO capacity per line:

Part 1, Question 10 (FATCA RO for the Financial Institution)

Language from the Form 8957 Instructions and the FATCA Online Registration User Guide specifies that the RO for question 10 purposes is a person authorized under applicable local law to establish the statuses of the entity’s home office and branches as indicated on the registration form.  (See FAQ below for what it means to “establish the FATCA statuses” of the FI’s home office and branches or direct reporting NFFE.)

Part 1, Question 11b (Point of Contact authorization)

The RO identified in question 11b must be an individual who is authorized under local law to consent on behalf of the FI or direct reporting NFFE (“an authorizing individual”) to the disclosure of FATCA-related tax information to third parties.  By listing one or more Points of Contact (each, a “POC”) in question 11b and selecting “Yes” in question 11a, the authorizing individual identified at the end of question 11b (to the right of the checkbox) is providing the IRS with written authorization to release the entity’s FATCA-related tax information to the POC.  This authorization specifically includes authorization for the POC to complete the FATCA Registration (except for Part 4), to take other FATCA-related actions, and to obtain access to the FI’s (or direct reporting NFFE’s) tax information.  Once the authorization is granted, it is effective until revoked by either the POC or by an authorizing individual of the FI or direct reporting NFFE.

Part 4

The authority required for an individual to be an RO for purposes of Part 4 is substantially similar to the authority required for RO status under Treas. Reg. § 1.1471-1(b)(116).

The RO designated in Part 4 must be an individual with authority under local law to submit the information provided on behalf of the FI or direct reporting NFFE.  In the case of FIs or FI branches not governed by a Model 1 IGA, this individual must also have authority under local law to certify that the FI meets the requirements applicable to the FI status or statuses identified on the registration form.  This individual must be able to certify, to the best of his or her knowledge, that the information provided in the FI’s or direct reporting NFFE’s registration is accurate and complete.  In the case of an FI, the individual must be able to certify that the FI meets the requirements applicable to the status(es) identified in the FI’s registration.  In the case of a direct reporting NFFE, the individual must be able to certify that the direct reporting NFFE meets the requirements of a direct reporting NFFE under Treas. Reg. § 1.1472-1(c)(3).

An RO (as defined for purposes of Part 4) can delegate authorization to complete Part 4 by signing a Form 2848 “Power of Attorney Form and Declaration of Representative” or other similar form or document (including an applicable form or document under local law giving the agent the authorization to provide the information required for the FATCA Registration).

Note: While the certification in Part 4 of the online registration does not include the term “responsible officer,” the FATCA Online Registration User Guide provides that the individual designated in Part 4 must have substantially the same authority as the RO as defined for purposes of Form 8957, Part 4.

Delegation of RO Duties

While the ROs for purposes of Question 10, Question 11b, and Part 4 of the FATCA Registration may be different individuals, in practice it will generally be the same individual (or his/her delegate)).  The regulatory RO is responsible for establishing and overseeing the FFI’s compliance program.  The regulatory RO may, but does not necessarily have to, be the registration RO for purposes of 1) ascertaining and completing the chapter 4 statuses in the registration process; 2) receiving the GIIN and otherwise interacting with the IRS in the registration process; and 3) making the Part 4 undertakings.  Alternatively, the regulatory RO, or the FFI (through another individual with sufficient authority), may delegate each of these registration roles to one or more persons pursuant to a delegation of authority (such as a Power of Attorney) that confers the particular registration responsibility or responsibilities to such delegate(s).  The scope of the delegation, and the delegate’s exercise of its delegated authority within such scope, will limit the scope of the potential liability of the delegate under the rules of agency law , to the extent applicable.  The ultimate principal, whether that is the regulatory RO or the FFI, remains fully responsible in accordance with the terms and conditions reflected in the regulations, and other administrative guidance to the extent applicable under FATCA, the regulations.

Q3. The Instructions for Form 8957 state that for purposes of Part 1, question 10, “. . .  RO means the person authorized under applicable local law to establish the statuses of the FI’s home office and branches as indicated on the registration form.”  What does it mean for an RO to have the authority to “establish the statuses of the FI’s home office and branches as indicated on the registration form”? To have the authority to “establish the statuses” for purposes of question 10, an RO must have the authority to act on behalf of the FI to represent the FATCA status(es) of the FI to the IRS as part of the registration process.  This RO must also have the authority under local law to designate additional POCs.
Q4. My FI plans on employing an outside organization (or individual) solely for the purpose of assisting with the registration process.  Once registration is complete, or shortly thereafter, my FI intends to discontinue its relationship with this organization.  Is this permissible under the FATCA registration system? How should my FI use the registration system to identify this relationship?

Yes, the FI or direct reporting NFFE may employ an outside organization to assist with FATCA registration and discontinue the relationship with the outside organization once registration is complete.  As part of the registration process, an FI or direct reporting NFFE may appoint up to five POCs who are authorized to take certain FATCA-related actions on behalf of the entity, including the ability to complete all parts of the FATCA Registration (except for Part 4), to take other appropriate or helpful FATCA-related actions, and to obtain access to the entity’s FATCA-related tax information.  The POC authorization must be made by an RO within the meaning of Part 1, question 10.  Part 4 must be completed by the RO or a duly authorized agent of the RO.  (See FAQ 1 for a discussion of the process for delegating authorization to complete Part 4.)

Once the services of a POC are no longer needed, the RO may log into the online FATCA account and delete the POC.  This process revokes the POC’s authorization.  At this point, the Responsible Officer can input a new POC, or leave this field blank if they no longer wish to have any POC other than the RO listed on Line 10.

If a third-party adviser that is an entity is retained to help the FI or direct reporting NFFE complete its FATCA registration process, the name of the third-party individual adviser that will help complete the FATCA registration process should be entered as a POC in Part 1, question 11b, and the “Business Title” field for that individual POC should be completed by inserting the name of the entity and the POC’s affiliation with the entity.  For example, suppose that John Smith, Partner of X Law Firm, has been retained and been given the authority to help complete the FATCA Registration on behalf of FI Y.  John Smith should be identified as the POC, and in the Business Title field for this POC, it should state Partner of X Law Firm.

Financial Institutions

# Questions Answers
Q1. Are U.S. Financial Institutions (USFIs) required to register under FATCA? If so, under what circumstances would a USFI register? A USFI is generally not required to register under FATCA. However, a USFI will need to register if the USFI chooses to become a Lead FI and/or a Sponsoring Entity or seeks to maintain and renew the QI status of a foreign branch that is a QI. Furthermore, a USFI with a foreign branch that is a reporting Model 1 FFI is required to register on behalf of its foreign branches (and should identify each such branch when registering). A USFI with non-QI branch operations in a Model 2 jurisdiction or in a non-IGA jurisdiction is not required to register with the IRS.
Q2. Is a Foreign Financial Institution (“FFI”) required to obtain an EIN? If the FFI has a withholding obligation and will be filing Forms 1042 and Forms 1042-S with the Internal Revenue Service, it will be required to have an EIN. Please see publication 515 (“Withholding of Tax on Nonresident Aliens and Foreign Entities”) for further information about U.S. Withholding requirements. See Pub. 515. An FFI is also required to obtain an EIN when it is a QI, WP, or WT (through the application process to obtain any such status) or when the FFI is a participating FFI that elects to report its U.S. accounts on Forms 1099 under Treas. Reg. §1.1471-4(d)(5).
How does a FFI apply for a EIN if it does not already have one? If a FFI does not have an EIN, it may apply for one using Form SS-4 (“Application for Employer Identification Number”) or the online registration system. See Apply-for-an-Employer-Identification-Number-(EIN)-Onlinefor more information.

Exempt Beneficial Owners

# Questions Answers
Q1. We are a foreign central bank of issue. Will we be subject to FATCA withholding if we do not register? You will generally be exempt from FATCA Registration and withholding if you meet the requirements to be treated as an exempt beneficial owner (e.g. as a foreign central bank of issue described in Treas. Reg. § 1.1471-6(d), as a controlled entity of a foreign government under Treas. Reg. §1.1471-6(b)(2), or as an entity treated as either of the foregoing under an applicable IGA). A withholding agent is not required to withhold on a withholdable payment to the extent that the withholding agent can reliably associate the payment with documentation to determine the portion of the payment that is allocable to an exempt beneficial owner in accordance with the regulations. However, an exempt beneficial owner may be subject to withholding on payments derived from the type of commercial activity described in Treas. Reg. § 1.1471-6(h).
Q2. We are a foreign pension plan. Will we be subject to FATCA withholding if we do not register? You will be exempt from FATCA Registration and withholding if you meet the requirements to be treated as a retirement fund described in Treas. Reg. § 1.1471-6(f), or under an applicable IGA. A withholding agent is not required to withhold on a withholdable payment to the extent that the withholding agent can reliably associate the payment with documentation to determine the portion of the payment that is allocable to an exempt beneficial owner (in this case, a retirement fund) in accordance with the regulations.

NFFEs

# Questions Answers
Q1. How should an entity seeking the FATCA status of “direct reporting NFFE” (other than a sponsored direct reporting NFFE) register for this status to obtain a GIIN in order to avoid FATCA withholding?

A direct reporting NFFE is eligible to register for this status and when registering should complete an online registration (or, alternatively, submit a paper Form 8957) based on the instructions provided in this FAQ.   For registrations occurring in years after 2014, it is anticipated that both the online registration user guide and the Instructions for Form 8957 will be updated to incorporate this information.

In general, for purposes of completing the registration of a direct reporting NFFE, substitute the words “direct reporting NFFE” for the words “financial institution” wherever  they appear in the online registration user guide (or in the Instructions for Form 8957).  Unless specific instructions for a registration question are described here in this FAQ, please use the generally applicable instructions provided in the online registration user guide (or in the Instructions for Form 8957).

Part 1

Question 1 – – Select “Single”.

Question 4 – – Select “None of the above”.

Question 6 – – Select “Not applicable”.

Question 7 – – Select “No”.  (If using the portal online, selecting “no” will automatically skip Questions 8 and 9.)

Question 8 – – Skip this question (which relates to branches)

Question 9 – – Skip all parts (a) through (c) of this question (which relate to branches).

Question 10 – – Enter the information of the individual who will be responsible for ensuring that the direct reporting NFFE meets its FATCA reporting obligations and will act as a point of contact with the IRS in connection with its status as a direct reporting NFFE.

Part 2 – – It is not necessary for a direct reporting NFFE to complete this section. (If using the portal online, selecting Single in question 1 will automatically skip Part 2.)

Part 3 – – It is not necessary for a direct reporting NFFE to complete this section. (If using the portal online, selecting “Not Applicable” in question 6 will automatically skip Part 3.)

Part 4 – – The individual who completes this part must have the authority to provide the certification.

Direct reporting NFFE QIs/WPs/WTs should renew their agreements through the existing traditional paper process.  Instructions can be found at the following link (Question IX), see:Qualified-Intermediary-Frequently-Asked-Questions

Q2. How should a sponsor of a sponsored direct reporting NFFE register itself for this status and obtain a GIIN?

A sponsor of a sponsored direct reporting NFFE is a sponsoring entity (see Treas. Reg. § 1.1471-1T(b)(124)) and  should complete an online registration (or, alternatively, submit a paper Form 8957) as a sponsoring entity, based on the instructions provided in this FAQ.  A sponsoring entity need only complete one registration to act as the sponsor for both sponsored FFIs and sponsored direct reporting NFFEs.  For registrations occurring in years after 2014, it is anticipated that both the online registration user guide and the Instructions for Form 8957 will be updated to incorporate this information, including by incorporating the definition of sponsoring entity provided in Treas. Reg. § 1.1471-1T(b)(124).

In general, for purposes of having a sponsor register a sponsored direct reporting NFFE, substitute the words “sponsor of a direct reporting NFFE” for the words “sponsoring entity” wherever they appear in the online registration user guide (or in the Instructions for Form 8957).  Unless specific instructions for a registration question are described here in this FAQ, please use the generally applicable instructions provided in the online registration user guide (or in the Instructions for Form 8957).

Part 1

Question 1 – – Select “Sponsoring Entity”.

Question 4 – – Select “None of the above”.

Question 6 – – Select “Not applicable”.

Question 7 – – Select “No”. (If using the portal online, selecting “no” will automatically skip Questions 8 and 9)

Question 8 – – Skip this question (which relates to branches)

Question 9 – – Skip all parts (a) through (c) of this question (which relate to branches).

Question 10 – – Enter the information of the individual who will be responsible for ensuring that the direct reporting NFFE meets its FATCA reporting obligations and who will act as a point of contact with the IRS in connection with its obligations as a sponsoring entity.

Part 2 – – It is not necessary for a sponsor of a direct reporting NFFE to complete this section.  (If using the portal online, selecting Sponsoring Entity in question 1 will automatically skip Part 2.)

Part 3 – – It is not necessary for a sponsor of a direct reporting NFFE to complete this section. (If using the portal online, selecting “Not Applicable” in question 6 will automatically skip Part 3.)

Part 4 – – The individual who completes this part must have the authority to provide the certification.

Registration Update

# Questions Answers
Q1. Why has my registration been put into “Registration Incomplete”? What can I do?

If your registration has been put into Registration Incomplete status, it is because the IRS has identified an issue with your registration.  If you are Registration Incomplete status, please review your registration for any of the following errors and update it accordingly:

  1. The FFI has identified itself as a Qualified Intermediary with a QI-EIN of which the IRS has no record.  (If you have QI, WP or WT Agreement signed with the IRS, please contact the Financial Intermediaries Team for further assistance.)

  2. The RO has been identified with initials only and no specific name has been provided.

  3. The RO does not appear to be a natural person.

  4. Notice 2013-43 stated that any registrations submitted prior to  January 1, 2014 would be taken out of submit and put into Registration Incomplete status. Thus, if your registration was submitted prior to  January 1, 2014, you must  re-submit your registration assuming that none of the other abovementioned reasons (1-3) are an issue with the FFI’s registration.

After you have updated your registration, you must resubmit in order for your registration to be processed.

General Compliance

# Questions Answers
Q1. How will Certified-Deemed Compliant FFIs, Owner-documented FFIs, or Excepted FFIs certify to U.S. withholding agents that they are not subject to Chapter 4 withholding given that they are not required to register with the IRS?  Certified-Deemed Compliant FFIs, Owner-documented FFIs, and Excepted FFIs will demonstrate their Chapter 4 withholding status to U.S. withholding agents by providing a withholding certificate and documentary evidence that complies with the requirements of Treas. Reg. 1.1471-3(d).
Q2. We are an FFI in a non-IGA country.  Will we be subject to Chapter 4 withholding if we do not register with the IRS?

Yes, to the extent that you receive withholdable payments and are not subject to an exemption from the registration requirement.  Under FATCA, to avoid being withheld upon, FFIs that are not subject to an exemption from the registration requirement must register with the IRS and agree to report to the IRS certain information about their U.S. accounts, including accounts of certain foreign entities with substantial U.S. owners.  An FFI that fails to satisfy its applicable registration requirements will generally be subject to 30% withholding on withholdable payments that it receives.  

Categories of FFIs that are exempt from registration include:

  1. Certified deemed-compliant FFIs (including any entities treated as certified deemed-compliant);
  2. Exempt beneficial owners;
  3. Owner Documented FFIs; and
  4. Excepted FFIs.
Q3. What are the consequences of terminating the FFI agreement for a Participating Foreign Financial Institution? If the FFI agreement is terminated by either the IRS or the FFI pursuant to the termination procedures set forth in Section 12 of the FFI agreement, the FFI will be treated as a nonparticipating FFI and subject to 30% withholding on withholdable payments made after the later of (i) the date of termination of the FFI agreement, or (ii) June 30, 2014, except to the extent that the withholdable payments are exempt from withholding (e.g. under the rules related to grandfathered obligations) or the FFI qualifies for a chapter 4 status other than a nonparticipating FFI (such as a certified deemed-compliant FFI).  See Revenue Procedure 2014-13, 2014-3 I.R.B. 419, for the terms of the FFI agreement
Q4. What happens if an FFI is not registered by May 5th, 2014? As set forth in Announcement 2014-17, released April 2, 2014, to ensure inclusion on the first IRS FFI List (which is expected to first be electronically available on June 2, 2014) prior to the date FATCA withholding goes into effect, an FFI must finalize its registration by May 5, 2014.   The regulations generally provide that, in order for withholding not to apply, a withholding agent must obtain an FFI’s GIIN for payments made after June 30, 2014, though it need not confirm that the GIIN appears on the IRS FFI List until 90 days after the FFI provides a withholding certificate or written statement claiming status as a participating FFI or registered deemed-compliant FFI.  A special rule, however, provides that a withholding agent does not need to obtain a reporting Model 1 FFI’s GIIN for payments made before January 1, 2015.  See Treas. Reg. § 1.1471-3(d)(4)(iv)(A).  As a result, while a reporting Model 1 FFI is currently able to register and obtain a GIIN, it will have additional time beyond July 1, 2014, to register and obtain a GIIN in order to ensure that it is included on the IRS FFI list before January 1, 2015.  See Announcement 2014-17 for revised FATCA registration deadlines to ensure inclusion on the first FFI List (which is expected to be electronically available on June 2, 2014).
Q5. Are Forms W-8 still required to be renewed by the appropriate beneficial owners?

Generally, a Form W-8BEN will remain in effect for purposes of establishing foreign status for a period starting on the date the form is signed and ending on the last day of the third succeeding calendar year, unless a change in circumstances makes any information on the form incorrect. For example, a Form W-8BEN signed on September 30, 2015, remains valid through December 31, 2018.

However, under certain conditions a Form W-8BEN will remain in effect indefinitely until a change of circumstances occurs. To determine the period of validity for Form W-8BEN for purposes of chapter 4, see Treas. Reg. § 1.1471-3(c)(6)(ii). To determine the period of validity for Form W-8BEN for purposes of chapter 3, see Teas. Reg. § 1.1441-1(e)(4)(ii).

Withholding certificates and documentary evidence obtained for chapter 3 or chapter 61 purposes that would otherwise expire on December 31, 2013, will not expire before January 1, 2015, unless a change in circumstances occurs that would otherwise render the withholding certificate or documentary evidence incorrect or unreliable.

Please note that various Forms in the W-8 series were revised in 2014 to incorporate the certifications required for FATCA purposes and can now be found at the following link: Form & Pubs.  See Treas. Reg. § 1.1471-3(c) for rules regarding reliance on a pre-FATCA Form W-8. 

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3 new IGAs in effect – FATCA IGA update

Posted by William Byrnes on April 23, 2014


67 days remain until the July 1st deadline that FATCA’s 30% withholding applies to payments from US sources.  But with less than 2 weeks, the crunch time is on for foreign financial institutions (FFIs) to register by May 5 with the IRS to obtain a GIIN and to be included on the IRS’ list of participating FFIs in order to avoid the attracting the 30% withholding by US withholding agents.

51 IGAs are now to be treated in effect, including 26 that have been signed and 25 that are agreed (but not yet officially signed).  The 3 newly added IGAs in the past two weeks include Bahamas, India and Slovak Republic.  FFIs in these IGA jurisdictions have an extension to register with the IRS before December 22, 2014 to obtain their GIINs.

The following jurisdictions are treated as having a FATCA intergovernmental agreement (IGA) in effect:

Jurisdictions that have reached agreements in substance and have consented to being included on this list (beginning on the date indicated in parenthesis):

Model 1 IGA = 24

  1. Australia (4-2-2014)
  2. Bahamas (4-17-2014) <— new
  3. Belgium (4-2-2014)
  4. Brazil (4-2-2014)
  5. British Virgin Islands (4-2-2014)
  6. Croatia (4-2-2014)
  7. Czech Republic (4-2-2014)
  8. Estonia (4-3-2014)
  9. Gibraltar (4-2-2014)
  10. India (4-11-2014) < — new
  11. Jamaica (4-2-2014)
  12. Kosovo (4-2-2014)
  13. Latvia (4-2-2014)
  14. Liechtenstein (4-2-2014)
  15. Lithuania (4-2-2014)
  16. New Zealand (4-2-2014)
  17. Poland (4-2-2014)
  18. Portugal (4-2-2014)
  19. Qatar (4-2-2014)
  20. Slovak Republic (4-11-2014) < — new
  21. Slovenia (4-2-2014)
  22. South Africa (4-2-2014)
  23. South Korea (4-2-2014)
  24. Romania (4-2-2014)

Model 2 IGA = 1

  1. Austria (4-2-2014)

Jurisdictions that have signed agreements:

 

book coverOperational Compliance Guide for FATCA .. a Lexis solution for compliance officers

For in-depth analysis of the practical compliance aspects of financial service business providing for exchange of information of information about foreign residents with their national competent authority or with the IRS (FATCA), see Lexis Guide to FATCA Compliance, 2nd Edition just published!

