Foreign Account Tax Compliance Act Archives

Foreign Account Tax Compliance Act

Weekly IRS Roundup December 27 – December 31, 2021

by McDermott Will & Emery | Jan 6, 2022 | IRS Guidance, Tax Reform, Tax Refunds

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of December 27, 2021 – December 31, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

December 27, 2021: The IRS published a news release reminding employers and self-employed individuals who chose to defer paying part of their 2020 social security tax obligation that a payment is due on January 3, 2022.

December 27, 2021: The IRS published a news release announcing that Illinois victims of severe storms, straight-line winds and tornadoes beginning December 10, 2021, now have until May 16, 2022, to file various individual and business tax returns and make tax payments.

December 28, 2021: The IRS and the US Department of the Treasury published final regulations relating to the foreign tax credit, including the disallowance of a credit or deduction for foreign income taxes with respect to dividends eligible for a dividends-received deduction; the allocation and apportionment of interest expense, foreign income tax expense and certain deductions of life insurance companies; the definition of a foreign income tax and a tax in lieu of an income tax; the definition of foreign branch category income and the time at which foreign taxes accrue and can be claimed as a credit. The regulations also contain clarifying rules relating to foreign-derived intangible income (FDII). The final regulations affect taxpayers who claim credits or deductions for foreign income taxes or claim a deduction for FDII.

December 28, 2021: The IRS published a news release announcing that Alabama victims of severe storms and flooding beginning October 6, 2021, now have until February 28, 2022, to file various individual and business tax returns and make tax payments.

December 28, 2021: The IRS published a news release announcing that Arkansas victims of severe storms and tornadoes beginning December 10, 2021, now have until May 16, 2022, to file various individual and business tax returns and make tax payments.

December 29, 2021: The IRS released instructions for Forms 1099-MISC and 1099-NEC, Miscellaneous Information and Nonemployee Compensation. The changes reflect, among other things, the addition of a Foreign Account Tax Compliance Act (FATCA) filing requirement checkbox.

December 30, 2021: The IRS published a notice and request for comments concerning Notice 2021-57, funding relief for multiemployer defined benefit pension plans under the American Rescue Plan Act of 2021 (ARPA). Certain provisions of ARPA permitted plan sponsors to: (1) elect to delay designating a plan as being in endangered, critical or critical and declining status under Section 432(b)(3), as applicable, or to delay updating the plan’s funding improvement plan or rehabilitation plan, as applicable; (2) elect to extend the plan’s funding improvement period under Section 432(c)(4) or the rehabilitation period under Section 432(e)(4), as applicable and (3) spread certain investment losses and other experience losses related to [...]

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Weekly IRS Roundup January 13 – 17, 2020

by McDermott Will & Emery | Jan 21, 2020 | IRS Audits, IRS Guidance, Tax Reform, Uncategorized

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of January 13 – 17, 2020.

January 13, 2020: The IRS published an information letter relating to the testamentary transfer to a trust of US Series EE savings bonds purchased by and issued to a decedent. The IRS stated that if the bonds were transferred to the trust because of a death, and if the transferor were either an accrual method taxpayer or a cash method taxpayer who reported interest annually, then the increase in value of the bonds in the year of death up to the date of death must be reported on the decedent’s final return. The IRS provided alternative guidance to cash method transferors that did not annually report their interest.

January 13, 2020: The Chief Counsel’s Office informally advised that for capital contributions where a partnership return is accepted as filed, the IRS may adjust the basis of an affected item at the partner level without opening a partnership-level examination. The Office explained that though the IRS cannot change any partnership-item components of outside basis without opening a TEFRA proceeding, the partnership itself can adjust the overall computation of outside basis, accepting all the partnership-item components as filed, as well as any nonpartnership-item components of outside basis.

January 13, 2020: The IRS updated their FATCA (Foreign Account Tax Compliance Act) IDES (International Data Exchange Services) Technical FAQs page. The update addresses taxpayers that receive an “Invalid Certificate” alert when uploading their digital certificates to the IDES system. The IRS provided a variety of explanations for the error, including that the digital certificate itself may be invalid and that there may be communication errors with the certificate authority.

