FATCA spawns 10th IRS reporting form as Form 8966 emerges for reports by foreign institutions, other

The United States Internal Revenue Service, the leader of the now-global intergovernmental effort to ferret out tax evaders who hide money in overseas accounts to keep tax collectors in the dark, last week issued the 10th reporting form spawned by the 2010 US Foreign Account Tax Compliance Act.

The IRS Form 8966, called ‘FATCA Report,’ emerged in draft form on August 15. It  is the vehicle by which “reporting financial institutions, participating foreign financial institutions, sponsoring entities, or other withholding agents” will report to the IRS the US persons who maintain accounts at their institutions or have had money withheld from payments that are due them, and details on these accounts.
The IRS said the long-awaited form is designed to “set forth all the information that must be reported with respect to financial accounts in accordance with” FATCA.

The form does not have a signature line or the customary statement that appears on most IRS forms that intentionally submitting false or incorrect information may subject the filer to prosecution for false statements to a government agency. The form must be filed electronically on or before March 31 of the year following the end of the calendar year to which the form relates.

FATCA, which constructs a worldwide dragnet to identify foreign financial accounts and other assets held by US persons, not just US citizens, has traveled a bumpy road since its 2010 passage.

Banks unhappy with FATCA for its burdens, possible lost business

Banks have not been happy with the compliance burdens FATCA imposes. Complying with the reporting, withholding and due diligence responsibilities that the far-ranging law and the 544-page IRS regulations impose presents a costly and risky challenge for them.

In addition, many foreign financial institutions fear the loss of business from customers who are not keen on having their hidden bank accounts disclosed to the IRS. The penalty that these institutions will suffer for noncompliance with FATCA is a 30% withholding tax that will be imposed, in general, on payments that are due to them from US sources.

IRS Form 8966 has five parts

The draft IRS Form 8966, which came unaccompanied by instructions for completing and filing it, is impressive for its simplicity. It covers barely more than one page and has five parts:

Part I – Identification of Filer

Part II – Account Holder or Recipient Information

Part III – Identifying Information of US Owners that are specified US Persons

Part IV – Financial Information

Part V – Pooled Reporting Type

In essence, the first three parts require information on who is reporting and being reported on. The last two parts seek information on what must be reported.

Brian H. Mahany, a tax lawyer and FATCA specialist in Milwaukee, told ACFCS, “The new IRS Form 8966 is just over one page long, but it crams the essential requirements of 544 pages of the IRS FATCA regulations, know-your-customer rules and anti-money laundering duties, and a new set of definitions into a single document.”

One expert says IRS Form 8966 is ‘IRS Form 1099 on steroids’

Another person who is a close observer of IRS actions concerning FATCA, who asked not to be named, told ACFCS the draft IRS Form 8966 is the FATCA equivalent of the IRS Form 1099 that is used for reporting ‘Miscellaneous Income.’

Form 8966 is a “Form 1099 on steroids,” this person said, because of the detailed financial information it demands in Part IV. This information includes account numbers, currency codes, account balances, interest, dividends, and gross proceeds/redemptions.

The IRS said Form 8966 must still be approved by the White House Office of Management and Budget before its final release and that it may be changed in the process. The IRS is still accepting comments on the form, which may be filed on the website page called Comment on Tax Forms and Publications at IRS.gov.

IRS FATCA forms are multiplying

The other FATCA forms issued thus far by the IRS under FATCA are. The IRS provides all ten forms on its FATCA page in draft versions only:

  • IRS Form W-9 – Request for Taxpayer Identification Number and Certification
  • IRS Form W-8BEN – Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting
  • IRS Form W-8BEN-E – Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities)
  • IRS Form W-8EXP – Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding and Reporting
  • IRS Form 8957 – Foreign Account Tax Compliance Act (FATCA) Registration
  • IRS Form 1042 – Annual Withholding Tax Return for US Source Income of Foreign Persons
  • IRS Form 1042-S – Foreign Person’s US Source Income Subject to Withholding
  • IRS Form W-8ECI – Certificate of Foreign Person’s Claim That Income Is Effectively Connected With the Conduct of a Trade or Business in the United States
  • IRS Form W-8IMY – Certificate of Branches for United States Tax Withholding. Foreign Person’s US Source Income Subject to Withholding

Click here to see draft IRS Form 8966. Other IRS FATCA reporting forms and accompanying IRS public statements can be accessed here.