The LexisNexis® Guide to FATCA Compliance (2nd Edition) comprises 34 Chapters grouped in three parts: compliance program (Chapters 1–4), analysis of FATCA regulations (Chapters 5–16) and analysis of Intergovernmental Agreements (IGAs) and local law compliance challenges (Chapters 17–34), including intergovernmental agreements as well as the OECD’s TRACE initiative for global automatic information exchange protocols and systems. The 34 chapters include many practical examples to assist a compliance officer contextualize the regulations, IGA provisions, and national rules enacted pursuant to an IGA.  Chapters include by example an in-depth analysis of the categorization of trusts pursuant to the Regulations and IGAs, operational specificity of the mechanisms of information capture, management and exchange by firms and between countries, insights as to the application of FATCA and the IGAs within new BRIC and European country chapters.

 

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6 Tax Facts for Self-Employed Taxpayers

Posted by William Byrnes on April 23, 2014


In Tax Tip 2014-34, the IRS provided 6 tax tips for self employed taxpayers.

  1. Self-employment income includes income received for part-time work.  This is in addition to income from a regular job.
  2. A self employed taxpayer must file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with your Form 1040.
  3. A self employed taxpayer may have to pay self-employment tax as well as income tax if a profit was earned.  Self-employment tax includes Social Security and Medicare taxes. Use Schedule SE, Self-Employment Tax, to calculate whether any self employment tax is due.
  4. A self employed taxpayer may need to make estimated tax payments. Taxpayers typically make these payments on income that is not subject to withholding.  A taxpayer may be charged a penalty if not paying enough estimated taxes throughout the entire year.
  5. A self employed taxpayer can deduct some expenses paid to run your trade or business. A self employed taxpayer can deduct most business expenses in full, but some must be ’capitalized.’  Capitalization means that the deduction will be limited to just a portion of the expense each year over a period of years.  By example, only the first $5,000 of the “start-up” expenses for a new business of the taxpayer is potentially deductible, and not until the year in which the active trade or business begins.  All other start up expenses must be amortized over a 180-month period, beginning with the month the business starts.  Thus, start up expenses in general are only deductible over this 180 month period, and not in the year actually incurred.
  6. A self employed taxpayer can deduct business expenses only if the expenses are both ordinary and necessary.  An ordinary expense is one that is common and accepted in an industry.  A necessary expense is one that is helpful and proper for the trade or business.

tax-facts-online_medium

Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This brand-new resource provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

“Our brand-new Tax Facts title is exciting in many ways,” says Rick Kravitz, Vice President & Managing Director of Summit Professional Network’s Professional Publishing Division. “First of all, it fills a huge gap in the resources available to today’s advisors. Small business is a big market, and this book enables advisors to get up-and-running right away, with proven guidance that will help them serve their clients’ needs. Secondly, it addresses the biggest questions facing all taxpayers and provides absolutely reliable answers that help advisors solve today’s biggest problems with confidence.”

Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.  The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community,” added Rick Kravitz.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

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Court Approves New Planning Techniques for Investment Income Tax Trap for Trusts

Posted by William Byrnes on April 22, 2014


The Tax Court recently handed down a decision that could prove to be just the break that trusts participating in business activities need to escape liability for the new 3.8 percent tax on investment-type income (the NIIT) enacted with the ACA / ObamaCare.

Many trusts with business-related income are finally feeling the sting of the tax, which applied to all trust investment income for trusts with income in excess of a low $11,950 in 2013 ($12,150 for 2014).* The decision paves the way for new planning techniques in 2014 and beyond …

Read about the new planning techniques for the new investment tax: https://www.lifehealthpro.com/2014/04/21/court-untangles-investment-income-tax-trap-for-tru

Also see previous planning analysis at https://profwilliambyrnes.com/2014/01/02/irs-gives-high-income-taxpayers-a-break-on-new-3-8-tax/

See also: 10 things to know about how investments are taxed

* Estates and trusts are subject to the Net Investment Income Tax if they have undistributed Net Investment Income and also have adjusted gross income over the dollar amount at which the highest tax bracket for an estate or trust begins for such taxable year under section 1(e) (for tax year 2013, this threshold amount is $11,950). For 2014, the threshold amount is $12,150.

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Posted in Retirement Planning, Taxation, Wealth Management | Tagged: , , , , , | Leave a Comment »

Why Are Many Baby Boomer Retirees Worried?

Posted by William Byrnes on April 21, 2014


“The 10,000 baby boomer that reach retirement age each day in America are waking up to the probability that they will outspend their retirement plan designed twenty or thirty years ago, forcing a drastic reduction in quality of life style for the ‘golden years’” revealed William Byrnes, author of National Underwriter’s Tax Facts.

“By example, social security increases since Ronald Reagan’s presidency, when many Baby Boomers crafted their family retirement plans, did not keep up with the actual inflation.  Also, baby boomers are outliving their retirement plans by ten or more years”, continued William Byrnes.  “Stretching the retirement savings available for an additional twenty years of life expectancy requires correctly managing the complex retirement taxation rules established by Congress and the IRS.”

Robert Bloink added, “Baby boomers retirement taxation questions include: How are earnings on an IRA taxed? What is the penalty for making excessive contributions to an IRA? How are amounts distributed from a traditional and from a ROTH IRA taxed?  How is the required minimum distribution (RMD) calculated?”

“By example of managing the retirement taxation rules, if the baby boomer engages in a prohibited transaction with his IRA, his or her individual retirement account may cease to qualify for the tax benefits.  Thus, then baby boomer needs to understand what is a prohibited transaction?  When can the baby boomer tax pull retirement funds as a loan from a retirement account or policy without it being prohibited?”

“For complex modern families with multiple marriages and various children, a retirement and estate planner should analyze the non-probate assets”, interjected Dr. George Mentz.  “Such assets may include the client’s 401k, 403b, 459, annuities, property and joint tenancy, among others.  Regarding insurance policy designations, the client may need to reexamine the beneficiaries, contingent and secondary, and percentages among them, based on current circumstances.”

“Because client’s are outliving their life expectancy and thus outliving their retirement planning, and medical expenses certainly factor into retirement planning, long term care for family members must also be addressed,” said William Byrnes.  “Moreover, recent press has focused client’s attention on tragic incident and end of life issues, such as a durable power of attorney for health care (DPA/HC), living will, or advance directives that explain the patient’s wishes in certain medical situations.  Finally in this regard, a client may require a Limited Powers of Attorney to address situations of incapacity, as well as orderly continuation of immediate family needs upon death.“

Robert Bloink included, “Other important issues to address with the client include pre-marital property contracts/pre-nuptials involving the second marriage(s), IRA beneficiary planning in blended families, spousal lifetime access trust (SLATs), and planning for unmarried domestic partners.”

tax-facts-online_medium

Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.” said Rick Kravitz.  The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

 Authoritative and easy-to-use, 2014 Tax Facts on Insurance & Employee Benefits shows you how the tax law and regulations are relevant to your insurance, employee benefits, and financial planning practices.  Often complex tax law and regulations are explained in clear, understandable language.  Pertinent planning points are provided throughout.

2014 Tax Facts on Investments provides clear, concise answers to often complex tax questions concerning investments.  2014 expanded sections on Limitations on Loss Deductions, Charitable Gifts, Reverse Mortgages, and REITs.

Posted in Estate Tax, Retirement Planning, Wealth Management | Tagged: , , , | Leave a Comment »

new FATCA FAQs released by IRS

Posted by William Byrnes on April 18, 2014


FATCA – FAQs General

  1. Qualified Intermediaries/Withholding Foreign Partnerships/Withholding Foreign Trusts
  2. IGA Registration
  3. Expanded Affiliated Groups
  4. Sponsoring/Sponsored Entities
  5. Responsible Officers and Points of Contact
  6. Financial Institutions
  7. Exempt Beneficial Owners
  8. NFFEs
  9. Registration Update
  10. ADDITIONAL SUPPORT
  11. FATCA Registration System Technical Support 
# Questions Answers
Qualified Intermediaries/Withholding Foreign Partnerships/Withholding Foreign Trusts

Q1.

How does a Financial Institution that is not currently a Qualified Intermediary (“QI”), a Withholding Foreign Partnership (“WP”), or a Withholding Foreign Trust (“WT”) register to become one?

The process to become a QI, WP or WT has not been modified by the provisions of FATCA.

The application for Qualified Intermediary status can be found here: QI Application

Information on acquiring Withholding Foreign Partnership, or Withholding Foreign Trust status can be found here: WP/WT Application

Q2.

How do FIs that are currently QIs, WPs and WTs renew their agreements?

Existing QIs, WPs and WTs are required to renew their QI agreements through the FATCA registration website as part of their FATCA registration process.

All QI, WP, or WT agreements that would otherwise expire on December 31, 2013 will be automatically extended until June 30, 2014.  (Notice 2013-43; 2013-31 IRB 113).

Q3.

I am not currently a QI/WP/WT.  Can I use the LB&I registration portal to register for FATCA and become a new QI/WP/WT?

No.

QI/WP /WT status can only obtained by completing and submitting a Form 14345 (“QI Intermediary Application”) and Form SS-4 (“Application for Employer Identification Number”) directly to the QI Program.   Interested QIs/WPs/WT should submit the required paperwork to the QI program and separately use the FATCA registration portal to obtain a GIIN for FATCA purposes.    FFIs can not become a new QI/WP/WT through the FATCA portal.

Applications for QI/WP/WT status can be made to:

IRS-Foreign Intermediary Program
Attn:  QI/WP/WT Applications
290 Broadway, 12th floor
New York City, New York 10007

Note:  Form 14345 (“QI Intermediary Application”) should be used for WPs and WTs in addition to QIs.

Q4.

Must an FI become a QI/WP/WT in order to register under FATCA?

An FI is not required to obtain QI/WP or WT status to register under FATCA.  If at the time of FATCA registration, the FI does not have in effect a withholding agreement with the IRS to be treated as a QI, WP or WT, the FI will indicate “Not applicable” in box 6 and will continue with the registration process.

IGA Registration

Q5.

Please provide a link that lists the jurisdictions treated as having in effect a Model 1 or Model 2 IGA.

The U.S. Department of Treasury’s list of jurisdictions that are treated as having an intergovernmental agreement in effect can be found by clicking on the following link: IGA LIST

Q6.

How do Foreign Financial Institutions in Model 1 jurisdictions register on the FATCA registration website?

Financial Institutions that are treated as Reporting Financial Institutions under a Model 1 IGA (see the list of jurisdictions treated as having an IGA in effect at IGA LIST) should register as Registered Deemed-Compliant Foreign Financial Institutions.

More information on registration can be found in the FATCA Registration Online User Guide:User Guide Link (See Section 2.4 “Special Rules for Registration”)

Q7.

How do Foreign Financial Institutions in Model 2 jurisdictions register on the FATCA registration website?

Financial Institutions that are treated as Reporting Financial Institutions under a Model 2 IGA (see the list of jurisdictions treated as having an IGA in effect at IGA LIST) should register as Participating Foreign Financial Institutions.

More information on registration can be found in the FATCA Registration Online User Guide:User Guide Link (See Section 2.4 “Special Rules for Registration”)

Q8.

We are an FFI in a country that has not signed an IGA, and the local laws of our country do not allow us to report U.S. accounts or withhold tax. What is our FATCA classification?

Unless the Treasury website provides that your country is treated as having an IGA in effect, then, because of its local law restrictions, this FFI should register as a Limited FFI provided it meets the definition shown directly below. See FATCA – Archive   for a list of countries treated as having an IGA in effect.

A Limited FFI means an FFI that, due to local law restrictions, cannot comply with the terms of an FFI Agreement, or otherwise be treated as a PFFI or RDCFFI, and that is agreeing to satisfy certain obligations for its treatment as a Limited FFI.

Expanded Affiliated Groups
Q9.

For registration purposes, can an EAG with a Lead FI and 2 Member FIs be divided into: (1) a group with a Lead FI and a member FI, and (2) a member FI that will register as a Single FI?

Yes. An EAG may organize itself into subgroups, so long as all entities with a registration requirement are registered. An FI that acts as a Compliance FI for any members of the EAG is, however, required to register each such member as would a Lead FI for such members.

Q10.

What is required for an entity to be a Lead FI?

A Lead FI means a USFI, FFI, or a Compliance FI that will initiate the FATCA Registration process for each of its Member FIs that is a PFFI, RDCFFI, or Limited FFI and that is authorized to carry out most aspects of its Members’ FATCA Registrations. A Lead FI is not required to act as a Lead FI for all Member FIs within an EAG. Thus, an EAG may include more than one Lead FI that will carry out FATCA Registration for a group of its Member FIs. A Lead FI will be provided the rights to manage the online account for its Member FIs. However, an FFI seeking to act as a Lead FI cannot have Limited FFI status in its country of residence. See Rev. Proc. 2014-13 to review the FFI agreement for other requirements of a Lead FI that is also a participating FFI.

Sponsoring/Sponsored Entities

Q11.

We are a Sponsoring Entity, and we would like to register our Sponsored Entities. How do we register our Sponsored Entities?

The Sponsoring Entity that agrees to perform the due diligence, withholding, and reporting obligations of one or more Sponsored Entities pursuant to Treas. Reg. §1.1471-5(f)(1)(i)(F) should register with the IRS via the FATCA registration website to be treated as a Sponsoring Entity. To allow a Sponsoring Entity to register its Sponsored Entities with the IRS, and, as previewed in Notice 2013-69, the IRS is developing a streamlined process for Sponsoring Entities to register Sponsored Entities on the FATCA registration website. Additional information about this process will be provided by the IRS at a later date.

While a Sponsoring Entity is required to register its Sponsored Entities for those entities to obtain GIINs, the temporary and proposed regulations provide a transitional rule that, for payments prior to January 1, 2016, permit a Sponsored Entity to provide the GIIN of its Sponsoring Entity on withholding certificates if it has not yet obtained a GIIN. Thus, a Sponsored Entity does not need to provide its own GIIN until January 1, 2016 and is not required to register before that date.

Responsible Officers and Points of Contact

Q12.

What is a Point Of Contact (POC)?

The Responsible Officer listed on line 10 of Form 8957 (or the online registration system) can authorize a POC to receive FATCA-related information regarding the FI, and to take other FATCA-related actions on behalf of the FI. While the POC must be an individual, the POC does not need to be an employee of the FI. For example, suppose that John Smith, Partner of X Law Firm, has been retained and been given the authority to help complete and submit the FATCA Registration on behalf of an FI. John Smith should be identified as the POC, and in the Business Title field for this POC, it should state Partner of X Law Firm.

Q13.

Is the Responsible Officer required to be the same person for all lines on Form 8957 or the online registration (“FATCA Registration”)?

No, it is not required that the Responsible Officer (“RO”) be the same person for all lines on Form 8957 or the online registration.  It is possible, however, that the same person will have the required capacity to serve as the RO for all FATCA Registration purposes.

The term “RO” is used in several places in the FATCA Registration process.  In determining an appropriate RO for each circumstance, the Financial Institution (“FI”) or direct reporting NFFE should review the capacity requirements and select an individual who meets those requirements.  This will be a facts and circumstances determination.

Please note that the responsible officer used for registration purposes may differ from the certifying responsible officer of an FFI referenced in Treasury Regulation §1.1471-1(b)(116).  (See, however, below regarding “Delegation of RO Duties.”)

Below is a description of the required RO capacity per line:

Language from the Form 8957 Instructions and the FATCA Online Registration User Guide specifies that the RO for question 10 purposes is a person authorized under applicable local law to establish the statuses of the entity’s home office and branches as indicated on the registration form.  (See FAQ below for what it means to “establish the FATCA statuses” of the FI’s home office and branches or direct reporting NFFE.)

Part 1, Question 11b (Point of Contact authorization)

The RO identified in question 11b must be an individual who is authorized under local law to consent on behalf of the FI or direct reporting NFFE (“an authorizing individual”) to the disclosure of FATCA-related tax information to third parties.  By listing one or more Points of Contact (each, a “POC”) in question 11b and selecting “Yes” in question 11a, the authorizing individual identified at the end of question 11b (to the right of the checkbox) is providing the IRS with written authorization to release the entity’s FATCA-related tax information to the POC.  This authorization specifically includes authorization for the POC to complete the FATCA Registration (except for Part 4), to take other FATCA-related actions, and to obtain access to the FI’s (or direct reporting NFFE’s) tax information.  Once the authorization is granted, it is effective until revoked by either the POC or by an authorizing individual of the FI or direct reporting NFFE.

Part 4

The authority required for an individual to be an RO for purposes of Part 4 is substantially similar to the authority required for RO status under Treas. Reg. § 1.1471-1(b)(116).

The RO designated in Part 4 must be an individual with authority under local law to submit the information provided on behalf of the FI or direct reporting NFFE.  In the case of FIs or FI branches not governed by a Model 1 IGA, this individual must also have authority under local law to certify that the FI meets the requirements applicable to the FI status or statuses identified on the registration form.  This individual must be able to certify, to the best of his or her knowledge, that the information provided in the FI’s or direct reporting NFFE’s registration is accurate and complete.  In the case of an FI, the individual must be able to certify that the FI meets the requirements applicable to the status(es) identified in the FI’s registration.  In the case of a direct reporting NFFE, the individual must be able to certify that the direct reporting NFFE meets the requirements of a direct reporting NFFE under Treas. Reg. § 1.1472-1(c)(3).

An RO (as defined for purposes of Part 4) can delegate authorization to complete Part 4 by signing a Form 2848 “Power of Attorney Form and Declaration of Representative” or other similar form or document (including an applicable form or document under local law giving the agent the authorization to provide the information required for the FATCA Registration).

Note: While the certification in Part 4 of the online registration does not include the term “responsible officer,” the FATCA Online Registration User Guide provides that the individual designated in Part 4 must have substantially the same authority as the RO as defined for purposes of Form 8957, Part 4.

Delegation of RO Duties

While the ROs for purposes of Question 10, Question 11b, and Part 4 of the FATCA Registration may be different individuals, in practice it will generally be the same individual (or his/her delegate)).  The regulatory RO is responsible for establishing and overseeing the FFI’s compliance program.  The regulatory RO may, but does not necessarily have to, be the registration RO for purposes of 1) ascertaining and completing the chapter 4 statuses in the registration process; 2) receiving the GIIN and otherwise interacting with the IRS in the registration process; and 3) making the Part 4 undertakings.  Alternatively, the regulatory RO, or the FFI (through another individual with sufficient authority), may delegate each of these registration roles to one or more persons pursuant to a delegation of authority (such as a Power of Attorney) that confers the particular registration responsibility or responsibilities to such delegate(s).  The scope of the delegation, and the delegate’s exercise of its delegated authority within such scope, will limit the scope of the potential liability of the delegate under the rules of agency law , to the extent applicable.  The ultimate principal, whether that is the regulatory RO or the FFI, remains fully responsible in accordance with the terms and conditions reflected in the regulations, and other administrative guidance to the extent applicable under FATCA, the regulations.

Q14.

The Instructions for Form 8957 state that for purposes of Part 1, question 10, “. . .  RO means the person authorized under applicable local law to establish the statuses of the FI’s home office and branches as indicated on the registration form.”  What does it mean for an RO to have the authority to “establish the statuses of the FI’s home office and branches as indicated on the registration form”?

To have the authority to “establish the statuses” for purposes of question 10, an RO must have the authority to act on behalf of the FI to represent the FATCA status(es) of the FI to the IRS as part of the registration process.  This RO must also have the authority under local law to designate additional POCs.

Q15.

My FI plans on employing an outside organization (or individual) solely for the purpose of assisting with the registration process.  Once registration is complete, or shortly thereafter, my FI intends to discontinue its relationship with this organization.  Is this permissible under the FATCA registration system? How should my FI use the registration system to identify this relationship?

Yes, the FI or direct reporting NFFE may employ an outside organization to assist with FATCA registration and discontinue the relationship with the outside organization once registration is complete.  As part of the registration process, an FI or direct reporting NFFE may appoint up to five POCs who are authorized to take certain FATCA-related actions on behalf of the entity, including the ability to complete all parts of the FATCA Registration (except for Part 4), to take other appropriate or helpful FATCA-related actions, and to obtain access to the entity’s FATCA-related tax information.  The POC authorization must be made by an RO within the meaning of Part 1, question 10.  Part 4 must be completed by the RO or a duly authorized agent of the RO.  (See FAQ 1 for a discussion of the process for delegating authorization to complete Part 4.)

Once the services of a POC are no longer needed, the RO may log into the online FATCA account and delete the POC.  This process revokes the POC’s authorization.  At this point, the Responsible Officer can input a new POC, or leave this field blank if they no longer wish to have any POC other than the RO listed on Line 10.

