IRS Issues Guidance for Early Country-by-Country Reporting

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February 7, 2017

Recently, the IRS issued guidance for multinational enterprises (MNEs) with at least $850 million in annual revenue based in the United States that may have constituent entities subject to country-by-country (CbC) reporting requirements in foreign jurisdictions because of the effective date of CbC reporting in the United States.  CbC reporting aims to eliminate tax avoidance by multinational companies by requiring MNEs to report certain indicators of the MNE’s economic activity in each country and allowing the tax authorities to share that information with one another.

In the U.S., MNEs make the CbC report on Form 8975, “Country-by-Country” report.  The report contains revenue, profit or loss, capital, and accumulated earnings data for each country of operation. … Read More

W-2 Phishing Scam Targeting More Employers, Including Chain Restaurants and Staffing Companies

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February 3, 2017

Yesterday, the IRS and state tax agencies issued a joint warning to employers that the Form W-2 phishing scam that first affected large businesses last year has now expanded to other organizations, including chain restaurants, staffing companies, schools, tribal organizations, and nonprofits.  The scam involves emails sent to payroll or human resources employees that appear to be from organization executives and request a list of all employees and their Forms W-2.  Once the scammer receives the information, it can be used to file false tax returns and claim employee refunds.

According to IRS Commissioner John Koskinen, this is one of the most dangerous phishing scams the tax world has faced in a long time. … Read More

First Friday FATCA Update

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February 3, 2017

Recently, the Treasury released the Intergovernmental Agreements (IGAs) entered into between the United States and the following treaty partners, in these respective forms:

  • Anguilla, Model 1B;
  • Bahrain, Model 1B;
  • Greece, Model 1A; and
  • Greenland, Model 1B.

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.  Model 1 IGAs are drafted as either reciprocal (Model 1A) agreements or nonreciprocal (Model 1B) agreements.  By contrast, Model 2 IGAs are issued in only a nonreciprocal format and require FFIs to report information directly to the IRS.… Read More

Discharge of Federal Student Loans Not Income to Defrauded Students; Creditors Relieved From Information Reporting Regarding Discharge

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January 23, 2017

The IRS announced in Rev. Proc. 2017-24 that creditors of federal student loans made to former students of American Career Institutes, Inc. (ACI) that were discharged under the Department of Education’s “Defense to Repayment” or “Closed School” discharge processes need not file or furnish a Form 1099-C reporting the loan discharge.  Former ACI students whose loans were discharged do not need include in income the amount of the loans discharged.  Only the federal loans discharged under one of the two named processes are subject to the relief.

Two years ago, in Rev. Proc. 2015-57, the IRS provided the same income exclusion under the same conditions to former students defrauded by Corinthian Colleges, Inc. … Read More

IRS Begins Requesting Missing ACA Returns from Employers

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January 19, 2017

Despite an uncertain future for the Affordable Care Act (ACA), the IRS is moving forward with enforcement efforts for 2015.  Employers have recently begun receiving IRS Letter 5699 requesting Forms 1094-C and 1095-C for 2015.  The letter notifies the recipient that it may have been an applicable large employer (ALE) in 2015 with ACA reporting obligations and that the IRS has not yet received Forms 1095-C for 2015.  The returns were due on June 30, 2016, for electronic filings through the ACA Information Reporting (AIR) system, or May 31, 2016, for paper filing (see prior coverage).

The letter requires that, within 30 days from the date of the letter, the recipient must provide one of the following responses: (1) the recipient was an ALE for 2015 and has already filed the returns; (2) the recipient was an ALE for 2015 and is now enclosing the returns with the response; (3) the recipient was an ALE for 2015 and will file the returns by a certain date; (4) the recipient was not an ALE in 2015; or (5) an explanation of why the recipient has not filed the returns and any actions the recipient intends to take.… Read More

Refusal to Allow Closing Agreements on FICA Timing May Lead to Challenge

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January 17, 2017

In an IRS Chief Counsel Advice Memorandum released on January 13, the IRS concluded that it should not enter into closing agreements with employers who failed to subject amounts of nonqualified deferred compensation to FICA taxes under the special timing rule in Section 3121(v)(2)(A).  In the past, some employers have been able to obtain a closing agreement in such circumstances.  In the CCA, the IRS concludes that, because the regulations apply the general timing rule in such situations, closing agreements that would allow the avoidance of the harsh result prescribed by the regulations are inappropriate.

The unwillingness of the IRS to issue closing agreements on the issue going forward may bring to a head arguments that the IRS’s regulations under Section 3121(v)(2) are not well supported by the language of the statute. … Read More

First Friday FATCA Update

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January 6, 2017

Since our last monthly FATCA update, we have addressed several other recent FATCA developments, including a flurry of FATCA-related regulations released by the IRS and Treasury Department:

  • Late Friday, December 30, 2016, the IRS and Treasury Department released four regulation packages related to its implementation of FATCA (see previous coverage).   These regulations largely finalized the 2014 temporary FATCA regulations and 2014 temporary FATCA coordination regulations with the changes that the IRS had previously announced in a series of notices.
  • The final regulations released by the IRS under FATCA on December 30, 2016, finalized the temporary presumption rules promulgated on March 6, 2014 with no substantive changes, but several changes were made to the final coordinating regulations under Chapter 3 and Chapter 61, also released on the same date (see previous coverage).
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Final Regulations Make Minor Changes to FATCA and Chapter 3 Presumption Rules

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January 5, 2017

The final regulations released by the IRS under the Foreign Account Tax Compliance Act (FATCA) on December 30, 2016 finalized the temporary presumption rules promulgated on March 6, 2014 with no substantive changes, but several changes were made to the final coordinating regulations under Chapter 3 and Chapter 61, also released on the same date.

Under FATCA, withholding agents must conduct certain due diligence to identify the Chapter 4 status of their payees.  In the absence of information sufficient to reliably identify a payee’s Chapter 4 status, withholding agents must apply specific presumption rules to determine that status.

According to the preamble to the final FATCA regulations, a commenter requested that a reporting Model 1 foreign financial institution (FFI) receiving a withholdable payment as an intermediary or making a withholdable payment to an account held by an undocumented entity be permitted to treat such an account as a U.S.… Read More

IRS Says NFFEs Must Determine their Chapter 4 Status Under Treasury Regulations

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January 5, 2017

In the preamble to the final FATCA regulations released on December 30, 2016, the IRS rejected a request from a commenter that the regulations be modified to permit a non-financial foreign entity (NFFE) operating in an IGA jurisdiction to determine its Chapter 4 status using the criteria specified in the IGA.

In the preamble, the IRS responded to the request by indicating that although an NFFE may use the IGA to determine whether it is a foreign financial institution (FFI) or a NFFE,  it must look to U.S. Treasury Regulations to determine its Chapter 4 status once it determines it is an NFFE. … Read More

Temporary FATCA Coordination Regulations Bring U.S. Source Gross Transportation Income Saga to a Close

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January 4, 2017

On Friday, December 30, 2016, the IRS and Treasury Department released over 600 pages of new final, temporary and proposed regulations under Chapter 4 (FATCA), Chapter 3, and Chapter 61 (see earlier coverage).  The four packages finalize the temporary regulations issued in 2014 and make additional changes based on comments received by the IRS.  One issue addressed by the temporary FATCA coordination regulations issues under Chapter 3 addresses the outstanding question of whether withholding agents must document the foreign payees of U.S. source gross transportation income (USSGTI) and withhold under Chapter 3.  The temporary regulations amend the regulations under Section 1441 to specifically exempt USSGTI from amounts subject to withholding.… Read More

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