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  3. IRS Advisers Recommend Delaying FATCA To 2015

IRS Advisers Recommend Delaying FATCA To 2015

by Mike Godfrey,, Washington

13 December 2013

The Information Reporting Program Advisory Committee (IRPAC) has urged the United States Internal Revenue Service (IRS) to delay the implementation date for the Foreign Account Tax Compliance Act (FATCA) by another six months, to January 1, 2015, to help withholding agents and their customers adjust to the new requirements.

FATCA, enacted by Congress in 2010, is intended to ensure that the IRS obtains information on accounts held abroad at foreign financial institutions (FFIs) by US persons. Failure by an FFI to disclose information on their US clients, including account ownership, balances and amounts moving in and out of the accounts, will result in a requirement on US financial institutions to withhold 30 percent tax on US-source income.

On July 12 this year, the US Department of the Treasury announced that FATCA implementation by FFIs would be postponed by six months to July 1, 2014, but it was only at the end of October that it provided a draft notice incorporating updates to certain due diligence, withholding and other reporting requirements, and including a draft FFI agreement.

While more detailed guidance and the FFI agreement are due to be finalized by December 31, 2013, IRPAC has now recommended that the IRS provides for an additional postponement until January 1, 2015, in order, it says, for withholding agents to complete the steps necessary to fulfill their FATCA obligations.

IRPAC confirms that withholding agents have already devoted substantial resources to the design of systems based on the draft final regulations and the associated draft forms. It is important to note, it adds, "that substantial work remains to be done and can only be undertaken after final and comprehensive guidance is issued."

It notes that "the systems development process involves a series of steps. The remaining steps include refining the scope of the project, development and documentation of technical requirements, design and coding of program changes, testing to ensure compliance with technical requirements, finalization of programming changes, and scheduling the release of systems changes. Each of these steps requires a substantial commitment of time and resources and must be undertaken sequentially."

So far, IRPAC notes, only preliminary work has been largely completed based on the guidance issued to date, and the completion of design, programming and testing can only be accomplished after the IRS has released comprehensive final guidance.

TAGS: compliance | Foreign Account Tax Compliance Act (FATCA) | tax | tax compliance | FATCA | law | Internal Revenue Service (IRS) | tax authority | withholding tax | United States | regulation | Compliance | Tax

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