If a third-party adviser that is an entity is retained to help the FI or direct reporting NFFE complete its FATCA registration process, the name of the third-party individual adviser that will help complete the FATCA registration process should be entered as a POC in Part 1, question 11b, and the “Business Title” field for that individual POC should be completed by inserting the name of the entity and the POC’s affiliation with the entity.  For example, suppose that John Smith, Partner of X Law Firm, has been retained and been given the authority to help complete the FATCA Registration on behalf of FI Y.  John Smith should be identified as the POC, and in the Business Title field for this POC, it should state Partner of X Law Firm.

Financial Institutions

Q16.

Are U.S. Financial Institutions (USFIs) required to register under FATCA? If so, under what circumstances would a USFI register?

A USFI is generally not required to register under FATCA. However, a USFI will need to register if the USFI chooses to become a Lead FI and/or a Sponsoring Entity or seeks to maintain and renew the QI status of a foreign branch that is a QI. Furthermore, a USFI with a foreign branch that is a reporting Model 1 FFI is required to register on behalf of its foreign branches (and should identify each such branch when registering). A USFI with non-QI branch operations in a Model 2 jurisdiction or in a non-IGA jurisdiction is not required to register with the IRS.

Q17.

Is a Foreign Financial Institution (“FFI”) required to obtain an EIN?

If the FFI has a withholding obligation and will be filing Forms 1042 and Forms 1042-S with the Internal Revenue Service, it will be required to have an EIN. Please see publication 515 (“Withholding of Tax on Nonresident Aliens and Foreign Entities”) for further information about U.S. Withholding requirements. SeePub. 515. An FFI is also required to obtain an EIN when it is a QI, WP, or WT (through the application process to obtain any such status) or when the FFI is a participating FFI that elects to report its U.S. accounts on Forms 1099 under Treas. Reg. §1.1471-4(d)(5).

How does a FFI apply for a EIN if it does not already have one?

If a FFI does not have an EIN, it may apply for one using Form SS-4 (“Application for Employer Identification Number”) or the online registration system. See Apply-for-an-Employer-Identification-Number-(EIN)-Onlinefor more information.

Exempt Beneficial Owners

Q18.

We are a foreign central bank of issue. Will we be subject to FATCA withholding if we do not register?

You will generally be exempt from FATCA Registration and withholding if you meet the requirements to be treated as an exempt beneficial owner (e.g. as a foreign central bank of issue described in Treas. Reg. § 1.1471-6(d), as a controlled entity of a foreign government under Treas. Reg. §1.1471-6(b)(2), or as an entity treated as either of the foregoing under an applicable IGA). A withholding agent is not required to withhold on a withholdable payment to the extent that the withholding agent can reliably associate the payment with documentation to determine the portion of the payment that is allocable to an exempt beneficial owner in accordance with the regulations. However, an exempt beneficial owner may be subject to withholding on payments derived from the type of commercial activity described in Treas. Reg. § 1.1471-6(h).

Q19.

We are a foreign pension plan. Will we be subject to FATCA withholding if we do not register?

You will be exempt from FATCA Registration and withholding if you meet the requirements to be treated as a retirement fund described in Treas. Reg. § 1.1471-6(f), or under an applicable IGA. A withholding agent is not required to withhold on a withholdable payment to the extent that the withholding agent can reliably associate the payment with documentation to determine the portion of the payment that is allocable to an exempt beneficial owner (in this case, a retirement fund) in accordance with the regulations.

NFFEs

Q20.

How should an entity seeking the FATCA status of “direct reporting NFFE” (other than a sponsored direct reporting NFFE) register for this status to obtain a GIIN in order to avoid FATCA withholding?

A direct reporting NFFE is eligible to register for this status and when registering should complete an online registration (or, alternatively, submit a paper Form 8957) based on the instructions provided in this FAQ.   For registrations occurring in years after 2014, it is anticipated that both the online registration user guide and the Instructions for Form 8957 will be updated to incorporate this information.

In general, for purposes of completing the registration of a direct reporting NFFE, substitute the words “direct reporting NFFE” for the words “financial institution” wherever  they appear in the online registration user guide (or in the Instructions for Form 8957).  Unless specific instructions for a registration question are described here in this FAQ, please use the generally applicable instructions provided in the online registration user guide (or in the Instructions for Form 8957).

Part 1

Question 1 – – Select “Single”.

Question 4 – – Select “None of the above”.

Question 6 – – Select “Not applicable”.

Question 7 – – Select “No”.  (If using the portal online, selecting “no” will automatically skip Questions 8 and 9.)

Question 8 – – Skip this question (which relates to branches)

Question 9 – – Skip all parts (a) through (c) of this question (which relate to branches).

Question 10 – – Enter the information of the individual who will be responsible for ensuring that the direct reporting NFFE meets its FATCA reporting obligations and will act as a point of contact with the IRS in connection with its status as a direct reporting NFFE.

Part 2 – – It is not necessary for a direct reporting NFFE to complete this section. (If using the portal online, selecting Single in question 1 will automatically skip Part 2.)

Part 3 – – It is not necessary for a direct reporting NFFE to complete this section. (If using the portal online, selecting “Not Applicable” in question 6 will automatically skip Part 3.)

Part 4 – – The individual who completes this part must have the authority to provide the certification.

Direct reporting NFFE QIs/WPs/WTs should renew their agreements through the existing traditional paper process.  Instructions can be found at the following link (Question IX), see:Qualified-Intermediary-Frequently-Asked-Questions

Q21.

How should a sponsor of a sponsored direct reporting NFFE register itself for this status and obtain a GIIN?

A sponsor of a sponsored direct reporting NFFE is a sponsoring entity (see Treas. Reg. § 1.1471-1T(b)(124)) and  should complete an online registration (or, alternatively, submit a paper Form 8957) as a sponsoring entity, based on the instructions provided in this FAQ.  A sponsoring entity need only complete one registration to act as the sponsor for both sponsored FFIs and sponsored direct reporting NFFEs.  For registrations occurring in years after 2014, it is anticipated that both the online registration user guide and the Instructions for Form 8957 will be updated to incorporate this information, including by incorporating the definition of sponsoring entity provided in Treas. Reg. § 1.1471-1T(b)(124).

In general, for purposes of having a sponsor register a sponsored direct reporting NFFE, substitute the words “sponsor of a direct reporting NFFE” for the words “sponsoring entity” wherever they appear in the online registration user guide (or in the Instructions for Form 8957).  Unless specific instructions for a registration question are described here in this FAQ, please use the generally applicable instructions provided in the online registration user guide (or in the Instructions for Form 8957).

Part 1

Question 1 – – Select “Sponsoring Entity”.

Question 4 – – Select “None of the above”.

Question 6 – – Select “Not applicable”.

Question 7 – – Select “No”. (If using the portal online, selecting “no” will automatically skip Questions 8 and 9)

Question 8 – – Skip this question (which relates to branches)

Question 9 – – Skip all parts (a) through (c) of this question (which relate to branches).

Question 10 – – Enter the information of the individual who will be responsible for ensuring that the direct reporting NFFE meets its FATCA reporting obligations and who will act as a point of contact with the IRS in connection with its obligations as a sponsoring entity.

Part 2 – – It is not necessary for a sponsor of a direct reporting NFFE to complete this section.  (If using the portal online, selecting Sponsoring Entity in question 1 will automatically skip Part 2.)

Part 3 – – It is not necessary for a sponsor of a direct reporting NFFE to complete this section. (If using the portal online, selecting “Not Applicable” in question 6 will automatically skip Part 3.)

Part 4 – – The individual who completes this part must have the authority to provide the certification.

Registration Update

Q22.

Why has my registration been put into “Registration Incomplete”? What can I do?

If your registration has been put into Registration Incomplete status, it is because the IRS has identified an issue with your registration.  If you are Registration Incomplete status, please review your registration for any of the following errors and update it accordingly:

  1. The FFI has identified itself as a Qualified Intermediary with a QI-EIN of which the IRS has no record.  (If you have QI, WP or WT Agreement signed with the IRS, please contact the Financial Intermediaries Team for further assistance.)

  2. The RO has been identified with initials only and no specific name has been provided.

  3. The RO does not appear to be a natural person.

  4. Notice 2013-43 stated that any registrations submitted prior to  January 1, 2014 would be taken out of submit and put into Registration Incomplete status. Thus, if your registration was submitted prior to  January 1, 2014, you must  re-submit your registration assuming that none of the other abovementioned reasons (1-3) are an issue with the FFI’s registration.

After you have updated your registration, you must resubmit in order for your registration to be processed.

Additional FAQs are available for the FATCA Registration System and the FATCA FFI List.

book coverPractical Compliance Aspects of Exchange of Information, FATCA and GATCA

For in-depth analysis of the practical compliance aspects of financial service business providing for exchange of information of information about foreign residents with their national competent authority or with the IRS (FATCA), see Lexis Guide to FATCA Compliance, 2nd Edition just published!

The LexisNexis® Guide to FATCA Compliance (2nd Edition) comprises 34 Chapters grouped in three parts: compliance program (Chapters 1–4), analysis of FATCA regulations (Chapters 5–16) and analysis of Intergovernmental Agreements (IGAs) and local law compliance challenges (Chapters 17–34), including intergovernmental agreements as well as the OECD’s TRACE initiative for global automatic information exchange protocols and systems. The 34 chapters include many practical examples to assist a compliance officer contextualize the regulations, IGA provisions, and national rules enacted pursuant to an IGA.  Chapters include by example an in-depth analysis of the categorization of trusts pursuant to the Regulations and IGAs, operational specificity of the mechanisms of information capture, management and exchange by firms and between countries, insights as to the application of FATCA and the IGAs within new BRIC and European country chapters.

Posted in FATCA | Tagged: , , , , | 1 Comment »

9 retirement savings tax tips

Posted by William Byrnes on April 17, 2014


You might be able to muddle through retirement without knowing each and every line of Uncle Sam’s tax code. But you’ll likely give the federal government more than its fair share of your nest egg if you don’t know what William Byrnes, author of National Underwriter’s Tax Facts, calls the big retirement plan tax facts.

Read the USA Today analysis, written by renown financial journalist Robert Powell:  “Stretching the retirement savings available for an additional 20 years of life expectancy requires correctly managing the complex retirement taxation rules established by Congress and the IRS,” says Byrnes, who is also associate dean at the Thomas Jefferson School of Law in San Diego, Calif.

The full analysis is available on USA Today at 9 retirement savings tax tips!

Posted in Retirement Planning | Tagged: , , , , , , | Leave a Comment »

What are Five Tax Credits That May Reduce Your Taxes?

Posted by William Byrnes on April 16, 2014


In Tax Tip 2014-33, the IRS revealed five tax credits that may reduce a taxpayers taxes.  Some tax credits are refundable regardless of whether the taxpayer owes any tax for the year, the IRS pointed out.

1. The Earned Income Tax Credit is a refundable credit for taxpayers who work but do not earn a lot of money.  For 2013, the EITC may have increased the tax refund by as much as $6,044.  

2. The Child and Dependent Care Credit can help a taxpayer offset the cost of daycare or day camp for children under age 13, and even the costs paid to care for a disabled spouse or dependent.

3. The Child Tax Credit can reduce a taxpayer’s taxes by as much as $1,000 for each qualified child claimed on the tax return.

4. The Saver’s Credit helps workers save for retirement. For 2013, a taxpayer may have qualified if income was $59,000 or less and the taxpayer contributed to an IRA or a retirement plan at work.

5. The American Opportunity Tax Credit can offset college costs. The credit is available for four years of post-secondary education. It’s worth up to $2,500 per eligible student enrolled at least half time for at least one academic period.

tax-facts-online_medium

 

 “Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.”

The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community,” added Rick Kravitz.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

Posted in Taxation | Tagged: , , , | Leave a Comment »

6 Tax Facts About Filing The Tax Return Today (April 15) and What To Do If You Can’t Pay the Full Amount of Taxes

Posted by William Byrnes on April 15, 2014


The IRS Tax Tip 2014-53 provided a series of Tax Facts of what to do if a taxpayer cannot pay the full amount of taxes owed, which I have supplemented with a couple Tax Facts from the U.S. Post Office.

1. File the Tax Return on Time to Avoid Late Filing Penalty.  File on time to avoid a late filing penalty.  By mailing or electronically filing the tax return with the postmark before or on Wednesday April 15, a taxpayer will avoid the late-filing penalty, normally 5% per month based on the unpaid balance, that applies to returns filed after the deadline.

2. Can’t File the Tax Return Today? Then File an Extension until October 15!  A taxpayer can use IRS Free File to e-file Form 4868 (PDF) Application For Automatic Extension of Time To File U.S. Individual Tax Return. The extension request must be filed by midnight on April 15.  E-filed extension request will receive an IRS receipt.  A taxpayer may still mail the request for an extension Form 4868, as long at the postmark is before or on April 15.

3. Mail must be Postmarked before or on April 15!  Gone are the days that the post office accepts a 11.59 pm tax return and tax extension letter, postmarking it by midnight April 15.  Thus, the taxpayer must drop off at the post office or post office approved provider before the last pick up time of April 15 to ensure a postmark of April 15.  See https://tools.usps.com/go/POLocatorAction!input.action for the closest post office or post service drop off approved provider within a zip code.

4. Pay as Much of the Tax Due as Possible to Avoid Interest and Late Payment Penalties. In addition, any payment made with an extension request will reduce or eliminate interest and late-payment penalties that apply to payments made after April 15.  The interest rate is currently 3% per year, compounded daily, and the late-payment penalty is normally 0.5 % per month.  Pay as much as possible to reduce interest charges and a late payment penalty.

5. Use a Credit Card to Pay the Tax. The interest and fees charged by a bank or credit card company may be less than IRS interest and penalties. See credit card options

6. Use the Online Payment Agreement tool.  Ask for a payment plan before the IRS sends a bill.  The best way is to use the Online Payment Agreement tool.  File Form 9465, Installment Agreement Request, with the tax return.

tax-facts-online_medium

Because of the constant changes to the tax law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. For over 110 years, National Underwriter has provided fast, clear, and authoritative answers to financial advisors pressing questions, and it does so in the convenient, timesaving, Q&A format.

“Our brand-new Tax Facts title is exciting in many ways,” says Rick Kravitz, Vice President & Managing Director of Summit Professional Network’s Professional Publishing Division. “First of all, it fills a huge gap in the resources available to today’s advisors. Small business is a big market, and this book enables advisors to get up-and-running right away, with proven guidance that will help them serve their clients’ needs. Secondly, it addresses the biggest questions facing all taxpayers and provides absolutely reliable answers that help advisors solve today’s biggest problems with confidence.”

Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.  The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community,” added Rick Kravitz.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

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11 more annuity tax facts you need to know

Posted by William Byrnes on April 14, 2014


An annuity is a complicated beast — and during tax season, your clients’ questions can pile up faster than hospitality complaints from the crowds at Sochi. How are payments under a variable immediate annuity taxed? When is the exchange of one annuity contract for another a nontaxable exchange? Read on to find answers to these and other queries.

1. What general rules govern the income taxation of payments received under annuity contracts?

read on at LifeHealthPro

LifeHealthPro.com is the vital online destination for life & health insurance advisors, designed to provide them with the essential elements they need to run their practice and increase their bottom line including breaking news, market trends, practice tips and more.

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Only 2 days left to file a tax return? 5 tax tips for request an extension until October 15

Posted by William Byrnes on April 13, 2014


In Tax Tip 2014-52, the IRS provided the elements of possible relief for taxpayers that now realize – only 2 days left to file a tax return.  File an extension to file the tax return instead, allowing the taxpayer 6 months breathing room until October 15, 2014, to file the return.

What a Taxpayer Should Know to Request More Time to File a Tax Return!

A taxpayer can electronically file Form 4868 (PDF), Application For Automatic Extension of Time To File U.S. Individual Tax Return; and (2) pay all or part of your estimated income tax due using a credit or debit card or by using the Electronic Federal Tax Payment System (EFTPS).  However, a taxpayer can still file a paper Form 4868 by mail.  Filing this form gives taxpayers until Oct. 15 to file a return. To get the extension, taxpayers must estimate their tax liability on this form and should also pay any amount due.

By properly filing this form, a taxpayer will avoid the late-filing penalty, normally 5% per month based on the unpaid balance, that applies to returns filed after the deadline.  In addition, any payment made with an extension request will reduce or eliminate interest and late-payment penalties that apply to payments made after April 15.  The interest rate is currently 3% per year, compounded daily, and the late-payment penalty is normally 0.5 % per month.

5 tax tips for filing an extension

1. A taxpayer should file on time even if unable to pay the tax due.  If a taxpayer completes a tax return but can not pay the taxes owed, do not request an extension.  Instead, the taxpayer should file the tax return on time and pay as much as possible to reduce the amount owed.  At least the taxpayer will avoid the hefty late filing penalty, which is much higher than the penalty for not paying all of the taxes owed on time.

2. Use IRS Free File to request an extension.  A taxpayer can use IRS Free File to e-file Form 4868 (PDF) Application For Automatic Extension of Time To File U.S. Individual Tax Return. The extension request must be filed by midnight on April 15.  E-filed extension request will receive an IRS receipt.

3. Mail Form 4868.  A taxpayer may still mail the request for an extension Form 4868.  The envelope must be postmarked at the post office by April 15.  The safest way to guarantee such a postmark is to bring the envelope to the post office counter during office hours.

4. Extra time to file is not extra time to pay.  An extension to file will allow six additional months to file a tax return, until Oct. 15.  However, it does not provide extra time to pay the tax due by April 15.  Thus, a taxpayer must estimate and pay the tax owed by or on April 15.  Any amount not paid by April 15 will be charged interest. Moreover, the IRS may levy a penalty for not paying the tax on time.

5. Payment Options Moreover, a taxpayer can use payment options.  Apply for a payment plan using the Online Payment Agreement tool.  Or a taxpayer can file Form 9465, Installment Agreement Request, with a tax return. If a taxpayer is unable to make payments because of a financial hardship, the IRS will work on a payment plan with the taxpayer.

2014_tf_on_individuals_small_businesses-m_1For over 110 years, National Underwriter has provided fast, clear, and authoritative answers to financial advisors pressing questions, and it does so in the convenient, timesaving, Q&A format.  “Our brand-new Tax Facts title is exciting in many ways,” says Rick Kravitz, Vice President & Managing Director. “First of all, it fills a huge gap in the resources available to today’s advisors. Small business is a big market, and this book enables advisors to get up-and-running right away, with proven guidance that will help them serve their clients’ needs. Secondly, it addresses the biggest questions facing all taxpayers and provides absolutely reliable answers that help advisors solve today’s biggest problems with confidence.”

Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.  The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community,” added Rick Kravitz.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

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Tax Tips for U.S. Taxpayers with Foreign Income in 2013

Posted by William Byrnes on April 12, 2014


If a taxpayer is a U.S. citizen or resident, then the taxpayer must report income from all sources within and outside of the U.S.  The rules for filing income tax returns are generally the same whether the taxpayer is living in the U.S. or abroad. Here are seven tips from the IRS from Tax Tips 2014-43 that U.S. taxpayers with foreign income should know:

1. Report Worldwide Income.  By law, U.S. citizens and resident aliens must report their worldwide income. This includes income from foreign trusts, and foreign bank and securities accounts.

2. File Required Tax Forms.  The taxpayer may need to file Schedule B, Interest and Ordinary Dividends, with the U.S. tax return.  The taxpayer may also need to file Form 8938, Statement of Specified Foreign Financial Assets. In some cases, the taxpayer may need to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts..

3. Consider the Automatic Extension.  If a taxpayer is living abroad and can’t file a tax return by the April 15 deadline, then the taxpayer may qualify for an automatic two-month filing extension. The taxpayer then will have until June 16, 2014 to file a U.S. income tax return. This extension also applies to those serving in the military outside the U.S. The taxpayer must attach a statement to the tax return to explain why the taxpayer qualifies for the extension.

4. Review the Foreign Earned Income Exclusion.  If a taxpayer lives and work abroad, then the taxpayer may be able to claim the foreign earned income exclusion. If the taxpayer qualifies, then the taxpayer will not pay tax on up to $97,600 of wages and other foreign earned income in 2013. See Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion, for more details.

5. Don’t Overlook Credits and Deductions.  A taxpayer may be able to take avtax credit or a deduction for income taxes paid to a foreign country. These benefits can reduce the amount of taxes that the taxpayer must pay if both countries tax the same income.

You can get more on this topic in Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.

2014_tf_on_individuals_small_businesses-m_1Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This brand-new resource provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

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8 Things to be Aware of for Deducting Medical and Dental Expenses for 2013 !

Posted by William Byrnes on April 11, 2014


IRS Tax Tip 2014-21 points out that if a taxpayer intends to claim a deduction for medical expenses, there are new rules that apply that may affect these deductions for 2013.  The IRS listed eight things that a taxpayer should be aware of about the medical and dental expense deduction:

1. AGI threshold increase.  Starting in 2013, the amount of allowable medical expenses must exceed 10% of adjusted gross income (AGI) to be able to claim this deduction. The threshold was 7.5% of AGI in prior years.

