October 18, 2016
The Social Security Administration (SSA) announced that the maximum amount of annual earnings subject to Social Security taxes will increase to $127,200 in 2017, a 7.3% increase from the current $118,500 ceiling. This represents the largest single-year percentage increase since the wage base increased from $32,400 to $35,700 in 1983, an increase of 10.2%. SSA explained that the increase is due to the rise in average income and it estimates that the increase will affect roughly 12 million workers. Other cost-of-living increases released by SSA can be found here.… Read More
October 13, 2016
Rep. Edward R. Royce (R-Calif.) recently introduced in the House of Representatives a bill that would exempt premiums paid on non-cash-value property and casualty insurance from coverage under the Foreign Account Tax Compliance Act (FATCA). Specifically, H.R. 6159 would amend the definition of “withholdable payment,” to which FATCA reporting and withholding rules apply, under Code Section 1473(1) to exempt premiums paid for any insurance contract that has an aggregate cash value of zero or less, and that is not considered for purposes of determining whether the insurance company is a life insurance company under Code Section 816. Cash value generally means the amount that is payable to the policyholder upon policy surrender or termination, or that can be borrowed, except that cash value does not include any death, sickness, or casualty loss benefit, refund of and dividends not exceeding premiums paid (less cost of insurance charges), and certain advance premium or deposit. … Read More
October 7, 2016
Recently, the Treasury released the Model 1A Intergovernmental Agreement (IGA) entered into between the United States and the Dominican Republic. The IRS also released the Competent Authority Agreement (CAA) implementing the Model 1B IGA between the United States and the Vatican City State entered into on June 10, 2015.
Since our last monthly FATCA update, we have also addressed other recent FATCA developments:
- New legislation, H.R. 5935, has been introduced in Congress to repeal FATCA, on the basis that FATCA violates Americans’ Fourth Amendment privacy rights (see previous coverage).
- On September 1, Justice Hanan Meltzer of Israel’s High Court of Justice issued a temporary injunction preventing exchange of tax information under FATCA with the United States (see previous coverage).
Beware of Errors in Limitations on Benefits Table on IRS Website When Vetting Treaty Claims on Forms W-8BEN-E
October 6, 2016
Earlier this year, the IRS changed the Form W-8BEN-E to require beneficial owners to identify the applicable limitation on benefits (“LOB”) test under the LOB article (if an LOB exists under the treaty) to claim tax treaty benefits. Income tax treaties often contain LOB articles to prevent treaty shopping by residents of a third country by limiting treaty benefits to residents of the treaty country that satisfy one of the tests specified in the LOB article. The form change requires additional complexity on the part of beneficial owners and additional due diligence on the part of withholding agents when vetting treaty claims.… Read More
September 27, 2016
The IRS recently reminded employers to certify certain new hires by September 28 to qualify for the newly expanded Work Opportunity Tax Credit (WOTC). The WOTC is a federal tax credit available to employers who hire eligible workers—e.g., certain veterans, public assistance recipients—who have consistently faced significant barriers to employment. Congress enacted the Protecting Americans from Tax Hikes (PATH) Act last December, which retroactively extended the WOTC for nine categories of eligible workers hired on or after January 1, 2015, and adding a tenth category for certain long-term unemployment recipients hired on or after January 1, 2016. Accordingly, the ten categories of eligible workers include:
- Qualified IV-A Temporary Assistance for Needy Families (TANF) recipients;
- Unemployed veterans, including disabled veterans;
- Designated community residents living in Empowerment Zones or Rural Renewal Counties;
- Vocational rehabilitation referrals;
- Summer youth employees living in Empowerment Zones;
- Food stamp (SNAP) recipients;
- Supplemental Security Income (SSI) recipients;
- Long-term family assistance recipients;
- Qualified long-term unemployment recipients (who begin work after 2015).
September 12, 2016
New legislation, H.R. 5935, has been introduced in Congress to repeal the Foreign Account Tax Compliance Act (FATCA), on the basis that FATCA violates Americans’ Fourth Amendment privacy rights. Rep. Mark Meadows (R-NC) introduced the bill to the House on September 7, along with two original cosponsors. The alleged privacy violations stem from requirements in FATCA that force foreign financial institutions to report all account holdings and assets of U.S. taxpayers to the IRS, or else face potential penalties in the form of 30% withholding on all U.S. source income. According to Rep. Meadows’s press release, FATCA “requires a level” of disclosure that violates the Fourth Amendment, though Rep.… Read More
September 8, 2016
Israel was nearing completion of the steps required to comply with the Foreign Account Tax Compliance Act (FATCA), but its attempt to comply may be in sudden jeopardy thanks to a recent Israeli court decision. FATCA exchanges were to begin on September 1, but Justice Hanan Meltzer issued a temporary injunction that day that prevents FATCA-related regulations that would have permitted the exchange of information with the United States from going into effect. The injunction was issued in response to a request filed August 8 by a group named Republicans Overseas Israel. An emergency hearing is scheduled for September 12.… Read More
September 2, 2016
Recently, the Treasury released the Model 1A Intergovernmental Agreement (IGA) entered into between the United States and Trinidad and Tobago.
The IRS also released the Competent Authority Agreements (CAAs) implementing the IGAs between the United States and the following treaty partners:
- Cambodia (Model 1B IGA signed on September 14, 2015);
- United Arab Emirates (Model 1B IGA signed on June 17, 2015);
- Turks and Caicos Islands (Model 1B IGA signed on December 1, 2014).
Under FATCA, IGAs come in two forms: Model 1 or Model 2. Under a Model 1 IGA, the foreign treaty partner agrees to collect information of U.S. accountholders in foreign financial institutions (FFIs) operating within its jurisdiction and transmit the information to the IRS. … Read More
August 26, 2016
Earlier this month, the IRS announced in interim guidance that it would amend Section 20.1.7 of the Internal Revenue Manual to provide a methodology for the calculation of intentional disregard penalties under Section 6721 for filers who fail to file information returns electronically when required. In general, filers of more than 250 information returns are required to file such returns electronically with the IRS. For this purpose, each type of information return is considered separately, so that a filer who files 200 Forms 1099-DIV and 200 Forms 1042-S is not required to file electronically. In contrast, if the filer was required to file 300 Forms 1099-DIV and 200 Forms 1042-S, it must file the Forms 1099-DIV electronically, but may file Forms 1042-S on paper.… Read More
August 24, 2016
A recent decision of the U.S. District Court for the Central District of California should remind employers to regularly verify the actions of payroll service providers regardless of the provider’s reputation and the longevity of the relationship. In particular, employers should open an e-Services account with the IRS and verify that all deposits are in fact hitting their payroll accounts timely. This check should be performed weekly. If deposits are not timely reflected on accounts, it is incumbent on employers to promptly determine the nature of the problem. The IRS does not police payroll service companies, and the Department of Justice has prosecuted a number of people for embezzlement of payroll taxes over the years.… Read More