January 13, 2020: The IRS supplemented the 2019 Instructions for Form 1042-S, which addresses a foreign person’s US source income subject to withholding. The changes reflect the proposed regulations that reduced a taxpayer’s burden with respect to certain requirements under FATCA. The Instructions’ Tax Rate Table was also adjusted to include the revised backup withholding tax rate of 24%, as required by the TCJA.

January 16, 2020: The IRS issued a news release announcing that it will return sequestered funds to businesses that were affected by a recent OMB determination regarding the Balanced Budget and Emergency Deficit Control Act of 1985, as amended. The IRS explained that it will restore any amounts sequestered since 2013 under section 168(k)(4), further stating that taxpayers need not take any action because the IRS has a complete list of all affected taxpayers.

January 17, 2020: The IRS issued a news release announcing that the agency is open to considering relief from double taxation resulting from the application of the repatriation tax under section 965 where there is no significant reduction in the resulting tax by application of foreign tax credits. The IRS explained that it would only be appropriate to provide relief in unique circumstances, such as where [...]

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When the IRS Says It’ll ‘Meet You in Paris’: Recent Trends & Developments in Outbound US Exchange-of-Information Techniques

by McDermott Will & Emery | Oct 3, 2019 | IRS Guidance, Uncategorized

The Internal Revenue Service is looking for your international tax data—that is, if the IRS doesn’t already have it. With the rollout of the Foreign Account Tax Compliance Act (FATCA) and other automatic exchange-of-information (EOI) procedures, the IRS is now receiving—and making use of—a large amount of international tax information about US taxpayers. In an article recently published in Tax Executive magazine, Laura Gavioli outlines the major ways the IRS is seeking international tax information, including treaty requests, MLATs, and letters of request. The article also offers a number of best practices in dealing with these requests and common defenses to them—all with the goal of making your next international tax information request go smoothly.

Read the full article.

The LB&I Campaigns Keep Coming!

by Kevin Spencer and McDermott Will & Emery | Oct 31, 2018 | IRS Audits, IRS Guidance, Uncategorized

The Internal Revenue Service (IRS) Large Business and International (LB&I) Division continues to churn out new audit “campaigns.” The most recent announcement on October 30, 2018, identifies five new campaigns, which were identified through LB&I data analysis and suggestions from IRS employees. With the addition of these new campaigns, LB&I has now identified 50 campaigns since the program’s initial release on January 13, 2017.

The five new LB&I campaigns are listed verbatim by title and description.

Individual Foreign Tax Credit Phase II

Section 901 of the Internal Revenue Code alleviates double taxation through a dollar-for-dollar credit against U.S. tax on foreign-sourced income in the amount of foreign taxes paid on that income.

Individuals who meet certain requirements may qualify for the foreign tax credit. This campaign addresses taxpayers who have claimed the credit but do not meet the requirements. The IRS will address noncompliance through a variety of treatment streams, including examination. (more…)

Weekly IRS Roundup July 30 – August 3, 2018

by McDermott Will & Emery | Aug 7, 2018 | IRS Guidance, Uncategorized

Presented below is our weekly roundup for July 30 – August 3, 2018 on significant IRS guidance and relevant tax matters.

July 31, 2018: In Notice 2018-58, the IRS stated that it intends to issue regulations clarifying new rules governing section 529 contributions.

July 31, 2018: The IRS published three new frequently asked questions (Certifications and Period Reviews FAQs 14-16) regarding Foreign Account Tax Compliance Act (FATCA) compliance for qualified intermediaries and qualified derivatives dealers related to account documentation review.

August 1, 2018: The IRS issued proposed regulations addressing the one-time section 965 “transition tax” imposed on US shareholders of certain foreign corporations.

August 1, 2018: Final regulations granted taxpayers a single non-automatic 30-day extension to file Form W-2.

August 2, 2018: A report published by the Treasury Inspector General for Tax Administration (TIGTA) made eight recommendations to the IRS for improving security over taxpayer data.

August 3, 2018: The IRS released proposed regulations under section 168(k), providing guidance regarding the additional first-year depreciation deduction for certain property placed in service between September 28, 2017 and December 31, 2022. The proposed regulations address the interaction of section 168(k) and certain partnership tax rules as well as other topics.

Special thanks to Kevin Hall in our DC office for this week’s roundup.