2. Temporary exception for age 65.  The AGI threshold is still 7.5% of AGI if the taxpayer or spouse is age 65 or older.  This exception will apply through Dec. 31, 2016.

3. Must itemize.  To claim medical and dental expenses the taxpayer must itemize deductions on the federal tax return.  Thus, if a taxpayer claims the standard deduction, then no deduction for medical expenses.

4. Paid in 2013. You can include only the expenses you paid in 2013. If you paid by check, the day you mailed or delivered the check is usually considered the date of payment.

5. Costs to include.  A taxpayer can include most medical or dental costs that paid for that taxpayer, the spouse and the dependents.  Some exceptions and special rules apply. Any costs reimbursed by insurance or other sources don’t qualify for a deduction.

6. Expenses that qualify.  The costs of diagnosing, treating, easing or preventing disease. The cost of insurance premiums for medical care, as does the cost of some long-term care insurance.  The cost of prescription drugs and insulin also qualify.  For more examples of costs you can deduct, see IRS Publication 502, Medical and Dental Expenses.

7. Travel costs count.  A taxpayer may be able to claim the cost of travel for medical care. This includes costs such as public transportation, ambulance service, tolls and parking fees.  For the use of a car, it may be possible to deduct either the actual costs or the standard mileage rate for medical travel. The rate is 24 cents per mile for 2013.

8. No double benefit.  A taxpayer can’t claim a tax deduction for medical and dental expenses paid with funds from a Health Savings Accounts or Flexible Spending Arrangements. Amounts paid with funds from those plans are usually tax-free – the salary used to fund these accounts is usually not included in taxable income.

For more than half a century, Tax Facts has been an essential resource designed to meet the real-world tax-guidance needs of professionals in both the insurance and investment industries.

2014_tf_on_individuals_small_businesses-m_1Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This brand-new resource provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

“Our brand-new Tax Facts title is exciting in many ways,” says Rick Kravitz, Vice President & Managing Director of Summit Professional Network’s Professional Publishing Division. “First of all, it fills a huge gap in the resources available to today’s advisors. Small business is a big market, and this book enables advisors to get up-and-running right away, with proven guidance that will help them serve their clients’ needs. Secondly, it addresses the biggest questions facing all taxpayers and provides absolutely reliable answers that help advisors solve today’s biggest problems with confidence.”

tax-facts-online_mediumThe company also points out that the expert authors—Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.

The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community,” added Kravitz.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.  Use coupon code Tax15 and Save 15%!

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Foreign Housing Allowance for United States Government Employees – Taxable or Non-taxable?

Posted by William Byrnes on April 10, 2014


EDN PhotoThe gross income of United States citizens and resident aliens is taxable on a worldwide basis.  In most cases, compensation for personal services such as employer payments for housing expenses is fully taxable as an employee fringe benefit unless specifically excluded from taxation.  But there are exceptions to the taxation of housing allowances such as the special rules for members of the clergy or Peace Corps volunteers.

Qualified individuals may either exclude or deduct foreign housing expenses if they have incurred housing expenses while living and working aboard. Foreign housing allowances paid to United States Government employees are treated as reimbursements for actual housing expenses and, therefore, not subject to taxation.

Link to Edward Nieto’s full analysis in his article Foreign Housing Allowance for United States Government Employees – Taxable or Non-taxable? on AdvisorFYI

Edward Nieto is a U.S. Government civilian working in Germany as a business advisor.  He has over 25 years of combined military, government, and defense industry experience.  He has also worked as a VITA tax advisor in support of military and government personnel overseas.  He may be contacted at edn2000@outlook.com

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Must a taxpayer report the value of his/her employer-sponsored health insurance coverage included on the W2?

Posted by William Byrnes on April 10, 2014


In its Health Care Tax Tip 2014-09, the IRS answered the question:  Must a taxpayer report on the income tax return (form 1040) the value of his/her employer-sponsored health insurance coverage?  The employer has included the cost of the employer-sponsored health insurance coverage on an employee’s W-2, Wage and Tax Statement.  What must a taxpayer do with this information?

The Affordable Care Act requires employers to report the cost of coverage under an employer-sponsored group health plan. Reporting the cost of health care coverage on the Form W-2 does not mean that the coverage is taxable. The value of the employer’s excludable contribution to health coverage continues to be excludable from an employee’s income, and it is not taxable. This reporting is for informational purposes only and will provide employees useful and comparable consumer information on the cost of their health care coverage.

Employers that provide “applicable employer-sponsored coverage” under a group health plan are subject to the reporting requirement. This includes businesses, tax-exempt organizations, and federal, state and local government entities (except with respect to plans maintained primarily for members of the military and their families). However, federally recognized Indian tribal governments are not subject to this requirement.  See Form-W-2-Reporting-of-Employer-Sponsored-Health-Coverage

Here is what the IRS stated about the amount shown on the W-2 “employer-sponsored health insurance coverage”.

  • The health care law requires certain employers to report the cost of coverage under an employer-sponsored group health plan.
  • The amount of employer-sponsored health insurance coverage appears in Box 12 of the W-2, and has the code letters “DD” next to it.
  • Reporting the cost of health care coverage on the Form W-2 does not mean that the coverage is taxable or that it needs to be reported on the tax return.
  • The amount in Box 12 is only for government information collection only, and shows the payments made by the taxpayer and the employer and is not included in the amount shown in Box 1, which is the amount of taxable earnings.

Reporting on the Form W-2

The value of the health care coverage will be reported in Box 12 of the Form W-2, with Code DD to identify the amount. There is no reporting on the Form W-3 of the total of these amounts for all the employer’s employees.

In general, the amount reported should include both the portion paid by the employer and the portion paid by the employee. See the chart, below, and the questions and answers for more information.

An employer is not required to issue a Form W-2 solely to report the value of the health care coverage for retirees or other employees or former employees to whom the employer would not otherwise provide a Form W-2.

Form W-2 Reporting of Employer-Sponsored Health Coverage

Coverage Type

Form W-2, Box 12, Code DD

Report

Do Not Report

Optional

Major medical

X

Dental or vision plan not integrated into another medical or health plan

X

Dental or vision plan which gives the choice of declining or electing and paying an additional premium

X

Health Flexible Spending Arrangement (FSA) funded solely by salary-reduction amounts

X

Health FSA value for the plan year in excess of employee’s cafeteria plan salary reductions for all qualified benefits

X

Health Reimbursement Arrangement (HRA) contributions

X

Health Savings Arrangement (HSA) contributions (employer or employee)

X

Archer Medical Savings Account (Archer MSA) contributions (employer or employee)

X

Hospital indemnity or specified illness (insured or self-funded), paid on after-tax basis

X

Hospital indemnity or specified illness (insured or self-funded), paid through salary reduction (pre-tax) or by employer

X

Employee Assistance Plan (EAP) providing applicable employer-sponsored healthcare coverage

Required if employer charges a COBRA premium

Optional if employer does not charge a COBRA premium

On-site medical clinics providing applicable employer-sponsored healthcare coverage

Required if employer charges a COBRA premium

Optional if employer does not charge a COBRA premium

Wellness programs providing applicable employer-sponsored healthcare coverage

Required if employer charges a COBRA premium

Optional if employer does not charge a COBRA premium

Multi-employer plans

X

Domestic partner coverage included in gross income

X

Governmental plans providing coverage primarily for members of the military and their families

X

Federally recognized Indian tribal government plans and plans of tribally charted corporations wholly owned by a federally recognized Indian tribal government

X

Self-funded plans not subject to Federal COBRA

X

Accident or disability income

X

Long-term care

X

Liability insurance

X

Supplemental liability insurance

X

Workers’ compensation

X

Automobile medical payment insurance

X

Credit-only insurance

X

Excess reimbursement to highly compensated individual, included in gross income

X

Payment/reimbursement of health insurance premiums for 2% shareholder-employee, included in gross income

X

Other Situations

Report

Do Not Report

Optional

Employers required to file fewer than 250 Forms W-2 for the preceding calendar year (determined without application of any entity aggregation rules for related employers)

X

Forms W-2 furnished to employees who terminate before the end of a calendar year and request, in writing, a Form W-2 before the end of that year

X

Forms W-2 provided by third-party sick-pay provider to employees of other employers

X

The chart was created at the suggestion of and in collaboration with the IRS’ Information Reporting Program Advisory Committee (IRPAC). IRPAC’s members are representatives of industries responsible for providing information returns, such as Form W-2, to the IRS. IRPAC works with IRS to improve the information reporting process.

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Energy-Efficient Home Improvements Can Lower Your Taxes

Posted by William Byrnes on April 10, 2014


The IRS reported in Tax Tip 2014-47 that a taxpayer may be able to reduce taxes if making certain energy-efficient home improvements last year.

Key Tax Facts about home energy tax credits:

2014_tf_on_individuals_small_businesses-m_1Residential Energy Efficient Property Credit

  • This tax credit is 30 percent (30%) of the cost of alternative energy equipment installed on or in the home.
  • Qualified equipment includes solar hot water heaters, solar electric equipment and wind turbines.
  • There is no dollar limit on the credit for most types of property. If the credit is more than the tax owed for the year, then the  unused portion of this credit can be carried forward to next year’s tax return.
  • The home must be in the U.S BUT it does not have to be the main home.
  • This credit is available through 2016.

Non-Business Energy Property Credit no longer offered after 2013 tax return

  • This credit is worth 10 percent (10%) of the cost of certain qualified energy-saving items added to the main home last year. This includes items such as insulation, windows, doors and roofs.
  • Taxpayer may also be able to claim the credit for the actual cost of certain property. This may include items such as water heaters and heating and air conditioning systems. Each type of property has a different dollar limit.
  • This credit has a maximum lifetime limit of $500, but only $200 of this limit may be for windows.
  • Main home must be located in the U.S. to qualify for the credit.
  • Obtain a written certification from the manufacturer that their product qualifies for this tax credit. They usually post it on their website or include it with the product’s packaging. Taxpayer’s may rely on such certificate to claim the credit.
  • This credit expired at the end of 2013. You may still claim the credit on your 2013 tax return if you didn’t reach the lifetime limit in prior years.

Use Form 5695, Residential Energy Credits, to claim these credits.

For more than half a century, Tax Facts has been an essential resource designed to meet the real-world tax-guidance needs of professionals in both the insurance and investment industries.  Use coupon code: TAX15 and save 15%!

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4 Tax Facts for Trading Services With Other Persons Taxable?

Posted by William Byrnes on April 9, 2014


The IRS published Tax Tip 2014-26: Four Things You Should Know About “Barter”

“Bartering” is the trading of one product or service for another. Often there is no exchange of cash. Small businesses sometimes barter to get products or services they need.  For example, a plumber might trade plumbing work with a dentist for dental services. 

If a taxpayer trade services with another person, “bartering”, then the value of the products or the services received by the taxpayer is taxable income.

Here are four facts that the IRS has alerted taxpayers to about bartering:

1. Barter exchanges.  A barter exchange is an organized marketplace where members barter products or services. Some exchanges operate out of an office and others over the Internet. All barter exchanges are required to issue Form 1099-B, Proceeds from Broker and Barter Exchange Transactions. The exchange must give a copy of the form to its members who barter and file a copy with the IRS.

2. Bartering income.  Barter and trade dollars are the same as real dollars for tax purposes and must be reported on a tax return. Both parties must report as income the fair market value of the product or service each received.

3. Tax implications.  Bartering is taxable in the year it occurs. The tax rules may vary based on the type of bartering that takes place. Barterers may owe income taxes, self-employment taxes, employment taxes or excise taxes on their bartering income.

4. Reporting rules.  How you report bartering on a tax return varies. If the taxpayer has a trade or business, then normally the taxpayer reports it on Form 1040,Schedule C, Profit or Loss from Business.

For more information, see the Bartering Tax Center.

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12 more estate planning tax facts you need to know

Posted by William Byrnes on April 8, 2014


Estate planning is a complicated business. Before you sit down with clients, find out what Uncle Sam will demand if a life insurance policy or an annuity is part of their estate, or part of a recent inheritance.

1. When are death proceeds of life insurance includable in an insured’s gross estate?

They are includable in the following four situations: … Read all 12 Tax Fact estate planning tips at LifeHealthPro

LifeHealthPro.com is the vital online destination for life & health insurance advisors, designed to provide them with the essential elements they need to run their practice and increase their bottom line including breaking news, market trends, practice tips and more.

Posted in Estate Tax, Retirement Planning | Tagged: , , | Leave a Comment »

10 estate planning tax facts you need to know

Posted by William Byrnes on April 7, 2014


The fiscal cliff deal cleared up every estate planning tax question ever, right? Or not. Because for as much fanfare as the new estate tax received, there are still a lot of sticky tax-related questions out there.

Like what, exactly, constitutes an estate?

Do life insurance proceeds count?

What about employer-provided income benefits?

How are annuities treated?

Here are 10 big estate planning tax questions, answered.  Read on at LifeHealthPro

LifeHealthPro.com is the vital online destination for life & health insurance advisors, designed to provide them with the essential elements they need to run their practice and increase their bottom line including breaking news, market trends, practice tips and more.

 

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10 Tax Facts: Do You Qualify for the Child and Dependent Care Tax Credit To Reduce Your Taxes?

Posted by William Byrnes on April 6, 2014


In Tax Tip 2014-37, the IRS provides ten tax tips for taxpayers that pay for the care of their child or other dependent while they’re at work.  The Child and Dependent Care Credit can reduce that cost of that child care.

10 tax facts from the IRS about this important tax credit

1. A taxpayer may qualify for the credit if the taxpayer paid someone to care for a child, dependent or spouse last year.

2. The care a taxpayer paid for must have been necessary so the taxpayer could work or look for work.  This also applies to the spouse if married and filing jointly.

3. The care must have been for ‘qualifying persons.’ A qualifying person can be a taxpayer’s child under age 13.  Qualifying persons may also be a spouse or dependent who is physically or mentally incapable of self-care. T hey must also have lived with the taxpayer for more than half the year.

4.  The taxpayer and the spouse if file jointly, must have earned income, such as wages from a job.  Special rules apply to a spouse who is a student or disabled.

5. The payments for care can not go to a spouse, the parent of your qualifying person or to someone claimed as a dependent on the taxpayer’s return. Care payments also can not go to a child under the age of 19, even if the child is not claimed as a dependent.

6. The credit is worth up to 35 percent of the qualifying costs for care, depending on a taxpayer’s income. The limit is $3,000 of the total cost for the care of one qualifying person. If the taxpayer pays for the care of two or more qualifying persons, the taxpayer can claim up to $6,000 of the costs.

7. If a taxpayer’s employer provides dependent care benefits, special rules apply.

8. A taxpayer must include the Social Security number of each qualifying person to claim the credit.

9. A taxpayer must include the name, address and identifying number of each care provider to claim the credit.  This is usually the Social Security number of an individual or the Employer Identification Number of a business.

10. To claim the credit, attach Form 2441 to the tax return.

tax-facts-online_medium

Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This brand-new resource provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

Our brand-new Tax Facts title is exciting in many ways,” says Rick Kravitz, Vice President & Managing Director of Summit Professional Network’s Professional Publishing Division. “First of all, it fills a huge gap in the resources available to today’s advisors. Small business is a big market, and this book enables advisors to get up-and-running right away, with proven guidance that will help them serve their clients’ needs. Secondly, it addresses the biggest questions facing all taxpayers and provides absolutely reliable answers that help advisors solve today’s biggest problems with confidence.”

Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.  The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community,” added Rick Kravitz.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.  Use coupon code TAX15 and save 15%!

Posted in Taxation | Tagged: , | Leave a Comment »

2013 Home Office Deduction Easier To Calculate

Posted by William Byrnes on April 5, 2014


In Tax Tip 2014-36, the IRS alerted taxpayers about the new, simple calculation for the Home Office deduction.

If a taxpayer works from home, then it may be possible for the taxpayer to claim the home office deduction.  However, in years past this home office deduction has been rather complicated to calculate.

Starting this year (and applying to the 2013 tax return die in just 10 days), the IRS has provided a simpler option to calculate the deduction for business use of your home. The new option will save taxpayers time because it simplifies how to calculate and claim the deduction.  It also makes it easier for a taxpayer to keep records.  However, this new option for simplified method of calculation does NOT change the rules for who may claim the home office deduction.

6 tax facts about the home office deduction

1. Generally, in order to claim a deduction for a home office, a taxpayer must use a part of your home exclusively and regularly for business purposes. Also, the part of your home used for business must be:

  • the principal place of business, or
  • a place where the taxpayer meets clients or customers in the normal course of business, or
  • a separate structure not attached to the home. Examples might include a studio, garage or barn.

What clearly does NOT qualify for a home office deduction?  By example, a taxpayer sets up a computer in her bedroom on a dresser that she uses for personal emails and for keeping her business records.  In the dresser drawers are pens, paperclips, some receipts, as well as hair clips and some pieces of jewelry.  The IRS isn’t going to allow a home office deduction based on that computer on that dresser.

2. If a taxpayer uses the actual expense method, the home office deduction includes certain costs that the taxpayer paid for your home. For example, if the taxpayer rents a home, part of the rent paid could qualify for the home office deduction.  If the taxpayer own a home, part of the mortgage interest, taxes and utilities paid could correspondingly qualify. The amount of the deduction usually depends on the percentage of the home used for business.

3. Beginning with 2013 tax returns, the taxpayer may be able to use the simplified option to claim the home office deduction instead of claiming actual expenses. Under this method, the taxpayer multiplies the allowable square footage of the office area by a prescribed rate of $5.  The maximum footage allowed by the IRS is 300 square feet. The deduction maximum limit using this method is thus $1,500 per year.

4. If the taxpayer’s gross income from the business use of your home is less than the expenses, the deduction for some expenses may be limited.

5. If the taxpayer is self-employed and chooses the actual expense method, then the taxpayer should use Form 8829, Expenses for Business Use of Your Home, to calculate the amount of the home office deduction.  The taxpayer claims the deduction on Schedule C, Profit or Loss From Business, whether using the simplified or actual expense method.

6. If the taxpayer is an employee, then additional rules apply to claim the deduction. For example, in addition to the above tests, the business use must also be for the employer’s convenience.  By example: a “work from home” arrangement.

tax-facts-online_medium

Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This brand-new resource provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

“Our brand-new Tax Facts title is exciting in many ways,” says Rick Kravitz, Vice President & Managing Director of Summit Professional Network’s Professional Publishing Division. “First of all, it fills a huge gap in the resources available to today’s advisors. Small business is a big market, and this book enables advisors to get up-and-running right away, with proven guidance that will help them serve their clients’ needs. Secondly, it addresses the biggest questions facing all taxpayers and provides absolutely reliable answers that help advisors solve today’s biggest problems with confidence.”

Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.  The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community,” added Rick Kravitz.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

Posted in Taxation | Tagged: , , | Leave a Comment »

New FATCA Frequently Asked Questions (FAQs) Released

Posted by William Byrnes on April 4, 2014


On July 1, 2014 FATCA withholding must be implemented for certain transactions (see Chapter 12 FATCA Withholding Compliance, LexisNexis® Guide to FATCA Compliance).  FATCA requires that a withholding agent must obtain an FFI’s GIIN for payments made from July 1, 2014 and must confirm that the GIIN appears on the IRS FFI List. However, an exception provides that a withholding agent does not need to obtain a reporting Model 1 FFI’s GIIN for payments made before January 1, 2015.

The IRS disclosed that “some FFIs that expect to be reporting Model 2 FFIs may not be able to register by April 25 if legal impediments would prevent them from agreeing to the terms of the FFI Agreement that would apply absent the modifications applicable to reporting Model 2 FFIs under a signed Model 2 IGA.”

“Some FFIs”, reported the IRS, “…expect to be reporting Model 1 FFIs … are concerned about missing the April 25 deadline in case the relevant IGA is not in fact signed, and therefore treated as being in effect, by July 1.”  Treasury has signed IGAs with 26 jurisdictions and has reached agreements in substance with 20 more that have been published, and is in advanced discussions with many others.  Treasury and the IRS have on April 2, 2014 issued Announcement 2014-17 to provide some level of comfort to FFIs in such jurisdictions that already have reached an IGA in substance and to USWAs paying agents.  See https://profwilliambyrnes.com/2014/04/03/treasury-releases-22-new-fatca-igas/

Moreover, the IRS has also granted an extension of 10 (ten) days, previously April 25 but now May 5, 2014 (GMT -5), for an FFI to register via the FATCA Registration Portal to be included on the PFFI Global Intermediary Identification Number (GIIN) list to be issued June 2, 2014.  But Treasury and the IRS remind all withholding agents that, in accordance with Reg. §1.1471-3(e)(3), a withholding agent that receives a Form W-8 from a payee with a GIIN that does not yet appear on the published IRS FFI List has 90 days to verify that the GIIN appears on the list before the withholding agent will be treated as having reason to know that the chapter 4 status of the payee is unreliable or incorrect. In addition, a withholding agent that receives a Form W-8 from a payee indicating that the payee has applied for a GIIN has 90 days to obtain the GIIN from the payee and verify it against the IRS FFI List before the withholding agent will be treated as having reason to know that the chapter 4 status of the payee is unreliable or incorrect.

