By Ken Berry
The IRS continues to work on improvements relating to tax reporting of assets held in foreign banking accounts. Now it has released a new draft of Form 8957 that it expects will lead to increased compliance. The form may be used for online registration by financial institutions under the auspices of the Foreign Account Tax Compliance Act of 2010 (FATCA).
FATCA generally requires foreign financial institutions to report assets held by US taxpayers, but the law has drawn criticism from US-born expatriates and individuals with dual citizenship who say that it violates national sovereignty and bank secrecy laws. As a result, the IRS has eased some of the requirements, while extending deadlines for implementation and agreeing to pacts with other countries in reliance on existing tax treaties.
In the latest draft of Form 8957, Foreign Account Tax Compliance Act (FATCA) Registration, the IRS provides for easier and more efficient registration by foreign financial institutions through a streamlined electronic online process. There will no longer be a need to print, complete, and mail paper forms. The IRS expects the draft form to go viral by July 1.
Significantly, the form also includes fields that allow the foreign financial institution to specify if it already has a withholding agreement with the IRS to be treated as a qualified intermediary, a withholding foreign partnership, or a withholding foreign trust, and whether it maintains a branch in the United States.
The questions asked through the online process resemble those shown on the draft form, but they will be presented differently to simplify electronic completion. Financial institutions registering through the online process will receive notice of registration acceptance and then will obtain the Global Intermediary Identification Number (GIIN) needed to demonstrate FATCA compliance on an expedited basis.
But the IRS isn't closing the door completely to registrations on paper forms. A final paper version of Form 8957 will also be available by July 1. Nevertheless, the IRS is strongly encouraging registration by electronic means and warns that paper forms won't be processed until October. Furthermore, the IRS says institutions that submit paper forms may experience a delay in receiving notice of registration acceptance and the GIIN needed to demonstrate FATCA compliance.