6/24: Dates to Remember; FATCA; and Taxpayer Bill of Rights
Tax Snacks: Bite-size tax news and information on the fly
- Form FinCEN 114 (replacing Form TDF 90-22.1) is due, reporting foreign financial holdings.
- Withholding tax applies to certain payments of US-sourced income to non-US financial institutions under “FATCA” rules (see below).
- Form 5500 is due for calendar year-end benefit plans.
No, we didn’t misspell “fat cat.” FATCA stands for The Foreign Account Tax Compliance Act that was brought to life in stages by 2010’s so-called “HIRE” act.
Plenty of ink & pixels have been spilled over the FATCA requirements, and we will not regurgitate it all here; the links below will provide more background. In a nutshell, though, one facet of the requirements will begin on July 1: Required withholding of 30% on certain payments to or from certain foreign financial institutions (“FFIs”).
Greatly oversimplifying, FFIs are encouraged to enter into agreements with the US government to share information with the US regarding foreign accounts owned by US citizens and held by the FFIs. This is designed to reduce US citizens’ ability to hide assets out of the country. Many countries have entered into such agreements with the US. On July 1, those who did not enter into an agreement will see certain payments of funds into their country’s banks become subject to a 30% rate of withholding. Even those who do participate will be required to undertake similar withholding on certain payments made by their banks to non-participating FFIs and certain other parties. Thus, the banks of the world have been dragooned into the role of police by the IRS.
More information can be found at these links:
- Summary of Key FATCA Provisions
- Revised Timeline and Other Guidance Regarding the Implementation of FATCA
The IRS recently released a list of rights that taxpayers have in their dealings with the IRS. None of these rules is new, and some of these rights have been included with correspondence the IRS has sent to taxpayers in the past. However, this new presentation serves as a useful, one-stop list of things that taxpayers should be aware of when dealing with an audit, a notice, or other correspondence with the IRS. The list may be found here.
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