On April 4, the following additional FATCA FAQS were released:

# Questions Answers
_Qualified Intermediaries/Withholding Foreign Partnerships/Withholding Foreign Trusts
Q1. How does a Financial Institution that is not currently a Qualified Intermediary (“QI”), a Withholding Foreign Partnership (“WP”), or a Withholding Foreign Trust (“WT”) register to become one? The process to become a QI, WP or WT has not been modified by the provisions of FATCA.

The application for Qualified Intermediary status can be found here: QI Application

Information on acquiring Withholding Foreign Partnership, or Withholding Foreign Trust status can be found here: WP/WT Application

Q2. How do FIs that are currently QIs, WPs and WTs renew their agreements? Existing QIs, WPs and WTs are required to renew their QI agreements through the FATCA registration website as part of their FATCA registration process.

All QI, WP, or WT agreements that would otherwise expire on December 31, 2013 will be automatically extended until June 30, 2014.  (Notice 2013-43; 2013-31 IRB 113).

Q3. If an FFI has a QI/WP/WT agreement in place, does the Responsible Party for purposes of the QI/WP/WT Agreement also have to the serve as the FFI’s Responsible Officer? No, the FFI’s Responsible Party for purposes of a QI/WP/WT Agreement does not have to be the Responsible Officer chosen by the FFI for purposes of certification under the regulations or for FATCA Registration purposes.
_IGA Registration
Q4. Please provide a link that lists the jurisdictions treated as having in effect a Model 1 or Model 2 IGA. The U.S. Department of Treasury’s list of jurisdictions that are treated as having an intergovernmental agreement in effect can be found by clicking on the following link: IGA LIST
Q5. How do Foreign Financial Institutions in Model 1 jurisdictions register on the FATCA registration website? Financial Institutions that are treated as Reporting Financial Institutions under a Model 1 IGA (see the list of jurisdictions treated as having an IGA in effect at IGA LIST) should register as Registered Deemed-Compliant Foreign Financial Institutions.

More information on registration can be found in the FATCA Registration Online User Guide:User Guide Link (See Section 2.4 “Special Rules for Registration”)

Q6. How do Foreign Financial Institutions in Model 2 jurisdictions register on the FATCA registration website? Financial Institutions that are treated as Reporting Financial Institutions under a Model 2 IGA (see the list of jurisdictions treated as having an IGA in effect at IGA LIST) should register as Participating Foreign Financial Institutions.

More information on registration can be found in the FATCA Registration Online User Guide:User Guide Link (See Section 2.4 “Special Rules for Registration”)

Q7. We are an FFI in a country that has not signed an IGA, and the local laws of our country do not allow us to report U.S. accounts or withhold tax. What is our FATCA classification? Unless the Treasury website provides that your country is treated as having an IGA in effect, then, because of its local law restrictions, this FFI should register as a Limited FFI provided it meets the definition shown directly below. See FATCA – Archive   for a list of countries treated as having an IGA in effect.

A Limited FFI means an FFI that, due to local law restrictions, cannot comply with the terms of an FFI Agreement, or otherwise be treated as a PFFI or RDCFFI, and that is agreeing to satisfy certain obligations for its treatment as a Limited FFI.

_Expanded Affiliated Groups
Q8. For registration purposes, can an EAG with a Lead FI and 2 Member FIs be divided into: (1) a group with a Lead FI and a member FI, and (2) a member FI that will register as a Single FI? Yes. An EAG may organize itself into subgroups, so long as all entities with a registration requirement are registered. An FI that acts as a Compliance FI for any members of the EAG is, however, required to register each such member as would a Lead FI for such members.
Q9. What is required for an entity to be a Lead FI? A Lead FI means a USFI, FFI, or a Compliance FI that will initiate the FATCA Registration process for each of its Member FIs that is a PFFI, RDCFFI, or Limited FFI and that is authorized to carry out most aspects of its Members’ FATCA Registrations. A Lead FI is not required to act as a Lead FI for all Member FIs within an EAG. Thus, an EAG may include more than one Lead FI that will carry out FATCA Registration for a group of its Member FIs. A Lead FI will be provided the rights to manage the online account for its Member FIs. However, an FFI seeking to act as a Lead FI cannot have Limited FFI status in its country of residence. See Rev. Proc. 2014-13 to review the FFI agreement for other requirements of a Lead FI that is also a participating FFI.
_Sponsoring/Sponsored Entities
Q10. We are a Sponsoring Entity, and we would like to register our Sponsored Entities. How do we register our Sponsored Entities? The Sponsoring Entity that agrees to perform the due diligence, withholding, and reporting obligations of one or more Sponsored Entities pursuant to Treas. Reg. §1.1471-5(f)(1)(i)(F) should register with the IRS via the FATCA registration website to be treated as a Sponsoring Entity. To allow a Sponsoring Entity to register its Sponsored Entities with the IRS, and, as previewed in Notice 2013-69, the IRS is developing a streamlined process for Sponsoring Entities to register Sponsored Entities on the FATCA registration website. Additional information about this process will be provided by the IRS at a later date.

While a Sponsoring Entity is required to register its Sponsored Entities for those entities to obtain GIINs, the temporary and proposed regulations provide a transitional rule that, for payments prior to January 1, 2016, permit a Sponsored Entity to provide the GIIN of its Sponsoring Entity on withholding certificates if it has not yet obtained a GIIN. Thus, a Sponsored Entity does not need to provide its own GIIN until January 1, 2016 and is not required to register before that date.

_Responsible Officers and Points of Contact
Q11. What is a Point Of Contact (POC)? The Responsible Officer listed on line 10 of Form 8957 (or the online registration system) can authorize a POC to receive FATCA-related information regarding the FI, and to take other FATCA-related actions on behalf of the FI. While the POC must be an individual, the POC does not need to be an employee of the FI. For example, suppose that John Smith, Partner of X Law Firm, has been retained and been given the authority to help complete and submit the FATCA Registration on behalf of an FI. John Smith should be identified as the POC, and in the Business Title field for this POC, it should state Partner of X Law Firm.
_Financial Institutions
Q12. Are U.S. Financial Institutions (USFIs) required to register under FATCA? If so, under what circumstances would a USFI register? A USFI is generally not required to register under FATCA. However, a USFI will need to register if the USFI chooses to become a Lead FI and/or a Sponsoring Entity or seeks to maintain and renew the QI status of a foreign branch that is a QI. Furthermore, a USFI with a foreign branch that is a reporting Model 1 FFI is required to register on behalf of its foreign branches (and should identify each such branch when registering). A USFI with non-QI branch operations in a Model 2 jurisdiction or in a non-IGA jurisdiction is not required to register with the IRS.
Q13. Is a Foreign Financial Institution (“FFI”) required to obtain an EIN? If the FFI has a withholding obligation and will be filing Forms 1042 and Forms 1042-S with the Internal Revenue Service, it will be required to have an EIN. Please see publication 515 (“Withholding of Tax on Nonresident Aliens and Foreign Entities”) for further information about U.S. Withholding requirements. SeePub. 515. An FFI is also required to obtain an EIN when it is a QI, WP, or WT (through the application process to obtain any such status) or when the FFI is a participating FFI that elects to report its U.S. accounts on Forms 1099 under Treas. Reg. §1.1471-4(d)(5).
How does a FFI apply for a EIN if it does not already have one? If a FFI does not have an EIN, it may apply for one using Form SS-4 (“Application for Employer Identification Number”) or the online registration system. See Apply-for-an-Employer-Identification-Number-(EIN)-Onlinefor more information.
_Exempt Beneficial Owners
Q14. We are a foreign central bank of issue. Will we be subject to FATCA withholding if we do not register? You will generally be exempt from FATCA Registration and withholding if you meet the requirements to be treated as an exempt beneficial owner (e.g. as a foreign central bank of issue described in Treas. Reg. § 1.1471-6(d), as a controlled entity of a foreign government under Treas. Reg. §1.1471-6(b)(2), or as an entity treated as either of the foregoing under an applicable IGA). A withholding agent is not required to withhold on a withholdable payment to the extent that the withholding agent can reliably associate the payment with documentation to determine the portion of the payment that is allocable to an exempt beneficial owner in accordance with the regulations. However, an exempt beneficial owner may be subject to withholding on payments derived from the type of commercial activity described in Treas. Reg. § 1.1471-6(h).
Q15. We are a foreign pension plan. Will we be subject to FATCA withholding if we do not register? You will be exempt from FATCA Registration and withholding if you meet the requirements to be treated as a retirement fund described in Treas. Reg. § 1.1471-6(f), or under an applicable IGA. A withholding agent is not required to withhold on a withholdable payment to the extent that the withholding agent can reliably associate the payment with documentation to determine the portion of the payment that is allocable to an exempt beneficial owner (in this case, a retirement fund) in accordance with the regulations.
_NFFEs
Q16. How should an entity seeking the FATCA status of “direct reporting NFFE” (other than a sponsored direct reporting NFFE) register for this status to obtain a GIIN in order to avoid FATCA withholding? A direct reporting NFFE is eligible to register for this status and when registering should complete an online registration (or, alternatively, submit a paper Form 8957) based on the instructions provided in this FAQ.   For registrations occurring in years after 2014, it is anticipated that both the online registration user guide and the Instructions for Form 8957 will be updated to incorporate this information.

In general, for purposes of completing the registration of a direct reporting NFFE, substitute the words “direct reporting NFFE” for the words “financial institution” wherever  they appear in the online registration user guide (or in the Instructions for Form 8957).  Unless specific instructions for a registration question are described here in this FAQ, please use the generally applicable instructions provided in the online registration user guide (or in the Instructions for Form 8957).

Part 1

Question 1 – – Select “Single”.

Question 4 – – Select “None of the above”.

Question 6 – – Select “Not applicable”.

Question 7 – – Select “No”.  (If using the portal online, selecting “no” will automatically skip Questions 8 and 9.)

Question 8 – – Skip this question (which relates to branches)

Question 9 – – Skip all parts (a) through (c) of this question (which relate to branches).

Question 10 – – Enter the information of the individual who will be responsible for ensuring that the direct reporting NFFE meets its FATCA reporting obligations and will act as a point of contact with the IRS in connection with its status as a direct reporting NFFE.

Part 2 – – It is not necessary for a direct reporting NFFE to complete this section. (If using the portal online, selecting Single in question 1 will automatically skip Part 2.)

Part 3 – – It is not necessary for a direct reporting NFFE to complete this section. (If using the portal online, selecting “Not Applicable” in question 6 will automatically skip Part 3.)

Part 4 – – The individual who completes this part must have the authority to provide the certification.

Direct reporting NFFE QIs/WPs/WTs should renew their agreements through the existing traditional paper process.  Instructions can be found at the following link (Question IX), see:Qualified-Intermediary-Frequently-Asked-Questions

Q17. How should a sponsor of a sponsored direct reporting NFFE register itself for this status and obtain a GIIN? A sponsor of a sponsored direct reporting NFFE is a sponsoring entity (see Treas. Reg. § 1.1471-1T(b)(124)) and  should complete an online registration (or, alternatively, submit a paper Form 8957) as a sponsoring entity, based on the instructions provided in this FAQ.  A sponsoring entity need only complete one registration to act as the sponsor for both sponsored FFIs and sponsored direct reporting NFFEs.  For registrations occurring in years after 2014, it is anticipated that both the online registration user guide and the Instructions for Form 8957 will be updated to incorporate this information, including by incorporating the definition of sponsoring entity provided in Treas. Reg. § 1.1471-1T(b)(124).

In general, for purposes of having a sponsor register a sponsored direct reporting NFFE, substitute the words “sponsor of a direct reporting NFFE” for the words “sponsoring entity” wherever they appear in the online registration user guide (or in the Instructions for Form 8957).  Unless specific instructions for a registration question are described here in this FAQ, please use the generally applicable instructions provided in the online registration user guide (or in the Instructions for Form 8957).

Part 1

Question 1 – – Select “Sponsoring Entity”.

Question 4 – – Select “None of the above”.

Question 6 – – Select “Not applicable”.

Question 7 – – Select “No”. (If using the portal online, selecting “no” will automatically skip Questions 8 and 9)

Question 8 – – Skip this question (which relates to branches)

Question 9 – – Skip all parts (a) through (c) of this question (which relate to branches).

Question 10 – – Enter the information of the individual who will be responsible for ensuring that the direct reporting NFFE meets its FATCA reporting obligations and who will act as a point of contact with the IRS in connection with its obligations as a sponsoring entity.

Part 2 – – It is not necessary for a sponsor of a direct reporting NFFE to complete this section.  (If using the portal online, selecting Sponsoring Entity in question 1 will automatically skip Part 2.)

Part 3 – – It is not necessary for a sponsor of a direct reporting NFFE to complete this section. (If using the portal online, selecting “Not Applicable” in question 6 will automatically skip Part 3.)

Part 4 – – The individual who completes this part must have the authority to provide the certification.

_Registration Update
Q18. Why has my registration been put into “Registration Incomplete”? What can I do? If your registration has been put into Registration Incomplete status, it is because the IRS has identified an issue with your registration.  If you are Registration Incomplete status, please review your registration for any of the following errors and update it accordingly:

  1. The FFI has identified itself as a Qualified Intermediary with a QI-EIN of which the IRS has no record.  (If you have QI, WP or WT Agreement signed with the IRS, please contact the Financial Intermediaries Team for further assistance.)
  2. The RO has been identified with initials only and no specific name has been provided.
  3. The RO does not appear to be a natural person.
  4. Notice 2013-43 stated that any registrations submitted prior to  January 1, 2014 would be taken out of submit and put into Registration Incomplete status. Thus, if your registration was submitted prior to  January 1, 2014, you must  re-submit your registration assuming that none of the other abovementioned reasons (1-3) are an issue with the FFI’s registration.

After you have updated your registration, you must resubmit in order for your registration to be processed.

 

Additional FAQs are available for the FATCA Registration System and the FATCA FFI List.

book coverPractical Compliance Aspects of Exchange of Information, FATCA and GATCA

For in-depth analysis of the practical compliance aspects of financial service business providing for exchange of information of information about foreign residents with their national competent authority or with the IRS (FATCA), see Lexis Guide to FATCA Compliance, 2nd Edition just published!

The LexisNexis® Guide to FATCA Compliance (2nd Edition) comprises 34 Chapters grouped in three parts: compliance program (Chapters 1–4), analysis of FATCA regulations (Chapters 5–16) and analysis of Intergovernmental Agreements (IGAs) and local law compliance challenges (Chapters 17–34), including intergovernmental agreements as well as the OECD’s TRACE initiative for global automatic information exchange protocols and systems. The 34 chapters include many practical examples to assist a compliance officer contextualize the regulations, IGA provisions, and national rules enacted pursuant to an IGA.  Chapters include by example an in-depth analysis of the categorization of trusts pursuant to the Regulations and IGAs, operational specificity of the mechanisms of information capture, management and exchange by firms and between countries, insights as to the application of FATCA and the IGAs within new BRIC and European country chapters.

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Employers Face Stiff Obama Care Excise Taxes (aka Penalties)

Posted by William Byrnes on April 4, 2014


The Affordable Health Care Act (ACA) (“Obama Care”) may lead to stiff excise taxes for midsize and larger employers that misclassify employees as independent contractors (see §4980H Shared responsibility for employers regarding health coverage).  The term “applicable large employer” means, with respect to a calendar year, an employer who employed an average of at least 50 full-time employees on business days during the preceding calendar year.  The term “full-time employee” means, with respect to any month, an employee who is employed on average at least 30 hours of service per week.  However, employers with less than a 100 employees have a transition period until 2016 for the application of §4980H.

Employers that misclassify employees as independent contractors already face potential tax liability and tax penalties for each misclassified employee.  In addition to these current potential liabilities and penalties for misclassification, employers will now face excise tax assessments under the ACA.   This new excise tax is $2,000 per employee not covered by a qualifying employer medical plan.  However, to encourage compliance with the ACA, if less than 95% of the employees of an employer are covered by a qualified medical employer plan, then a stiffer penalty of $2,000 for every employee of the company may be imposed, albeit with an exemption of the excise tax applying to the first 30 employees.

By example, an employer has 50 workers of which the employer has classified 80% (40) as employees and the remaining 20% (10) as independent contractors.  The employer provides a medical insurance plan for the 40 employees that qualifies for purposes of the ACA.  The §4980H issue is moot, meaning it does not need to be considered, because the employer does not reach the minimum 50 employee threshold.  But now the problem …

The IRS audits the employer and determines that the employer has misclassified the 10 independent contractors, and re-classifies them as employees.  The employer has employment tax issues, and penalties to contend with, regarding the 10 employees.  But also, §4980H now applies because the employer has reached 50 employees.  Worse yet, the employer has not covered 95% of its employees with qualified medical coverage.  Instead of 40 employees covered out of 40 covered for 100% coverage, after audit the employer is determined to have only covered 80% of employees (40 out of 50), missing the minimum 95% threshold.   Thus, the excise tax does not apply to just the 10 employees but instead applies to all employees, with an allowance for the first 30.  How much excise tax will be owed then?  50 employees, subtracting the allowance for the first 30, leaves 20 employees multiplied by the excise  tax of $2,000, thus $40,000 for the year (on top of normal employment taxes and penalties for the 10 misclassified employees).

Classification of a worker as either an “employee” or an “independent contractor” is based on the common law standard of an examination of the facts and circumstances of the relationship between the employer and the worker to assess whether the employer has the right to direct and control the performance of services.  Substantial case law has developed from disputes between employers and the IRS, and between workers, who may want to be classified as independent contractors to better leverage tax deductions, and the IRS.

tax-facts-online_medium

Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This brand-new resource provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

“Our brand-new Tax Facts title is exciting in many ways,” says Rick Kravitz, Vice President & Managing Director of Summit Professional Network’s Professional Publishing Division. “First of all, it fills a huge gap in the resources available to today’s advisors. Small business is a big market, and this book enables advisors to get up-and-running right away, with proven guidance that will help them serve their clients’ needs. Secondly, it addresses the biggest questions facing all taxpayers and provides absolutely reliable answers that help advisors solve today’s biggest problems with confidence.”

Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.  The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community,” added Rick Kravitz.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

Posted in Compliance, Taxation | Tagged: , , , , , , | Leave a Comment »

Ten Tax Facts about Capital Gains and Losses

Posted by William Byrnes on April 4, 2014


In Tax Tip 2014-27, the IRS discussed capital gains and losses.  The IRS stated that when a taxpayer sells a ’capital asset,’ the sale usually results in a capital gain or loss. A ‘capital asset’ includes most property owned and used for personal or investment purposes.

10 tax facts about capital gains and losses:

1. Capital assets include property such as a home or a car. They also include investment property such as stocks and bonds.

2. A capital gain or loss is the difference between the “basis” and the amount earned upon the sale of the asset.  The basis is usually what the taxpayer paid for the asset.

3. A taxpayer must include all capital gains in income.  Beginning in 2013, a taxpayer may be subject to the Obama Care “Net Investment Income Tax”.  The NIIT applies at a rate of 3.8% to certain net investment income of individuals, estates, and trusts that have income above statutory threshold amounts.

4. A taxpayer can deduct capital losses on the sale of investment property (such as an apartment building) but can not deduct losses on the sale of personal-use property (such as the family home).

5. Capital gains and losses are either long-term or short-term, depending on how long the property is owned.  If a taxpayer owns the property for more than one year, the gain or loss is long-term.  If owned one year or less, the gain or loss is short-term.

6. If long-term gains are more than long-term losses, the difference between the two is a “net long-term capital gain”.  If net long-term capital gain is more than net short-term capital loss, then the taxpayer has a ‘net capital gain.’

7. The tax rates that apply to net capital gains will usually depend on a taxpayer’s income.  For lower-income individuals, the rate may be zero percent on some or all of their net capital gains.  In 2013, the maximum net capital gain tax rate increased from 15 to 20 percent. A 25 or 28 percent tax rate can also apply to special types of net capital gains.

8. If capital losses are more than capital gains, the taxpayer can deduct the difference as a loss on the tax return. This loss is limited to $3,000 per year, or $1,500 if filing married but separate returns.

9. If total net capital loss is more than the deduction limit above, the losses above the allowable deduction can be carried over to next year’s tax return.  The carried over losses will be treated as if they happened next year.

10. File Form 8949, Sales and Other Dispositions of Capital Assets, with the federal tax return to report your gains and losses.   Also file Schedule D, Capital Gains and Losses with the federal tax return.

