The Internal Revenue Service has released for public comment draft versions of three forms for complying with the Foreign Account Tax Compliance Act, or FATCA.
They are Draft Form W-8BEN “Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals),” Draft Form W-8BEN-E “Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities)” and Draft Form W-9 “Request for Taxpayer Identification Number and Certification.”
FATCA was included as part of the HIRE Act of 2010 and requires foreign financial institutions to report the holdings of U.S. taxpayers to the Internal Revenue Service, or face stiff penalties. The law has provoked controversy among U.S-born expatriates and dual citizens, as well as foreign banks and governments, who have complained the law may violate their own bank secrecy laws and privacy protections.
However, the IRS and the Treasury Department have been easing some of the provisions through regulations and extending the timeline for implementation, while also negotiating intergovernmental agreements with other countries to exchange taxpayer information with them. Sen. Rand Paul, R-Ken., introduced legislation earlier this month to repeal some of FATCA’s more controversial provisions (see Rand Paul Introduces Bill to Repeal Parts of FATCA).
Over the past year, the IRS has been rolling out a series of forms and draft versions of forms for comment as the deadlines approach for FATCA implementation (see IRS Releases FATCA Draft Forms and Warns of Deadline).
“The forms were something that a lot of institutions have been waiting on,” said Joe Bognanno, director of product marketing for the AML Solutions Suite at anti-money laundering software developer NICE Actimize. “There have been a number of things that with respect to the FATCA regulations we have still been waiting to come out, and the forms were one of those things. So little by little, the other remaining pieces of FATCA regulation are showing up. What that means is it really allows not only the individuals and entities that have foreign assets to ensure that they’re in compliance by reporting, but also allows financial institutions to continue to work on their in-house operations and technology solutions for fully implementing the mechanisms that will allow them to be in compliance with FATCA.”
While pulling in and managing the data still represents a challenge for financial institutions, Bognanno isn’t sure that the latest draft forms represent a major step forward in FATCA implementation.
“I don’t know that there’s big news around these draft forms being published,” he said. “Because they are being published as draft, it means that the IRS is looking for feedback. The institution is going to take these forms, understand what the implication would be in terms of the data they would need to populate them and maybe give the IRS some feedback on how difficult or where they may have challenges in regard to providing some of this information. There’s been back and forth throughout this FATCA process, getting comments from the financial sector and private entities and then polishing, reviewing and renewing some of the rules and how they’re going to actually implement FATCA compliance. That’s really a large share of what these latest events are. It’s not really big news, but it’s an ongoing process of adjusting.”