Weekly IRS Roundup July 23 – 27, 2018

by McDermott Will & Emery | Jul 31, 2018 | IRS Guidance, Uncategorized

Presented below is our weekly roundup for July 23 – 27, 2018 on significant IRS guidance and relevant tax matters.

July 20, 2018: The IRS has updated its FAQ list for the Foreign Account Tax Compliance Act (FATCA) including new questions and answers regarding the IRS’s updated processing system and certifications for compliance.

July 23, 2018: In Publication 5118, the IRS released the July updated version of the FATCA Online Registration User Guide. This includes, among other additions, changes to enable for financial institutions to submit certifications of pre-existing accounts and periodic certifications.

July 27, 2018: The IRS issued TD 9836 containing final regulations regarding the substantiation and reporting rules for cash and noncash charitable contributions. The regulations provide guidance to individuals, partnerships and corporations.

July 27, 2018: The IRS released their weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandum and Chief Counsel Advice).

Special thanks to Christy Vouri-Misso and Greg Berson in our DC office for this week’s roundup.

Weekly IRS Roundup June 25 – 29, 2018

by McDermott Will & Emery | Jul 2, 2018 | IRS Guidance, Uncategorized

Presented below is our weekly roundup for June 25 – 29, 2018 on significant IRS guidance and relevant tax matters.

June 25, 2018: The IRS has scheduled a public hearing on the proposed regulations that would bar nongovernment attorneys from questioning summoned witnesses on behalf of the IRS for July 31.

June 25, 2018: The IRS has published Internal Revenue Bulletin No. 2018-26 including Rev. Rul. 2018-18 (regarding interest rates); Notice 2018-55 (proposed regulations regarding calculations of net investment income for purposes of the section 4968); and Notice 2018-57 (noting that the IRS intends to delay the applicability date of the final section 987 regulations by an additional year).

June 27, 2018: Nina E. Olson, the United States National Taxpayer Advocate, released her statutorily mandated mid-year report to Congress. The report notes that the most significant challenge the IRS faces in the upcoming year is implementing the 2017 tax reform act.

June 27, 2018: Pursuant to its continuing effort to reduce paperwork, the IRS has requested comments on Rev. Prov. 2015-41 related to the process of applying for Advance Pricing Agreements and TD 8742 concerning requirements respecting the adoption or change of accounting method, and extensions of time to make elections.

June 27, 2018: The IRS added an additional FAQ to its FAQs on Foreign Account Tax Compliance Act requirements discussing the good faith standard for intermediary withholding agents.

June 29, 2018: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandum and Chief Counsel Advice).

Special thanks to Christy Vouri-Misso in our DC office for this week’s round-up.

IRS Criminal Investigation Division Expects Official “Stand Up” of National Coordinated Investigation Units in January

by Kevin Spencer and McDermott Will & Emery | Oct 30, 2017 | IRS Guidance, Uncategorized

In early August 2017 (as we previously reported), the Chief of the Internal Revenue Service’s (IRS) Criminal Investigation Division (CID), John D. Fort, announced that CID would be forming new National Coordinated Investigation Units over the next few months. In a recent conference, Fort has confirmed that these units will be fully operational in January, and they are already sending out referrals to field offices.

The units are intended to modernize CID’s investigative tools to rely more upon data analytics to harvest leads from information received through the Swiss Banking Program, the Foreign Account Tax Compliance Act (FATCA) and the Panama Papers investigation, among other sources. The effort is also clearly intended to maximize the Division’s resources in light of budgetary concerns.

Fort also noted that CID has increasingly focused on tax evasion issues related to cryptocurrencies, and that the use of cryptocurrencies in money laundering operations has become much more mainstream in the last few years. We have also observed a number of developments in this area. For example, the Department of Justice Tax Division is currently engaged in an IRS “John Doe” summons enforcement action against a Bitcoin clearinghouse, seeking the names of Coinbase’s customers who engaged in certain types of potentially reportable transactions. See United States v. Coinbase, Inc., 3:17-cv-01431-JSC (N.D. Cal.).

Practice Point: The new National Coordinated Investigation Units have the potential to reinvigorate and sharpen CID’s investigative efforts in the United States and for taxpayers abroad. Particularly in the area of undeclared offshore accounts, voluntary disclosure is strongly advisable; the world is getting smaller and smaller. Also, CID’s heightened focus upon Bitcoin and other cryptocurrencies may have far-reaching effects beyond criminal investigations. For example, as we have seen historically with the UBS and Jenkens & Gilchrist “John Doe” summons enforcement cases, among others, these summons proceedings can hold open statutes of limitations for assessment in civil audits as well.

