IRS Adds to Lists of Countries Subject to Bank Interest Reporting Requirements

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December 9, 2016

Earlier this week, the IRS issued Revenue Procedure 2016-56 to add to the list of countries subject to the reporting requirements of Code section 6049, which generally relate to reporting on bank interest paid to nonresident alien individuals.  Specifically, the Revenue Procedure adds Saint Lucia to the list of countries with which the U.S. has a bilateral tax information exchange agreement, and adds Saint Lucia, Israel, and the Republic of Korea to the list of countries with which Treasury and IRS have determined the automatic exchange of information to be appropriate.

Prior to 2013, interest on bank deposits was generally not required to be reported if paid to a nonresident alien other than a Canadian.… Read More

IRS Guidance Provides Transition Relief for Withholding Agents and Qualified Derivative Dealers under Section 871(m)

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December 7, 2016

Last week, the IRS issued Notice 2016-76 providing phased-in application of certain section 871(m) withholding rules applicable to dividend equivalents.  In addition to providing good-faith relief to certain transactions in 2017 and 2018, the Notice eases several reporting and withholding requirements for withholding agents and qualified derivatives dealers (QDDs).

Section 871(m) of the Code imposes withholding on certain payments that are determined by reference to or contingent upon the payment of a U.S. source dividend.  Thus, when a foreign financial institution issues derivatives based on U.S. equities to non-U.S. investors, it must withhold on the dividend payments it makes to the non-U.S.… Read More

D.C. Council Moves Closer to Enacting Employer Payroll Tax to Create Nation’s Most Generous Family Leave Law

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December 7, 2016

On December 6, the District of Columbia Council advanced a bill known as the Universal Paid Leave Act of 2016.  The bill would impose an estimated $250 million in employer payroll taxes on local businesses to fund a paid leave benefit created by the bill.  The bill would raise the funds by creating a new employer payroll tax of 0.62%.  Self-employed individuals may also opt-in to the program by paying the tax.  Federal government employees and District residents who work outside of the District would not be covered by the bill.  However, Maryland and Virginia residents who work within the district would be covered and entitled to benefits from the government fund created by the bill.… Read More

First Friday FATCA Update

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December 2, 2016

Recently, the IRS released the Competent Authority Agreements (CAAs) implementing the intergovernmental agreements (IGAs) between the United States and the following treaty partners:

  • Qatar (Model 1B IGA signed on January 7, 2015);
  • Kosovo (Model 1B IGA signed on February 26, 2015).

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. … Read More

New Jersey and Pennsylvania Will Maintain Tax Reciprocal Agreement

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November 23, 2016

New Jersey Governor Chris Christie, who promised in September to revoke New Jersey’s 40-year-old tax reciprocal agreement with Pennsylvania, announced through a November 22 statement that he would continue the agreement.  Governor Christie had said he would eliminate the State of New Jersey and the Commonwealth of Pennsylvania Reciprocal Personal Income Tax Agreement unless the New Jersey legislature took steps to reduce public employee health insurance costs.

The stated impetus for scrapping the agreement was to make up for a budget deficit: cancelling the agreement was estimated to produce $180 million in revenue for New Jersey. Under the agreement, New Jersey and Pennsylvania residents who work in the other state are only required to file a tax return in their state of residence. … Read More

Change to Sentencing Guidelines Reflects DOJ’s Increased Employment Tax Enforcement Efforts

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November 21, 2016

Pursuant to amendments to the U.S. Sentencing Commission Guidelines Manual (Sentencing Guidelines), the background commentary to the Sentencing Guidelines no longer refers to violations of Code section 7202 as “infrequently prosecuted.” These amendments were passed by the Federal Sentencing Commission on May 5, 2016 and effective November 1, 2016.  Code section 7202 provides that any person who willfully fails to collect or truthfully account for and pay taxes when required shall be guilty of a felony and subject to a fine up to $10,000 and up to five years’ imprisonment. Defense attorneys had been using the “infrequently prosecuted” language to argue for more lenient sentences for Code section 7202 violations, and the Justice Department, citing the increase in prosecutions of Code section 7202 violations, had recommended that the language be removed because it is no longer true.… Read More

IRS Extends Deadline for Furnishing ACA Statements to Individuals And Good-Faith Transition Relief

Today, the IRS in Notice 2016-70 extended the deadline for certain 2016 information reporting requirements under the Affordable Care Act (ACA), as employers and other coverage providers prepare for their second year of ACA reporting.   Specifically, providers of minimum essential coverage under Code section 6055 and applicable large employers under Code section 6056 will have until March 2, 2017—not January 31, 2017—to furnish to individuals the 2016 Form 1095-B (Health Coverage) and the 2016 Form 1095-C (Employer-Provided Health Insurance Offer and Coverage).  Because this extended deadline is available, the normal automatic and permissive 30-day extensions of time for furnishing ACA forms will not apply on top of the extended deadline. … Read More

IRS Extends Transitional Relief for PATH Act’s Changes to Form 1098-T Reporting for Colleges and Universities

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November 17, 2016

In Announcement 2016-42, the IRS recently provided transitional penalty relief to certain colleges and universities with respect to new Form 1098-T reporting requirements under the Protecting Americans from Tax Hikes (PATH) Act of 2015.  Specifically, the IRS will not impose penalties under Code section 6721 or 6722 on an eligible educational institution with respect to Forms 1098-T required to be filed and furnished for the 2017 calendar year, if the institution reports the total amount billed for qualified tuition and related expenses instead of the total payments received, as required by section 212 of the PATH Act.  This transitional relief for 2017 reporting effectively extends the same transitional relief for 2016 reporting in Announcement 2016-17, released this spring (see prior coverage). … Read More

Earlier Deadline for Filing Forms W-2 and 1099-MISC Looms

The earlier filing deadline for the Form W-2 and a Form 1099-MISC that reports nonemployee compensation (Box 7) is fast approaching.  In prior years, electronic filers had until as late as March 31 to file copies of such forms with the IRS (or the Social Security Administration (SSA), in the case of Forms W-2).  Additionally, filers could request an automatic extension to push the deadline back another 30 days.  Many large filers requested automatic extensions in the normal course to provide extra time to clean up their filings and avoid penalties.  For 2016, however, Forms W-2 and Forms 1099-MISC reporting nonemployee compensation in Box 7 are required to be filed by January 31, 2017–the deadline for furnishing copies to recipients–regardless of whether they are filed electronically or on paper.… Read More

Final Regulations Amend Section 6050P Regulations to Remove 36-Month Nonpayment Testing Period

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November 15, 2016

Last week, the IRS issued final regulations removing the 36-month nonpayment testing period from the regulations issued under section 6050P of the Code.  The final regulations adopted the proposed regulations issued in 2014 without significant changes.

Code section 6050P requires certain financial entities to file a Form 1099-C when it cancels (in whole or in part) debt of a debtor in the amount of $600 or more.  This obligation is generally triggered when an identifiable event, as defined in the regulations, occurs.  Unlike all of the other identifiable events, the expiration of the 36-month nonpayment period, which creates a rebuttable presumption that an “identifiable event” occurred that would trigger the obligation to report the cancellation of debt on Form 1099-C, does not necessarily reflect a discharge of the underlying debt. … Read More

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