2014_tf_on_investments-m2014 Tax Facts on Investments provides clear, concise answers to often complex tax questions concerning investments.  Pertinent planning points are provided throughout.

Organized in a convenient Q&A format to speed you to the information you need, 2014 Tax Facts on Investments delivers the latest guidance on:

  • Mutual Funds, Unit Trusts, REITs
  • Incentive Stock Options
  • Options & Futures
  • Real Estate
  • Stocks, Bonds
  • Oil & Gas
  • Precious Metals & Collectibles
  • And much more!

Key updates for 2014:

  • Important federal income and estate tax developments impacting investments, including changes from the American Taxpayer Relief Act of 2012
  • Expanded coverage of Reverse Mortgages
  • Expanded coverage of Real Estate Investment Trusts (REITs)
  • More than 30 new Planning Points, written by practitioners for practitioners, in the following areas:
    • Limitations on Loss Deductions
    • Charitable Gifts
    • Reverse Mortgages
    • Deduction of Interest and Expenses
    • REITs

Plus, you’re kept up-to-date with online supplements for critical developments.  Written and reviewed by practicing professionals who are subject matter experts in their respective topics, Tax Facts is the practical resource you can rely on.

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Expanded EU Savings Directive Enacted By EU Commission – National Adoptions before 2016 !

Posted by William Byrnes on April 3, 2014


EU Council Announces March 2014 Adoption of Expanded EU Savings Directive

On Saturday, March 22, 2014 the EU Council’s General Secretariat announced that it will adopt major amendments to the EU Directive on taxation of savings income.  That Monday, March 24, the EU Commission adopted amendments to expand the application of the EU Savings Directive.   The amendments address the current loopholes, such as application to trusts, to foundations, and to investment income that is comparable to interest income.  By January 2016 each EU State must adopt national legislation enacting the directive within its system, and implement the directive by January 1, 2017.  See the EU Commission’s Presentation Powerpoint.

Brief Background on EU Savings Directive

The liberalization of capital markets and the free movement of capital within the EU borders revealed how important it was to establish cooperation with a view to preventing, in the direct taxation area, fraud and evasion linked to cross-border financial investments. The problem with taxpayers moving their investments to Member States which did not impose taxation at source while the taxpayers simultaneously under-reported to their respective State of residence (or not reporting at all) the income earned. The EU Savings Directive was adopted to address this situation, coming into effect in 2005.

The mechanism of the Directive works by imposing an obligation to any paying agent in an EU Member State which makes a payment to an individual resident in the other Member State which is the beneficial owner of the income, to report that payment of interest to the competent tax authorities of the Member State in which the paying agent is established. The competent tax authorities of that (source) State in turn transfer the information collected to the competent tax authority of the residence of the beneficial owner. Based on the information received it is possible for the State of residence of the beneficial owner to verify if the amount is declared for tax purposes and to tax the corresponding income.

Loopholes Reported in 2008

In his 2004 Report on the Regulatory, Competitive, Economic and Socio-Economic Impact of the European Union Code of Conduct on Business Taxation and Tax Savings Directive to the United Kingdom Foreign and Commonwealth Office and the Overseas Territories of The Virgin Islands (British), Turks & Caicos Islands, Anguilla and Montserrat, Professor William Byrnes undertook an in-depth analysis of the EU Savings Directive identifying several loopholes that would require later amendments for it to achieve its objectives.

The Savings Directive loopholes include:

• Territorial scope: It is limited to intra-community situations in which a paying agent from one Member State pays to an individual resident in another Member State. It does not apply to payments from outside the EU, i.e. when the paying agent is located in a third (non-EU) State or to payments to beneficial owners who reside in third States.

• Personal scope: it does not apply to persons other than individuals, in particular payments made to legal entities. This limitation provides individuals with opportunities to circumvent the Savings Directive by using an interposed legal person or arrangement.

• Material scope: it does not cover other forms of savings like insurance products, pensions, some tailored investment funds, return on derivative contracts, structured products, etc.

These and other loopholes have been formally reported by the European Commission since 2008. The main findings of a report produced by the Commission identified as a major problem lack of “consistent treatment of other comparable situations”.[1] Pursuing this aim of consistency requires that interest payments obtained by an individual through intermediate vehicles are consistently put on an equal footing with interest payments directly received by the individual. This consistency of coverage is required not only to ensure the effectiveness of the Directive, but also compliance with the rules of the internal market and fair competition between comparable financial products and structures.

proposal was submitted to the Council which aimed at extending the scope of the Directive.[2] 

European Council Announces Amended Savings Directive Adoption in March 2014

On March 22, 2014 the European Council reported in a press release[3] that (emphasis added):

The European Council welcomes the Commission’s report on the state of play of negotiations on savings taxation with European third countries (Switzerland, Liechtenstein, Monaco, Andorra and San Marino) and calls on those countries to commit fully to implementing the new single global standard for automatic exchange of information, developed by the OECD and endorsed by the G20, and to the early adopters initiative.

The European Council calls on the Commission to carry forth the negotiations with those countries swiftly with a view to concluding them by the end of the year, and invites the Commission to report on the state of play at its December meeting. If sufficient progress is not made, the Commission’s report should explore possible options to ensure compliance with the new global standard.

In the light of this, the Council will adopt the Directive on taxation of savings income at its next March 2014 meeting.

The European Council invites the Council to ensure that, with the adoption of the Directive on Administrative Cooperation by the end of 2014, EU law is fully aligned with the new global standard.

What About the Withholding Exception for Austria and Luxembourg?

While most Member States adopted the exchange of information regime provided in the 2005 Savings Directive, three Member States with a tradition of bank secrecy—Belgium, Luxembourg and Austria—preferred to adopt, during a transitional period, a withholding tax regime. They were authorized to adopt a withholding tax (now 35%) on interest income that is paid to individual savers resident in other EU Member States. In the meantime Belgium decided to discontinue applying the transitional withholding tax as of 1 January 2010 and exchange information instead.

Therefore, only Luxembourg and Austria are currently entitled to levy a withholding tax. Luxembourg has notified the EU Commission that from next year, January 1, 2015 it will discontinue applying the transitional withholding tax and thus begin automatically exchanging information for applicable accounts from that date.

Thus, only Austria has expressed that it will maintain the withholding tax option. Austria’s finance minister is quoted in April 2013 stating: “All this data exchange will not put one red cent in my tax coffers, …. I want to have the money, not a data cemetery.”[4]  However, in light of the Council’s press release on Saturday, this position has probably changed.

The Austria’s Chancellor had also indicated that Austria may begin automatic exchange regarding the interest from savings accounts beginning 2014.[5] Although this statement is different from the Luxembourg commitment towards automatic exchange of information, it would not be surprising that Austria will soon also endorse this automatic exchange standard within the scope of applying the Savings Directive, in light of FATCA, GATCA, and the Council’s press release.

book coverPractical Compliance Aspects of Exchange of Information, FATCA and GATCA

For in-depth analysis of the practical compliance aspects of financial service business providing for exchange of information of information about foreign residents with their national competent authority or with the IRS (FATCA), see Lexis Guide to FATCA Compliance, 2nd Edition just published!

William H. Byrnes, author of six Lexis international tax titles, has achieved authoritative prominence with more than 20 books, 100 book chapters and supplements, and 1,000 media articles.  In 2008 he was appointed Associate Dean at Thomas Jefferson School of Law, previously obtaining Professor of Law with Tenure at St. Thomas University.   William Byrnes was a Senior Manager, then Associate Director of international tax for Coopers and Lybrand, and consulted for clients involved with Africa, Europe, Asia, the Indian sub-continent, and the Caribbean.   He has been commissioned by a number of governments on tax policy.

[1] See Commission Staff Working Document, “Refining the present coverage of Council Directive 2003/48/EC on taxation of income from savings”, SEC (2008), p. 559.

[2] See “Proposal for a Council Directive amending Council Directive 2003/48/EC on taxation of savings income in the form of interest payments”, COM (2008) 727 final, of November 13, 2008.

[3] Conclusions, European Council, Brussels, Euco 7/1/14, 21 March 2014.

[4]“All this data exchange will not put one red cent in my tax coffers,” finance minister Maria Fekter said on 13 April. “I want to have the money, not a data cemetery.”  Stamatoukou, Eleni, “EU Savings Directive to be modified”, New Europe Online, (April 15, 2013) Available at http://www.neurope.eu/article/eu-savings-directive-be-modified.

[5] Austria’s position regarding the extension of the EU Savings Directive requires that such extension be also imposed through international agreements with San Marino, Switzerland, Lichtenstein, Andorra, and Monaco.  However, it is unclear if Austria has since backtracked and made these five agreements a pre-condition for its own automatic information exchange on savings income for depository accounts.  See Bodoni, Stephanie, EU Push For Savings-Tax Deal Fought By Luxembourg, Austria, Bloomberg (Nov 14, 2013).  Available at http://www.bloomberg.com/news/2013-11-14/eu-set-to-fail-to-meet-savings-tax-goal-on-luxembourg-opposition.html.

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Treasury releases 22 new FATCA IGAs

Posted by William Byrnes on April 3, 2014


Treasury released 22 new IGAs the past week and yesterday, April 2.  Hionduras and Luxembourg both have Model 1 IGAs that are now in effect.  The other 20 countries and jurisdictions include signed but not yet in effect Model 1 IGA, except for Austria which has signed a Model 2 that has not yet entered into effect.  See below.

The following jurisdictions are treated as having an intergovernmental agreement in effect:

Jurisdictions that have signed agreements:

Model 1 IGA

Model 2 IGA

all NEW —> Jurisdictions that have reached agreements in substance and have consented to being included on this list (beginning on the date indicated in parethesis):

Model 1 IGA

  • Australia (4-2-2014)
  • Belgium (4-2-2014)
  • Brazil (4-2-2014)
  • British Virgin Islands (4-2-2014)
  • Czech Republic (4-2-2014)
  • Gibraltar (4-2-2014)
  • Jamaica (4-2-2014)
  • Kosovo (4-2-2014)
  • Latvia (4-2-2014)
  • Liechtenstein (4-2-2014)
  • Lithuania (4-2-2014)
  • New Zealand (4-2-2014)
  • Poland (4-2-2014)
  • Portugal (4-2-2014)
  • Qatar (4-2-2014)
  • Slovenia (4-2-2014)
  • South Africa (4-2-2014)
  • South Korea (4-2-2014)
  • Romania (4-2-2014)

Model 2 IGA

  • Austria (4-2-2014)

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Advance Pricing Agreements Report released by IRS

Posted by William Byrnes on April 3, 2014


Report Concerning Advance Pricing Agreements (2013)

Highlights excerpted:

In February of 2012, the former APA Program was moved from the Office of Chief Counsel to the Office of Transfer Pricing Operations, Large Business and International Division of the IRS (TPO) and combined with the United States Competent Authority (USCA) staff responsible for transfer pricing cases, thereby forming the Advance Pricing and Mutual Agreement (APMA) Program.  During the last quarter of 2013, new proposed revenue procedures governing APA applications and MAP applications were released for public comment in Notice 2013-79, 2013-50 I.R.B. 653, and Notice 2013-78, 2013-50 I.R.B. 633, respectively. These proposed revenue procedures reflect the changes in APMA’s structure, and more importantly, were informed by the cumulative experience of more than 20 years of APA practice in the United States, which has produced more than eleven hundred unilateral and bilateral agreements since 1991.

During 2013, the APMA Program continued to benefit from the merger and processing efficiencies that began in 2012. For the second year in a row, the number of executed APAs increased (from 140 in 2012 to 145 in 2013). The median completion time fell from 39.8 months in 2012 to 32.7 months in 2013. The increase in efficiency is further illustrated by the fact that the number of executed APAs (145) again surpassed the number of applications filed (111).

Part I of this report includes information on the structure, composition, and operation of the APMA Program; Part II presents statistical data for 2013; and Part III includes general
descriptions of various elements of the APAs executed in 2013, including types of transactions covered, transfer pricing methods used, and completion time.

The 111 APA applications received during 2013, represent a slight decrease from the 126 received in 2012.  Almost 75 percent of the bilateral applications filed in 2013 involved either Japan or Canada.  The APMA Program increased the number of APAs executed in its second year. The 145 APAs executed in 2013 surpassed the previous record of 140 executed agreements set in 2012. Of the 145 agreements executed in 2013, 68 of the agreements (47 percent) were new APAs (i.e., not renewal APAs), an increase from the 57 (41 percent) new APAs executed in 2012.

In 2013, approximately 55 percent of the APAs executed involved transactions between a non-U.S. parent and a U.S. subsidiary; 40 percent of the APAs executed involved transactions between a U.S. parent and a non-U.S. subsidiary; and the remaining 5 percent involved transactions that included either a partnership or a branch. In 2012, approximately 75 percent of the APAs executed involved transactions between a non-U.S. parent and a U.S. subsidiary, while the remaining 25 percent involved transactions between a U.S. parent and a non-U.S. subsidiary.

Although more than 75 percent of covered transactions involve tangible goods and services transactions, the IRS also has successfully completed numerous APAs involving transfers of intangibles.  More than 60 percent of the tested parties in the APAs executed in 2013 involved distribution or related functions, e.g., marketing and product support.

In controlled transactions using the CPM/TNMM, the Operating Margin was the most common profit level indicator (PLI) used to benchmark results for transfers of tangible and intangible property. Per the applicable regulations, Operating Margin is defined as the ratio of operating profits to sales. The Berry Ratio, defined as the ratio of gross profit to operating expenses, was applied as the profit level indicator in 8 percent of the controlled transactions that used the CPM/TNMM. Each other profit level indicator accounted for a smaller share.

For services transactions, the majority of cases applied the Services Cost Method or the CPM/TNMM. The Services Cost Method evaluates the amount charged for certain services with
reference to the total services costs.

For the APAs executed in 2013 that used external comparables data in the analysis, the most widely used data source for comparables was the Standard and Poor’s Compustat database. Other sources were also used in appropriate cases, e.g., where the tested party was not the U.S. entity. The most commonly used sources are:

  • Disclosure
  • Mergent
  • Orbis
  • GlobalVantage
  • Worldscope
  • OneSource
  • Osirus

practical_guide_book

Lexis’ Practical Guide to U.S. Transfer Pricing, 28 chapters from 30 expert contributors led by international tax Professor William Byrnes,  is designed to help multinationals cope with the U.S. transfer pricing rules and procedures, taking into account the international norms established by the Organisation for Economic Co-operation and Development (OECD). It is also designed for use by tax administrators, both those belonging to the U.S. Internal Revenue Service and those belonging to the tax administrations of other countries, and tax professionals in and out of government, corporate executives, and their non-tax advisors, both American and foreign.  Fifty co-authors contribute subject matter expertise on technical issues faced by tax and risk management counsel.

 

 

 

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FATCA Jurisdictions Treated as Having an IGA in Effect and 10 Day Extension for FFI Registration

Posted by William Byrnes on April 2, 2014


Foreign financial institutions (FFIs) and US withholding agents (USWAs) have presented compliance concerns to Treasury and the IRS about the status of FFIs in jurisdictions that are known to be in an advanced stage of concluding an IGA, but have not yet signed such agreement.  Treasury has signed IGAs with 26 jurisdictions and has reached agreements in substance or is in advanced discussions with many others.

Treasury and the IRS have on April 2, 2014 issued Announcement 2014-17 to provide some level of comfort to FFIs in such jurisdictions that already have reached an IGA in substance and to USWAs paying agents.

Moreover, the IRS has also granted an extension of 10 (ten) days, previously April 25 but now May 5, 2014 (GMT -5), for an FFI to register via the FATCA Registration Portal to be included on the PFFI Global Intermediary Identification Number (GIIN) list to be issued June 2, 2014.

On July 1, 2014 FATCA withholding must be implemented for certain transactions (see Chapter 12 FATCA Withholding Compliance, LexisNexis® Guide to FATCA Compliance).  FATCA requires that a withholding agent must obtain an FFI’s GIIN for payments made from July 1, 2014 and must confirm that the GIIN appears on the IRS FFI List. However, an exception provides that a withholding agent does not need to obtain a reporting Model 1 FFI’s GIIN for payments made before January 1, 2015.

The IRS disclosed that “some FFIs that expect to be reporting Model 2 FFIs may not be able to register by April 25 if legal impediments would prevent them from agreeing to the terms of the FFI Agreement that would apply absent the modifications applicable to reporting Model 2 FFIs under a signed Model 2 IGA.”

“Some FFIs”, continued the IRS Notice, “…expect to be reporting Model 1 FFIs … are concerned about missing the April 25 deadline in case the relevant IGA is not in fact signed, and therefore treated as being in effect, by July 1.”

Relevant portions of Announcement 2014-17 are excerpted below.

Expansion of IGAs Treated as Being in Effect to Include Agreements in Substance

This announcement aims to address these concerns by providing that the jurisdictions listed on the Treasury and IRS websites as jurisdictions that are treated as having an IGA in effect will also include jurisdictions that, before July 1, 2014, have reached agreements in substance with the United States on the terms of an IGA and have consented to be included on the Treasury and IRS list, even if those agreements have not yet been signed.

Such jurisdictions will be treated as having an IGA in effect from the date that the jurisdiction provides its consent (or April 2, 2014, the date of the public release of this announcement, if later) until December 31, 2014, the date by which the IGA must be signed in order for this status to continue without interruption. Treasury expects to add jurisdictions to this list in the coming weeks as additional jurisdictions consent to inclusion on the list and additional agreements in substance are reached. Jurisdictions that reach agreements in substance on or after July 1, 2014, will not be included in the list of jurisdictions that are treated as having an IGA in effect until the IGA is signed.

The text of the agreements in substance that are treated as being in effect will not be published by the IRS or Treasury until the IGA is signed. Instead, the list will specify only whether the relevant IGA is a Model 1 or a Model 2 IGA. Until the IGA is signed, the jurisdiction will be treated as having in effect the relevant model provisions. This means that an FFI resident in, or organized under the laws of, a jurisdiction that is listed on the Treasury and IRS websites as having reached an agreement in substance will be permitted to register on the FATCA registration website consistent with its treatment under the relevant model IGA and will be permitted to certify its status to a withholding agent consistent with that treatment.

New Dates for Registering to Ensure GIIN Inclusion on the IRS FFI List

Finally, Treasury and the IRS remind all withholding agents that, in accordance with Reg. §1.1471-3(e)(3), a withholding agent that receives a Form W-8 from a payee with a GIIN that does not yet appear on the published IRS FFI List has 90 days to verify that the GIIN appears on the list before the withholding agent will be treated as having reason to know that the chapter 4 status of the payee is unreliable or incorrect. In addition, a withholding agent that receives a Form W-8 from a payee indicating that the payee has applied for a GIIN has 90 days to obtain the GIIN from the payee and verify it against the IRS FFI List before the withholding agent will be treated as having reason to know that the chapter 4 status of the payee is unreliable or incorrect.

Jurisdictions that have signed agreements:

Model 1 IGA

Model 2 IGA

Jurisdictions that have reached agreements in substance and have consented to being included on this list (beginning on the date indicated in parethesis):

Model 1 IGA

  • Australia (4-2-2014)
  • Belgium (4-2-2014)
  • Brazil (4-2-2014)
  • British Virgin Islands (4-2-2014)
  • Czech Republic (4-2-2014)
  • Gibraltar (4-2-2014)
  • Jamaica (4-2-2014)
  • Kosovo (4-2-2014)
  • Latvia (4-2-2014)
  • Liechtenstein (4-2-2014)
  • Lithuania (4-2-2014)
  • New Zealand (4-2-2014)
  • Poland (4-2-2014)
  • Portugal (4-2-2014)
  • Qatar (4-2-2014)
  • Slovenia (4-2-2014)
  • South Africa (4-2-2014)
  • South Korea (4-2-2014)
  • Romania (4-2-2014)

Model 2 IGA

  • Austria (4-2-2014)

book coverPractical Compliance Aspects of Exchange of Information, FATCA and GATCA

For in-depth analysis of the practical compliance aspects of financial service business providing for exchange of information of information about foreign residents with their national competent authority or with the IRS (FATCA), see Lexis Guide to FATCA Compliance, 2nd Edition just published!

The LexisNexis® Guide to FATCA Compliance (2nd Edition) comprises 34 Chapters grouped in three parts: compliance program (Chapters 1–4), analysis of FATCA regulations (Chapters 5–16) and analysis of Intergovernmental Agreements (IGAs) and local law compliance challenges (Chapters 17–34), including intergovernmental agreements as well as the OECD’s TRACE initiative for global automatic information exchange protocols and systems. The 34 chapters include many practical examples to assist a compliance officer contextualize the regulations, IGA provisions, and national rules enacted pursuant to an IGA.  Chapters include by example an in-depth analysis of the categorization of trusts pursuant to the Regulations and IGAs, operational specificity of the mechanisms of information capture, management and exchange by firms and between countries, insights as to the application of FATCA and the IGAs within new BRIC and European country chapters.

