The Internal Revenue Service has issued Notice 2004-71, providing procedures for persons required to prepare Form 1099-DIV and other information reporting with respect to dividends from foreign corporations and for individuals receiving such forms.

"The notice simplifies the procedures and rules for persons required to file returns for dividend distributions from foreign corporations," said Selva Ozelli, CPA, an international tax attorney with New York-based RIA, a Thomson business.

"Dividend distributions from foreign corporations are eligible for the reduced rates applicable to certain capital gains if the foreign corporation is eligible for the benefits of a comprehensive income tax treaty with the United States, or if its dividend-paying foreign corporation stock is readily tradable on an established securities market in the United States," she said.

Form 1099-DIV includes a separate box identifying the amount of dividends eligible for reduced rates of tax. A dividend paid by a foreign corporation is eligible for the reduced rates if it satisfies the special rules applicable to foreign dividends. Last year, the Treasury Department and the IRS provided simplified procedures for 2003 information reporting of foreign dividends on Form 1099-DIV. The notice extends those simplified procedures to apply to 2004 information reporting.

The Treasury Department and the IRS intend shortly to issue detailed guidance regarding information reporting procedures to be applied for future years. This guidance will be issued in proposed form in order to provide interested parties an opportunity to comment.

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