New online IRS system for FATCA obligations
Aug. 21, 2013 – A new IRS online system that allows financial institutions to register with the IRS under the Foreign Account Tax Compliance Act is now open.
Starting in January 2014, financial institutions will be expected to finalize their registration information, make any necessary changes and submit the information as final by logging into their accounts.
This regulation, among other things, requires credit unions to:
- withhold 30 percent of certain funds that are transferred to non-FATCA compliant FFIs;
- require U.S.-based credit unions and financial institutions to file Forms 1042-S for payments of deposit interest or dividends in amounts of $10 or more that are made to nonresident alien members and customers; and
- conduct due diligence regarding whether credit union members’ payments to overseas foreign financial institutions are to an FFI that is not FATCA compliant.
This regulation was originally slated to take effect on payments made on or after Jan. 1, 2013, but the IRS pushed back the compliance dates earlier this year. Under the delayed implementation dates:
- due diligence procedures must be established by Jan. 1, 2014; and
- requirements regarding documentation of payees that do not comply with FACTA take effect on July 1, 2014.
- Compliance with withholding requirements for funds that are transferred to a non-FACTA compliant FFI is pushed Jan 1, 2017 (however, credit unions are still expected to withhold on other types of payments on Jan. 1, 2014.)
Financial institutions will also need to file a 1042-S on foreign recipients on accounts that are $10 or more in interest. NAFCU has expressed its opposition to this regulation to the IRS from the onset of the rulemaking process, urging the government entity to withdraw this regulation as it only expand credit unions’ tax reporting burden.
Access to the FATCA registration system and related support information can be found on the FATCA page of IRS.gov.
IRS Opens Online FATCA Registration System statement