Treasury Releases Report on Reducing Tax Regulatory Burdens

by McDermott Will & Emery | Oct 5, 2017 | IRS Guidance, Uncategorized

On October 2, 2017, the US Department of the Treasury (Treasury) submitted a report (Report) to the President of the United States recommending the withdrawal, revocation or revision of eight Treasury Regulations in order to eliminate or otherwise mitigate the “burdens imposed on taxpayers.” This action springs from Executive Order 13789 issued by the President on April 21, 2017, calling on Treasury to identify and reduce tax regulatory burdens that impose undue financial burdens on US taxpayers or otherwise add undue complexity to federal tax laws.

The Report is largely consistent with Treasury’s interim report dated June 22, 2017, but sets forth in greater detail the specific actions recommended by Treasury. However, the Report also stated that Treasury is considering possible reforms of several recent regulations not identified in its interim report, such as regulations under Internal Revenue Code (Code) Section 871(m) (relating to payments treated as US source dividends) and the Foreign Account Tax Compliance Act. The Report also states that Treasury and the Internal Revenue Service (IRS) have initiated a comprehensive review of all regulations—regardless of when they were issued—that is coordinated by the Treasury Regulatory Reform Task Force and is a furtherance of executive orders adopting a PAYGO approach to regulations. (more…)

IRS Is Underutilizing Exchange of Information Capabilities

by McDermott Will & Emery | Sep 21, 2017 | IRS Guidance, Uncategorized

According to the Treasury Inspector General for Tax Administration (TIGTA), the Internal Revenue Service (IRS) is underutilizing exchange of information (EOI) capabilities with foreign countries. On September 11, 2017, TIGTA issued a report summarizing its evaluation of the IRS’s current efforts to improve tax compliance by using information obtained from foreign countries through the Exchange of Information Program agreements.

TIGTA’s three main conclusions were: (1) the automatic exchange of information (AEOI) recordkeeping is inadequate and the usefulness of the information is unknown; (2) the Mutual Collection Assistance Request Program (MCAR) may not be used to its full potential; and (3) the spontaneous exchange of information program requires a multitude of enhancements.

TIGTA made several recommendations to the IRS to maximize the use of information received and collection assistance available from foreign countries. The recommendations included:

(1) Conduct an outreach to examination and collection field functions to alert them on the availability and potential usefulness of automatic data provided by treaty partners that can be gained by requesting and obtaining access to an easy search tool;

(2) Expand upon the AEOI Program section of the Internal Revenue Manual (§ 4.60.1) to add recordkeeping requirements to track the incoming and outgoing records;

(3) Create procedures for AEOI personnel that: a) allow AEOI personnel to accurately track the data and/or record counts received by country; b) track the data by country that contractors upload to the AEOI database; and c) monitor the difference in received and posted record counts by country to identify and resolve upload issues in a timely fashion;

(4) Reinforce the IRS’s 2016 international collection strategy related to the MCAR Program to address the importance of issuing MCARs when warranted as an additional collection tool, and prioritize the timely processing of outgoing MCAR requests;

(5) Enhance revenue officers’ awareness of tools to explore international asset identification;

(6) Coordinate with Treasury Department’s Office of Tax Policy to identify additional countries with whom the United States could benefit by adopting MCAR provisions in a treaty; and

(7) Establish criteria for withdrawing issued outbound MCARs when the taxpayer has not fully paid.

The IRS agreed with TIGTA’s recommendations and plans to address those issues by implementing several corrective actions by the summer of 2018.

The final report entitled “Exchange of Information Capabilities Are Underutilized by the Internal Revenue Service” and the IRS’s response to an earlier draft is available here.

Practice Point: The information exchanged among tax administrations has increased significantly since the implementation of the Foreign Account Tax Compliance Act (FATCA). The TIGTA report identified several areas in which the exchange of information is currently being underutilized by the IRS. The IRS is clued into these flaws and is focused on updates to maximize the value of the information. As we previously discussed, the IRS recently announced two new enforcement initiatives in the Criminal Investigation Division (CID) to use FATCA [...]

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