Posted in FATCA | Tagged: , | 2 Comments »

Transition into retirement seamlessly with combo DIA-variable annuity

Posted by William Byrnes on April 2, 2014


While deferred income annuities have gained a prominent position in the retirement income planning game, the newest entrant into the annuity marketplace is poised to change the way these products operate for good. This is because the new deferred income annuity comes wrapped up within a variable annuity product, allowing clients to access the best of both worlds though a single annuity contract.

By structuring the deferred income annuity as a rider, rather than as a stand-alone contract, insurance carriers can now provide clients with the ability to participate in market gains while ensuring sufficient income even late into retirement, without the need to purchase, manage, or exchange multiple annuity contracts.

Read the analysis of William Byrnes and Robert Bloink at > LifeHealthPro <

LifeHealthPro.com is the vital online destination for life & health insurance advisors, designed to provide them with the essential elements they need to run their practice and increase their bottom line including breaking news, market trends, practice tips and more.

Posted in Retirement Planning | Tagged: , , | Leave a Comment »

IRS Releases Final FATCA Form W-8BEN-E & Instructions – Analysis

Posted by William Byrnes on April 2, 2014


free FATCA chapter download here —> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671   Number of Pages in PDF File: 58

The Form W-8BEN has been split into two forms.  The new 2014 Form W-8BEN (revision date 2014) is for use solely by foreign individuals, whereas the new Form W-8BEN-E is for use by entities for 2014 (revision date 2014) to provide US withholding agents.  The newest version of Form W-8BEN-E must be used by all entities that are beneficial owners of a payment, or of another entity that is the beneficial owner.

The IRS released the new 2014 Form W-8BEN-E (2-2014) that coincides with FATCA and QI entity classification reporting requirements, and on April 30, 2014 the IRS followed up with the new Form W-8IMY (read my analysis at “Form W-8IMY”), formally replacing its 2006 predecessor W-8IMY.

Form W-8IMY is submitted generally by a payment recipient (the “filer”) with non-beneficial owner status, i.e. an intermediary.  Such intermediary can be a U.S. branch, a qualified intermediary, a non-qualified intermediary, foreign partnership, foreign grantor or a foreign simple trust.  Form W-8IMY requires a tax identification number.  The new Form W-8IMY has 28 parts whereas the previous August 2013 FATCA draft W-8IMY only contained 26.  The new 2014 Form W-8IMY is vastly different from the seven-part 2006 predecessor form.

Below is an analysis of how to fill out the 2014 W-8BENW-8BEN-E  and of W-8IMY.  The Form W8BEN instructions >link is here< and the Form W-8BEN-E Instructions link is here. My 600 page  Lexis FATCA compliance manual link is here.  Free download link is here.

Analysis of the W-8BEN

Foreign individuals (non-resident aliens – NRAs) must use Form W-8BEN to document their foreign status and claim any applicable treaty benefits for chapter 3 purposes, including a foreign individual that is the single member of an entity that is disregarded for U.S. tax purposes.

The NRA must give the Form W-8BEN to the withholding agent or payer if he/she is the beneficial owner of an amount subject to withholding, or if he/she an account holder of an FFI then to the FFI to document his/her status as a nonresident alien.  Note that a sole member of a “disregarded” entity is considered the beneficial owner of income received by the disregarded entity, and thus the sole member must provide a W-8BEN.

If the income or account is jointly owned by more than one persons, the income or account will be treated by the withholding agent as owned by a foreign person that is a beneficial owner of a payment only if Forms W-8BEN or W-8BEN-E are provided by EVERY owner of the account.  If the withholding agent or financial institution receives a Form W-9 from any of the joint owners, then the payment must be treated as made to a U.S. person and the account treated as a U.S. account.

If any information on the Form W-8BEN becomes incorrect because of a change in circumstances, then the NRA must provide within 30 days of the change of circumstances the withholding agent, payer, or FFI with a new W-8BEN.   By example, if an NRA has a change of address to an address in the United States, then this change is a change in circumstances that requires contacting the withholding agent or FFI within 30 days.  Generally, a change of address within the same foreign country or to another foreign country is not a change in circumstances.   However, if Form W-8BEN is used to claim treaty benefits of a country based on a residence in that country and the NRA changes address to outside that country, then it is a change in circumstances requiring notification within 30 days to the withholding agent or FFI.

A NRA (nonresident alien individual) is any individual who is not a citizen or resident alien of the United States.  An foreign person (‘alien”) meeting either the “green card test” or the “substantial presence test” for the calendar year is a resident alien. Any person not meeting either of these two tests is a nonresident alien individual.   Additionally, an alien individual who is a bona fide resident of Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, the U.S. Virgin Islands, or American Samoa is a nonresident alien individual.

Taxpayer Identification Numbers

Line 5 requires a taxpayer identification number, which is the US social security number (SSN), or if not eligible to receive a SSN, then an individual taxpayer identification number (ITIN).  The SSN may be applied for www.socialsecurity.gov/online/ss-5.html.  An ITIN may be applied for by filing Form W-7 with the  IRS.  To claim  certain treaty benefits, either line 5 must be completed with an SSN or ITIN, or line 6 must include a foreign  tax identification number (foreign TIN).

US Exchange of Tax Information with Foreign Countries

Line 6 of Form W-8BEN requires a foreign tax identifying number ( foreign TIN) issued by a foreign jurisdiction of residence when an NRA documents him or herself with respect to a financial account held at a U.S. office of a financial institution.  However, if the foreign jurisdiction does not issue TINs or has not provided the NRA a TIN yet, then the NRA must enter a date of birth in line 8.

Analysis of the W-8BEN-E 

The W-8BEN-E form has thirty parts, that can be catalogued into four sections.  The filer’s primary focus will be on Part I.  By the way, the draft W-8BEN-E form only had twenty-seven, and the former W8BEN in use since 2006 has just four parts.

Identifying Information and Choice of Classification Part: All filers of the new W-8BEN-E must complete Parts I (Identifying Information and FATCA Classification).  Part I of the W-8BEN-E requires general information, the QI status, and the FATCA classification of the filer.  Question 4 of Part I requests the QI status. If the filer is a disregarded entity, partnership, simple trust, or grantor trust, and also is claiming benefits under a U.S. tax treaty, then the filer must complete Part III.  Part I, Question 5 requests the FATCA classification of the filer, of which the form list thirty-one choices (see analysis below).  The classification indicated determines which one of the Parts IV through XXVIII must be completed.

General Certification Part: All filers must complete Part XXIX (General Certification).  Part XXIX requires certification, under penalty of perjury, by the payee or a person authorized to sign on the payee’s behalf.  This part of the final form also contains the following language that does not appear in the current form: “I agree that I will submit a new form within 30 days if any certification made on this form becomes incorrect.”

FATCA Classification Certification Parts: Completion of the other parts of the form W-8BEN-E will depend upon the Part I, Question 5 FATCA classification of the filer (see list below). The classifications on the newest version Form W-8BEN-E maintain the classification of a Restricted Distributor (previously Part X of the draft form, but in the final form Part XI) (see the Rev. 2013 version of the W-8BEN-E).

Substantial US Owner Part: Note that if the filer is a passive NFFE, it must complete Part XXVI as well as Part XXX if it has substantial U.S. owners.  For a Passive NFFE, a specified U.S. person is a substantial U.S. owner if the person has more than a 10 percent beneficial interest in the entity.

Who Must Provide W-8BEN-E?

A foreign entity must submit a Form W-8BEN-E to the withholding agent if it will receive a FATCA withholdable payment, receive a payment subject to chapter 3 withholding, or if it maintains an account with an FFI.

All Beneficial Owners

Form W-8 BEN-E must be provided by ALL the entities that are beneficial owners of a payment, or of another entity that is the beneficial owner.  If the income or account is jointly owned by more than one person, then the income or account will be treated by the withholding agent as owned by a foreign beneficial owner only if Forms W-8BEN or W-8BEN-E are provided by EVERY owner of the account.

Treatment as US Account

If the withholding agent or financial institution receives a Form W-9 from any of the joint owners, then the payment must be treated as made to a U.S. person and the account treated as a U.S. account.  An account will be treated as a U.S. account for FATCA by an FFI if any of the account holders is a specified U.S. person or a U.S.-owned foreign entity (unless the account is otherwise excepted from U.S. account status for FATCA purposes).

Hybrids

Hybrid Entity: A hybrid entity should give Form W-8BEN-E on its own behalf to a withholding agent only for income for which it is claiming a reduced rate of withholding under an income tax treaty or to document its chapter 4 status for purposes of maintaining an account with an FFI requesting this form (when it is not receiving withholdable payments or payments subject to chapter 3 withholding).

Reverse Hybrid: A reverse hybrid entity should give Form W-8BEN-E on its own behalf to a withholding agent only for income for which no treaty benefit is being claimed or to establish its status for chapter 4 purposes (when required).

Who Should Not Use Form W-8BEN-E?

US Person: If the filer is a US person (including US citizens, resident aliens, and entities treated as US persons, such as a corporation organized under the law of a state), then submit Form W-9, Request for Taxpayer Identification Number and Certification.

Foreign Insurance Company: A foreign insurance company that has made an election under section 953(d) to be treated as a U.S. person should submit Form W-9 to certify its “U.S. status” even if it is an FFI for FATCA purposes.  Certain foreign insurance companies issuing annuities or cash value insurance contracts that elect to be treated as a U.S. person for federal tax purposes but are not licensed to do business in the United States are treated as FFIs for purposes of chapter 4. For purposes of providing a withholding agent with documentation for both chapter 3 and chapter 4 purposes, however, such an insurance company is permitted to use Form W-9 to certify its status as a U.S. person.

NRA: A nonresident alien individual must submit Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals).

Disregarded: A U.S. person that is a single owner of a disregarded entity, and that is not also a hybrid entity claiming treaty benefits, should provide Form W-9.  A foreign branch of a U.S. financial institution (other than a branch that operates as a qualified intermediary) that is treated as an FFI under an applicable IGA is permitted to use Form W-9 to certify its status as a U.S. person for chapter 3 and chapter 4 purposes.

But if the single owner is not a U.S. person,is not a branch of an FFI claiming FATCA status, and is not a hybrid entity claiming treaty benefits, it should provide either Form W-8BEN or Form W-8BEN-E as appropriate.

Intermediary: Form W-8IMY is submitted generally by a payment recipient with non-beneficial owner status, i.e. an intermediary.  Such intermediary can be a U.S. branch, a qualified intermediary, a non-qualified intermediary, foreign partnership, foreign grantor or a foreign simple trust.  Read my analysis of W-8IMY and its instructions in my June 24th article.  An entity treated as a flow-through entity should generally provide Form W-8IMY for chapter 3 or chapter 4 purposes.

Expiration of Form W-8BEN-E.

Generally, a Form W-8BEN-E will remain valid for purposes of both chapters 3 and 4 for a period starting on the date the form is signed and ending on the last day of the third succeeding calendar year, unless a change in circumstances makes any information on the form incorrect.  For example, a Form W-8BEN signed on September 30, 2014 remains valid through December 31, 2017.  However, under certain conditions a Form W-8BEN-E will remain in effect indefinitely until a change of circumstances occurs.

Change in circumstances.

If a change in circumstances makes any information on the Form W-8BEN-E incorrect for purposes of either chapter 3 or chapter 4, then the submitting person must notify the withholding agent or financial institution maintaining the account within 30 days of the change in circumstances and you must file a new Form W-8BEN-E (or other appropriate form as applicable).

Certification

Part XXIX requires certification, under penalty of perjury, by the payee or a person authorized to sign on the payee’s behalf.  This part of the final form also contains the following language that does not appear in the current form: “I agree that I will submit a new form within 30 days if any certification made on this form becomes incorrect.”

Analysis of Part I – Identification of Beneficial Owner

Part I of the W-8BEN-E requires general information, the QI status, and the FATCA classification of the filer.

Question 1A disregarded entity or branch enters the legal name of the entity that owns the disregarded entity (looking through multiple disregarded entities if applicable) or maintains the branch.

Question 2A corporation must enter its country of incorporation.  Any other type of entity must instead enter the country under whose laws it is created, organized, or governed.

Question 3A disregarded entity receiving a payment should only enter its name on line 3 if it is receiving a withholdable payment or hold an account with an FFI and

  1. has registered with the IRS and been assigned a GIIN associated with the legal name of the disregarded entity;
  2. is a reporting Model 1 FFI or reporting Model 2 FFI; and
  3. is not a hybrid entity using this form to claim treaty benefits.

If not required to provide the legal name, then a disregarded entity receiving a payment or maintaining an account may instead enter its name on line 10.

Question 4 requests the QI status. If the filer is a disregarded entity, partnership, simple trust, or grantor trust, then the filer must complete Part III if the entity is claiming benefits under a U.S. tax treaty.  See new 2014 QI agreement here.

Question 5 requests the FATCA classification of the entity.  W-8BEN-E currently lists 31 FATCA classifications of which the entity must check only one box unless otherwise indicated. Completion of the W-8BEN-E other parts depend upon the selection of the FATCA classification.

  1. Nonparticipating FFI (including a limited FFI or an FFI related to a Reporting IGA FFI other than a registered deemed-compliant FFI or participating FFI).
  2. Participating FFI.
  3. Reporting Model 1 FFI.
  4. Reporting Model 2 FFI.
  5. Registered deemed-compliant FFI (other than a reporting Model 1 FFI or sponsored FFI that has not obtained a GIIN).
  6. Sponsored FFI that has not obtained a GIIN. Complete Part IV.
  7. Certified deemed-compliant nonregistering local bank. Complete Part V.
  8. Certified deemed-compliant FFI with only low-value accounts. Complete Part VI.
  9. Certified deemed-compliant sponsored, closely held investment vehicle. Complete Part VII.
  10. Certified deemed-compliant limited life debt investment entity. Complete Part VIII.
  11. Certified deemed-compliant investment advisors and investment managers. Complete Part IX.
  12. Owner-documented FFI. Complete Part X.
  13. Restricted distributor. Complete Part XI.
  14. Nonreporting IGA FFI (including an FFI treated as a registered deemed-compliant FFI under an applicable Model 2 IGA). Complete Part XII.
  15. Foreign government, government of a U.S. possession, or foreign central bank of issue. Complete Part XIII.
  16. International organization. Complete Part XIV.
  17. Exempt retirement plans. Complete Part XV.
  18. Entity wholly owned by exempt beneficial owners. Complete Part XVI.
  19. Territory financial institution. Complete Part XVII.
  20. Nonfinancial group entity. Complete Part XVIII.
  21. Excepted nonfinancial start-up company. Complete Part XIX.
  22. Excepted nonfinancial entity in liquidation or bankruptcy. Complete Part XX.
  23. 501(c) organization. Complete Part XXI.
  24. Nonprofit organization. Complete Part XXII.
  25. Publicly traded NFFE or NFFE affiliate of a publicly traded corporation. Complete Part XXIII.
  26. Excepted territory NFFE. Complete Part XXIV.
  27. Active NFFE. Complete Part XXV.
  28. Passive NFFE. Complete Part XXVI as well as Part XXX if substantial U.S. owners*.
  29. Excepted inter-affiliate FFI. Complete Part XXVII.
  30. Direct reporting NFFE.
  31. Sponsored direct reporting NFFE. Complete Part XXVIII

*For a Passive NFFE, a specified U.S. person is a substantial U.S. owner if the person has more than a 10 percent beneficial interest in the entity.

FFIs Covered by an IGA and Related Entities

A reporting IGA FFI resident in, or established under the laws of, a jurisdiction covered by a Model 1 IGA should check “Reporting Model 1 FFI.” A reporting FFI resident in, or established under the laws of, a jurisdiction covered by a Model 2 IGA should check “Reporting Model 2 FFI.”

If the FFI is treated as a registered deemed-compliant FFI under an applicable IGA, it should check “Nonreporting IGA FFI” rather than “registered deemed-compliant FFI” and provide its GIIN in Part XII, line 26.

An FFI that is related to a reporting IGA FFI and that is treated as a nonparticipating FFI in its country of residence should check nonparticipating FFI in line 5. An FFI that is related to a reporting IGA FFI and that is a participating FFI, deemed-compliant FFI, or exempt beneficial owner under the U.S. Treasury regulations or an applicable IGA should check the appropriate box for its chapter 4 status.

Requirement to Provide a GIIN

If the entity is in the process of registering with the IRS as a participating FFI, registered deemed-compliant FFI, reporting Model 1 FFI, reporting Model 2 FFI, direct reporting NFFE, or sponsored direct reporting NFFE, but has not received a GIIN, it may complete this line by writing “applied for.” However, the person requesting this form must receive and verify the GIIN within 90 days.

For payments made prior to January 1, 2015, a Form W-8BEN-E provided by a reporting Model 1 FFI need not contain a GIIN. For payments made prior to January 1, 2016, a sponsored direct reporting NFFE or sponsored FFI that has not obtained a GIIN must provide the GIIN of its sponsoring entity.

Part X – Owner-Documented FFI

Line 24a. An owner-documented FFI must check the box to certify that it meets all of the requirements for this status and is providing this form to a U.S. financial institution, participating FFI, reporting Model 1 FFI, or reporting Model 2 FFI that agrees to act as a designated withholding agent with respect to the FFI identified on line 1. Then select either 24b or 24c.

Line 24b. Check this box to certify that the documentation set forth in the certifications has been provided (or will be provided), including the owner reporting statement described in this line 24b, or

Line 24c. Check this box to certify that the auditor’s letter has been provided (or will be provided).

Part XXI – 501(c) Organization

Only foreign entities that are tax-exempt under section 501 should check the 501(c) organization “Tax-exempt organization” box. Such organizations should use Form W-8BEN-E only if they are claiming a reduced rate of withholding under an income tax treaty or a code exception other than section 501. If claiming an exemption from withholding under code section 501, then it must submit Form W-8EXP to document the exemption and chapter 4 status.

Part XXII – Non-Profit Organizations Covered by an IGA

A non-profit entity that is established and maintained in a jurisdiction that is treated as having in effect a Model 1 IGA or Model 2 IGA, and that meets the definition of Active NFFE under Annex I of the applicable IGA, should not check a box for its status on line 5.

Entities Providing Certifications Under an Applicable IGA

In lieu of the certifications contained in Parts IV through XXVIII of Form W-8BEN-E, a reporting Model 1 FFI or reporting Model 2 FFI in certain cases may request alternate certifications to document its account holders pursuant to an applicable IGA or it may otherwise provide an alternate certification to a withholding agent.

A withholding agent that is an FFI may provide a chapter 4 status certification other than as shown in Parts IX through XXVIII in order to satisfy its due diligence requirements under an applicable IGA. In such a case, attach that alternative certification to this Form W-8BEN-E in lieu of completing a certification otherwise required in Parts IV through XXVIII provided that

1) the certification accurately reflects the chapter 4 status or under an applicable IGA; and

2) the withholding agent provides a written statement that it has provided the certification to meet its due diligence requirements as a participating FFI or registered deemed-compliant FFI under an applicable IGA.

An applicable IGA certification may be provided with the W-8BEN-E if determining chapter 4 status under the definitions provided in an applicable IGA and that certification identifies the jurisdiction that is treated as having an IGA in effect and describes the status as an NFFE or FFI in accordance with the applicable IGA.

However, if under an applicable IGA the entity’s status is determined to be an NFFE, it must still determine if it is an excepted NFFE under the FATCA Regulations. Additionally, the entity must comply with the conditions of its status under the law of the IGA jurisdiction.

W-8BEN-E’s 30 Parts

Part I Identification of Beneficial Owner
Part II Disregarded Entity or Branch Receiving Payment.
Part III Claim of Tax Treaty Benefits (if applicable). (For chapter 3 purposes only)
Part IV Sponsored FFI That Has Not Obtained a GIIN
Part V Certified Deemed-Compliant Nonregistering Local Bank
Part VI Certified Deemed-Compliant FFI with Only Low-Value Accounts
Part VII Certified Deemed-Compliant Sponsored, Closely Held Investment Vehicle
Part VIII Certified Deemed-Compliant Limited Life Debt Investment Entity
Part IX Certified Deemed-Compliant Investment Advisors and Investment Managers
Part X Owner-Documented FFI
Part XI Restricted Distributor
Part XII Nonreporting IGA FFI
Part XIII Foreign Government, Government of a U.S. Possession, or Foreign Central Bank of Issue
Part XIV International Organization
Part XV Exempt Retirement Plans
Part XVI Entity Wholly Owned by Exempt Beneficial Owners
Part XVII Territory Financial Institution
Part XVIII Excepted Nonfinancial Group Entity
Part XIX Excepted Nonfinancial Start-Up Company
Part XX Excepted Nonfinancial Entity in Liquidation or Bankruptcy
Part XXI 501(c) Organization
Part XXII Non-Profit Organization
Part XXIII Publicly Traded NFFE or NFFE Affiliate of a Publicly Traded Corporation
Part XXIV Excepted Territory NFFE
Part XXV Active NFFE
Part XXVI Passive NFFE
Part XXVII Excepted Inter-Affiliate FFI
Part XXVIII Sponsored Direct Reporting NFFE
Part XXIX Certification
Part XXX Substantial U.S. Owners of Passive NFFE

Analysis of the Form W-8IMY

Part I of the W8-IMY Form adds FATCA classification.   Part I of the form requires general information, the Chapter 3 QI status, and the Chapter 4 FATCA classification of the filer.

Question 4 of Part I requests the QI status:

  • If the filer is a Qualified Intermediary, then the filer must complete Part III Qualified Intermediary.  If the filer is a Nonqualified Intermediary, then the filer must complete Part IV Nonqualified Intermediary.
  • Territory Financial Institutions complete Part V. U.S. Branches complete Part VI.
  • Withholding Foreign Partnership or Withholding Foreign Trusts complete Part VII.
  • Nonwithholding Foreign Partnership, Nonwithholding Foreign Simple Trust, and Nonwithholding foreign grantor trusts must complete Part VIII.

Question 5 requests the FATCA classification of the filer. The classification indicated determines which one of the Parts IX through XXVII must be completed.

Part II of this form is to be completed if the entity is a disregarded entity or a branch receiving payment as an intermediary. Part II only applies to branches of an FFI outside the FFI’s country of residence.

Statement of General Certification

Part XXVIII requires certification, under penalty of perjury, by the payee or a person authorized to sign on the payee’s behalf. Finally, the form contains the following language: “I agree that I will submit a new form within 30 days if any certification made on this form becomes incorrect.”

Who Must File W-8IMY?

An entity should provide Form W-8IMY when receiving a reportable amount or withholdable payment on behalf of another person or as a flow-through entity.

  •  A foreign person, or a foreign branch of a U.S. personto establish that it is a qualified intermediary that is not acting for its own account, to represent that it has provided or will provide a withholding statement, as required, or, if applicable, to represent that it has assumed primary withholding responsibility under chapters 3 and 4 of the Code and/or primary Form 1099 reporting and backup withholding responsibility.
  •  A foreign person to establish that it is a nonqualified intermediary that is not acting for its own account, to certify its chapter 4 status (if required), to certify whether it reports U.S. accounts under chapter 4 (if required), and to indicate, if applicable, that it is using the form to transmit withholding certificates and/or other documentary evidence and has provided, or will provide, a withholding statement, as required.  A U.S. person cannot be a nonqualified intermediary.
  •  A U.S. branch that is acting as an intermediary to represent that the income it receives is not effectively connected with the conduct of a trade or business within the United Statesand either that it is using the form (a) to evidence it is treated as a U.S. person under Regulations section 1.1441-1(b)(2)(iv)(A) with respect to any payments associated with the Form W-8IMY, or (b) to certify to its chapter 4 status and to transmit the documentation of the persons for whom it receives a payment and has provided, or will provide, a withholding statement, as required.
  •  A financial institution incorporated or organized under the laws of a U.S. territory that is acting as an intermediary or is a flow-through entity to represent that it is a financial institution (other than an investment entity that is not also a depository institution, custodial institution, or specified insurance company) and either that it is using the form (a) to evidence it is treated as a U.S. person under Regulations section 1.1441-1(b)(2)(iv)(A) with respect to any payments associated with the Form W-8IMY, or (b) to certify that it is transmitting documentation of the persons for whom it receives a payment and has provided, withholding statement, as required.
  •  A foreign partnership or a foreign simple or grantor trust to establish that it is a withholding foreign partnership or withholding foreign trust under the regulations for sections 1441 and 1442 and to certify its chapter 4 status (if required).
  •  A foreign partnership or a foreign simple or grantor trust to establish that it is a nonwithholding foreign partnership or nonwithholding foreign simple or grantor trust for purposes of sections 1441 and 1442, to certify to its chapter 4 status (if required), and to represent that the income is not effectively connected with a U.S. trade or business, that the form is being used to transmit withholding certificates and/or documentary evidence, and that it has provided or will provide a withholding statement as required.
  •  A foreign partnership or foreign grantor trust to establish that it is an upper-tier foreign partnership or foreign grantor trust for purposes of section 1446 and to represent that the form is being used to transmit withholding certificates and/or documentary evidence and that it has provided, or will provide, a withholding statement, as required.
  •  A flow-through entity (including a foreign reverse hybrid entity) transmitting withholding certificates and/or other documentary evidence to claim treaty benefits on behalf of its owners, to certify its chapter 4 status (if required), and to certify that it has provided, or will provide, a withholding statement, as required.
  •  A nonparticipating FFI acting as an intermediary or that is a flow-through entity using this form to transmit a withholding statement and withholding certificates or other documentation for exempt beneficial owners described in Regulations section 1.1471-6.
  •  A QSL certifying to a withholding agent that it is acting as a QSL with respect to U.S. source substitute dividends received from the withholding agent pursuant to a securities lending transaction (as described in Notice 2010-46).
  •  A foreign intermediary or flow-through entity not receiving withholdable payments or reportable amounts that is holding an account with a participating FFI or registered deemed-compliant FFI providing this form for purposes of documenting the chapter 4 status of the account holder.  However, no withholding statement is required to be provided along with Form W-8IMY if it is being provided by an FFI solely to document such an account when no withholdable payments or reportable amounts are made to the account. Also note that the entity may instead provide Form W-8BEN-E when it is not receiving withholdable payments or reportable amounts to document its status as an account holder.

Partnership allocations

Form W-8IMY may be submitted and accepted to satisfy documentation requirements for purposes of withholding on certain partnership allocations to foreign partners under section 1446. Section 1446 generally requires withholding when a partnership is conducting a trade or business in the United States and allocates income effectively connected with that trade or business (ECI) to foreign persons that are partners in the partnership. Section 1446 can also apply when certain income is treated as effectively connected income of the partnership and is so allocated.

Chapter 3 and Chapter 4 status Certification by Filer required with Applicable Documentation 

In general, intermediaries and flow-through entities receiving reportable amounts will be required to provide both their chapter 3 status and the chapter 3 status of persons for whom they receive such payments.

An intermediary or flow-through entity receiving a withholdable payment will also be required to provide its chapter 4 status and the chapter 4 status of persons for whom it receives a withholdable payment when required for chapter 4 purposes.

Parts III – VIII: Chapter 3 Status Certifications

Parts III – VIII of this form address the QI Status of the entity. Part III is to be completed if the entity is a QI, and requires the entity to certify that it is a QI and has provided appropriate documentation. Part IV is to be completed if the entity is a Nonqualified Intermediary (NQI), and requires the entity to certify that it is a NQI not acting for its own account.

Part V is to be completed if the entity is a Territory Financial Institution. Part VI is to be completed by a U.S. branch only if the branch certifies on the form that it is the U.S. branch of a U.S. bank or insurance company, and that the payments made are not effectively connected to a U.S. trade or business. Part VII is to be completed if the entity is a Foreign Withholding Partnership (WP) or a Withholding Foreign Trust (WT). Part VIII is to be completed if the entity is either a Nonwithholding Foreign Partnership, Simple Trust, or Grantor Trust.

Parts III – VIII of this form address the QI Status of the entity.

  • Part III Qualified Intermediary
  • Part IV Nonqualified Intermediary
  • Part V Territory Financial Institution
  • Part VI Certain U.S. Branches
  • Part VII Withholding Foreign Partnership (WP) or Withholding Foreign Trust (WT)
  • Part VIII Nonwithholding Foreign Partnership, Simple Trust, or Grantor Trust

Part III is to be completed if the entity is a QI, and requires the entity to certify that it is a QI and has provided appropriate documentation.  Part IV is to be completed if the entity is a Nonqualified Intermediary (NQI), and requires the entity to certify that it is a NQI not acting for its own account.  Part V is to be completed if the entity is a Territory Financial Institution.  Part VI is to be completed by a U.S. branch only if the branch certifies on the form that it is the U.S. branch of a U.S. bank or insurance company, and that the payments made are not effectively connected to a U.S. trade or business.  Part VII is to be completed if the entity is a Foreign Withholding Partnership (WP) or a Withholding Foreign Trust (WT).  Part VIII is to be completed if the entity is either a Nonwithholding Foreign Partnership, Simple Trust, or Grantor Trust.

Parts IX – XXVI: Chapter 4 Status Certifications

Parts IX – XXVI of this form address the filer certifying the FATCA Status of the entity. These classifications include the new classification of a Restricted Distributor (Part XVI), but do not include the new classification of a Reporting NFFE.  Each of these parts begins with a check the box selection of “I certify that …”, followed by the definition components of each classification.  These classifications include the new classification of a Restricted Distributor (Part XVI), but do not include the new classification of a Reporting NFFE.

  • Part IX Nonparticipating FFI with Exempt Beneficial Owners
  • Part X Sponsored FFI That Has Not Obtained a GIIN
  • Part XI Owner-Documented FFI
  • Part XII Certified Deemed-Compliant Nonregistering Local Bank
  • Part XIII Certified Deemed-Compliant FFI with Only Low-Value Accounts
  • Part XIV Certified Deemed-Compliant Sponsored, Closely Held Investment Vehicle
  • Part XV Certified Deemed-Compliant Limited Life Debt Investment Entity
  • Part XVI Restricted Distributor
  • Part XVII Foreign Central Bank of Issue
  • Part XVIII Nonreporting IGA FFI
  • Part XIX Exempt Retirement Plans
  • Part XX Excepted Nonfinancial Group Entity
  • Part XXI Excepted Nonfinancial Start-Up Company
  • Part XXII Excepted Nonfinancial Entity in Liquidation or Bankruptcy
  • Part XXIII Publicly Traded NFFE or NFFE Affiliate of a Publicly Traded Corporation
  • Part XXIV Excepted Territory NFFE
  • Part XXV Active NFFE
  • Part XXVI Passive NFFE
  • Part XXVII Sponsored Direct Reporting NFFE

Part IX is not required to be completed unless the filer is a nonparticipating FFI providing documentation on behalf of an exempt beneficial owner (by example, a local qualifying retirement fund).

Part XI – An owner-documented FFI should only complete Form W-8IMY if it is a flow-through entity receiving income allocable to its partners, owners, or beneficiaries. An owner-documented FFI is not permitted to act as an intermediary with respect to a withholdable payment.

Part XVIII – A nonreporting FFI pursuant to an IGA must indicate that it is to be treated as such under an applicable IGA, including an entity treated as a registered deemed-compliant FFI under an applicable IGA.  The nonreporting IGA FFI must identify the applicable IGA by entering the name of the jurisdiction that has the applicable IGA in effect with the United States. It must also provide the withholding agent with the class of entity described in Annex II of the IGA applicable to its nonreporting FFI IGA status.  If the nonreporting FFI IGA is claimed pursuant to a Model 2 IGA, then the FFI treated as a registered deemed-compliant FFI under that applicable Model 2 IGA must provide a GIIN in the space provided.

If the filer is a sponsored FFI in a Model 1 IGA jurisdiction or other nonreporting FFI in a Model 1 IGA jurisdiction that is required to report an account, it is not currently required to provide a GIIN in this Part. However, a future version of this form may require it to provide a GIIN.

Entities Providing Certifications Under an Applicable IGA

A withholding agent that is an FFI may provide a chapter 4 status certification other than as shown in Parts IX through XXVII in order to satisfy its due diligence requirements under an applicable IGA. In such a case, attach the alternative certifications to this Form W-8IMY in lieu of completing a certification otherwise required in Parts IX through XXVII provided that the withholding agent:

  1. determine that the certification accurately reflects the status for chapter 4 purposes or under an applicable IGA; and
  2. the withholding agent provides a written statement that it has provided the certification to meet its due diligence requirements as a participating FFI or registered deemed-compliant FFI under an applicable IGA.

The filer may also provide with this form an applicable IGA certification if it determines its chapter 4 status under the definitions provided in an applicable IGA and that certification identifies the jurisdiction that is treated as having an IGA in effect and describes the filer status as an NFFE or FFI in accordance with the applicable IGA.  However, if the filer determines its status under an applicable IGA as an NFFE, it must still determine if it is an excepted NFFE under the regulations in order to complete this form.  Additionally, it is required to comply with the conditions of its chapter 4 status under the law of the IGA jurisdiction if it determines its status under an applicable IGA.

Entities Providing Alternate Certifications Under Regulations

If the filer qualifies for a chapter 4 status that is not shown in Part I, line 5, of this form, it may attach applicable certifications for such status from any other Form W-8 on which the relevant certifications appear.

For example, if the filer is a certified deemed-compliant investment advisor or investment manager described in Regulations section 1.1471-5(f)(2)(v)
that is a flow-through entity, it may instead attach the certifications found in Part IX of Form W-8BEN-E.

If the applicable certifications do not appear on any Form W-8 (if, for example, new regulations provide for an additional chapter 4 status and this form has not been updated) then the filer may provide an attachment certifying that it qualifies for the applicable status described in a particular Regulations section in lieu of checking a box in Part I, line 5. The filer must also include a citation to the applicable provision in the Regulations.

Final Statement of Certification

Part XXVIII requires certification, under penalty of perjury, by the payee or a person authorized to sign on the payee’s behalf. Finally, the form contains the following language: “I agree that I will submit a new form within 30 days if any certification made on this form becomes incorrect.”

Expiration of Form W-8IMY 

Generally, a Form W-8IMY remains valid until the status of the person whose name is on the certificate is changed in a way relevant to the certificate or there is a change in circumstances that makes the information on the certificate no longer correct. The indefinite validity period does not extend, however, to any other withholding certificates, documentary evidence, or withholding statements associated with the certificate.

Change in circumstances. 

If a change in circumstances makes any information on the Form W-8IMY (or any documentation or a withholding statement associated with the Form W-8IMY) have submitted incorrect for purposes of chapter 3 or chapter 4 (when relevant), the intermediary must notify the withholding agent within 30 days and file a new Form W-8IMY or provide new documentation or a new withholding statement (as applicable).

The information associated with Form W-8IMY must be updated as often as is necessary to enable the withholding agent to withhold at the appropriate rate on each payment and to report such income.

(See Regulations sections 1.1441-1(e)(4)(ii)(D) for the definition of a change in circumstances for purposes of chapter 3. See Regulations section 1.1471-3(c)(6)(ii)(E) for the definition of a change in circumstances for purposes of chapter 4.)

Structure of New Form Form W-8IMY

  • Part I Identification of Entity
  • Part II Disregarded Entity or Branch Receiving Payment.

Chapter 3 Status Certifications

  • Part III Qualified Intermediary
  • Part IV Nonqualified Intermediary
  • Part V Territory Financial Institution
  • Part VI Certain U.S. Branches
  • Part VII Withholding Foreign Partnership (WP) or Withholding Foreign Trust (WT)
  • Part VIII Nonwithholding Foreign Partnership, Simple Trust, or Grantor Trust

Chapter 4 Status Certifications

  • Part IX Nonparticipating FFI with Exempt Beneficial Owners
  • Part X Sponsored FFI That Has Not Obtained a GIIN
  • Part XI Owner-Documented FFI
  • Part XII Certified Deemed-Compliant Nonregistering Local Bank
  • Part XIII Certified Deemed-Compliant FFI with Only Low-Value Accounts
  • Part XIV Certified Deemed-Compliant Sponsored, Closely Held Investment Vehicle
  • Part XV Certified Deemed-Compliant Limited Life Debt Investment Entity
  • Part XVI Restricted Distributor
  • Part XVII Foreign Central Bank of Issue
  • Part XVIII Nonreporting IGA FFI
  • Part XIX Exempt Retirement Plans
  • Part XX Excepted Nonfinancial Group Entity
  • Part XXI Excepted Nonfinancial Start-Up Company
  • Part XXII Excepted Nonfinancial Entity in Liquidation or Bankruptcy
  • Part XXIII Publicly Traded NFFE or NFFE Affiliate of a Publicly Traded Corporation
  • Part XXIV Excepted Territory NFFE
  • Part XXV Active NFFE
  • Part XXVI Passive NFFE
  • Part XXVII Sponsored Direct Reporting NFFE

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A free download of the first of the 34 chapters is available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671

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If you are interested in discussing the Master or Doctoral degree in the areas of international taxation or anti money laundering compliance, please contact me profbyrnes@gmail.com to Google Hangout or Skype that I may take you on an “online tour” 

  • Chapter 1 Background and Current Status of FATCA
  • Chapter 1A The International Financial System and FATCA
  • Chapter 2 Practical Considerations for Developing a FATCA Compliance Program
  • Chapter 2A FATCA Internal Policy
  • Chapter 3 FATCA Compliance and Integration of Information Technology
  • Chapter 4 Financial Institution Account Remediation
  • Chapter 4A FATCA Customer Outreach
  • Chapter 5 FBAR and Form 8938 Reporting and List of International Taxpayer IRS Forms
  • Chapter 6 Determining U.S. Ownership of Foreign Entities
  • Chapter 7 Foreign Financial Institutions
  • Chapter 7A Account reporting under FATCA
  • Chapter 8 Non-Financial Foreign Entities
  • Chapter 9 FATCA and the Offshore Trust Industry
  • Chapter 10 FATCA and the Insurance Industry
  • Chapter 11 Withholding and Qualified Intermediary
  • Chapter 12 FATCA Withholding Compliance
  • Chapter 13 “Withholdable” Payments
  • Chapter 13A Reporting Payments
  • Chapter 14 Determining and Documenting the Payee
  • Chapter 14A W8 Equivalents
  • Chapter 15 Framework of Intergovernmental Agreements
  • Chapter 16 Analysis of Current Intergovernmental Agreements
  • Chapter 17 European Union Cross Border Information Reporting
  • Chapter 18 The OECD Role in Exchange of Information: The Trace Project, FATCA, and Beyond
  • Chapter 19 Germany
  • Chapter 20 Ireland
  • Chapter 21 Japan
  • Chapter 22 Mexico
  • Chapter 23 Switzerland
  • Chapter 24 United Kingdom
  • Chapter 25 Brazil
  • Chapter 26 British Virgin Islands
  • Chapter 27 Canada
  • Chapter 28 Spain
  • Chapter 29 China
  • Chapter 30 Netherlands
  • Chapter 31 Luxembourg
  • Chapter 32 Russia
  • Chapter 33 Turkey
  • Chapter 34 India
  • Chapter 35 Argentina
  • Chapter 36 Aruba
  • Chapter 37 Australia
  • Chapter 38 Bermuda
  • Chapter 39 Colombia
  • Chapter 40 Cyprus
  • Chapter 41 Hong Kong
  • Chapter 42 Macau
  • Chapter 43 Portugal
  • Chapter 44 South Africa
  • Chapter 45 France
  • Chapter 46 Gibraltar
  • Chapter 47 Guernsey
  • Chapter 48 Italy

Posted in FATCA | Tagged: , , , , , , , , | 16 Comments »

Six Tax Tips When Deciding to Itemize or Take the Standard Deduction

Posted by William Byrnes on April 1, 2014


2014_tf_on_individuals_small_businesses-m_1The IRS published Tax Tip 2014-29 with 6 helpful tips for deciding whether to itemize deductions or to rely upon the standard deduction.  The IRS stated that a taxpayer should calculate the available deduction using both methods and then choose the deduction method that produces the greater deduction (thus lower amount of tax).

1. Figure the itemized deductions.  Add up deductible expenses paid during the year. These may include expenses such as:

  • Home mortgage interest
  • State and local income taxes or sales taxes (but not both)
  • Real estate and personal property taxes
  • Gifts to charities
  • Casualty or theft losses
  • Unreimbursed medical expenses
  • Unreimbursed employee business expenses

2. Know the standard deduction.  If a taxpayer does not itemize, the basic standard deduction for 2013 depends on your filing status:

  • Single $6,100
  • Married Filing Jointly $12,200
  • Head of Household $8,950
  • Married Filing Separately $6,100
  • Qualifying Widow(er) $12,200

The standard deduction is higher for persons when 65 or older or blind.

3. Check the exceptions.  Some taxpayers do not qualify for the standard deduction and therefore should itemize.  This includes married couples who file separate returns and one spouse itemizes.

4. Use the IRS’s ITA tool: Interactive Tax Assistant tool to help determine your standard deduction.

5. File the right forms.  To itemize deductions, use Form 1040 and Schedule A, Itemized Deductions. Standard deduction is on Forms 1040, 1040A or 1040EZ.

6. File Electronically.  Some taxpayers are eligible for free, brand-name software to prepare and e-file the tax return. IRS Free File will do the work for you.

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