IRS Updates List of Countries Subject to Bank Interest Reporting Requirements

The IRS has issued Revenue Procedure 2017-31 to supplement the list of countries to subject to the reporting requirements of Code section 6049, which generally relate to reporting on bank interest paid to nonresident alien individuals.  This was an expected move, as this list of countries, originally set forth in Revenue Procedure 2014-64 and modified a handful of times since, will likely continue to expand as more countries enter into tax information exchange agreements with the U.S. in order to implement the Foreign Account Tax Compliance Act (FATCA).  Specifically, Revenue Procedure 2017-31 adds Belgium, Colombia, and Portugal to the list of countries with which Treasury and the IRS have determined the automatic exchange of information to be appropriate. … Read More

New FATCA FAQs Address Date of Birth and Foreign TIN Requirements for Withholding Certificates

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April 7, 2017

Yesterday, the IRS added three new FAQs to its list of frequently asked questions on compliance with the Foreign Account Tax Compliance Act (“FATCA”).  The questions address the need for withholding agents to obtain foreign TINs or dates of birth for nonresident alien or foreign entity on beneficial owner withholding certificates, e.g., Forms W-8BEN and W-8BEN-E.  The FAQs address the requirement under temporary regulations published in the Federal Register on January 6, 2017, that a beneficial owner withholding certificate contains a foreign TIN and, in the case of an individual, a date of birth in order to be considered valid.… Read More

IRS Guidance on Reporting W-2/SSN Data Breaches

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April 6, 2017

The IRS recently laid out reporting procedures for employers and payroll service providers that have fallen victim to various Form W-2 phishing scams.  In many of these scams, the perpetrator poses as an executive in the company and requests Form W-2 and Social Security Number (SSN) information from an employee in the company’s payroll or human resources departments (see prior coverage).  If successful, the perpetrator will immediately try to monetize the stolen information by filing fraudulent tax returns claiming a refund, selling the information on the black market, or using the names and SSNs to commit other crimes.  Thus, time is of the essence when responding to these data breaches.… Read More

Entities Allowed Additional Time to Renew QI Agreements

In a Q&A on its list of questions and answers for qualified intermediaries (QIs), foreign withholding partnerships (WPs), and foreign withholding trusts (WTs) (see Q&A-22), the IRS today extended the deadline for submitting QI, WP, and WT agreement renewal requests from March 31, 2017, to May 31, 2017.  Applications submitted by the deadline will be granted a QI, WP, or WT agreement (as applicable) with an effective date of January 1, 2017.  This delay gives entities additional time to comply with the new application system (discussed in a prior post) and gather the necessary information to submit renewal requests.… Read More

Poor Design and Poor Defense Sink Employee Discount Plan

A recent IRS Field Attorney Advice (FAA) memorandum highlights the risk of poorly designed employee discount plans.  In FAA 20171202F, the IRS Office of Chief Counsel determined that an employer was liable for failing to pay and withhold employment taxes on employee discounts provided under an employee discount plan that failed to satisfy the requirements for qualified employee discounts under Code section 132(c).  The FAA also suggests that had the employer either kept or provided better records of the prices at which it provided services to select groups of customers, the result may have been different.  In the FAA, the IRS applied the fringe benefit exclusion for qualified employee discounts to an employer whose business information was largely redacted. … Read More

Recent FAA Serves as Warning to Employers Using PEOs

A recent Internal Revenue Service Office of Chief Counsel field attorney advice memorandum (FAA 20171201F) sounds a cautionary note for employers making use of a professional employer organization (PEO).  The FAA holds a common law employer ultimately liable for employment taxes owed for workers it leased from the PEO.  Under the terms of the employer’s agreement with the PEO, the PEO was required to deposit employee withholdings with the IRS and pay the employer share of payroll taxes to the IRS.  Alas, that was not what happened.

The taxpayer did not dispute that it had the right to direct and control all aspects of the employment relationship and was thus was the common law employer with respect to the employees, but asserted that it was not liable for the unpaid employment taxes.… Read More

House Republicans Pull ACA Replacement Bill

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March 24, 2017

Facing likely defeat, Republicans have pulled the American Health Care Act, which would have made numerous changes to the information reporting provisions and employment tax provisions of the Affordable Care Act (ACA) (earlier coverage).   The legislation would have also created a new information reporting requirement by adding Section 6050X to the Code.  The House was scheduled to vote on the legislation this afternoon, but Republicans have struggled to appease both conservative Republicans, who wanted a more completed repeal of the ACA, and moderate Republicans, who were concerned about the potential loss of coverage that could result from the legislation.… Read More

Employers Likely Need to Update Their Processes Based on New Requirements for Employer Refund Claims of FICA and RRTA Taxes

On March 20, the IRS released Rev. Proc. 2017-28, providing guidance to employers on employee consents used to support a claim for credit or refund of overpaid taxes under the Federal Insurance Contributions Act (FICA) and the Railroad Retirement Tax Act (RRTA). The revenue procedure requires the employee consent to contain, among other information, the basis for the refund claim and a penalties of perjury statement. In addition, it permits employers to request, receive, and retain employee consent electronically, and clarifies the “reasonable efforts” an employer must make, if it fails to secure employee consent, to claim a refund of the employer’s share of overpaid FICA or RRTA taxes.… Read More

Revised House ACA Repeal Will Delay Repeal of AMT until 2023

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March 24, 2017

Last night, Republican leadership released a manager’s amendment to the American Health Care Act (AHCA) that would delay the repeal of the additional Medicare tax (AMT) of 0.9% imposed on certain high-income individuals from 2017 until 2023.  The move is an effort to shore up Republican support for the bill in advance of an expected vote late this afternoon or this evening.  The delay comes three days after an earlier manager’s amendment moved up the repeal of the AMT from 2018 to 2017, and added a transition rule related to employer withholding of the tax.  That change was also made in an effort to shore-up Republican support ahead of the House vote, which was originally expected to happen yesterday.  … Read More

IRS Negotiating CbC Information Exchange Agreements

The IRS is engaging in negotiations with individual countries to implement country-by-country (CbC) reporting according to Douglas O’Donnell, Commissioner of IRS’s Large Business and International Division.  In a March 10 speech at the Pacific Rim Tax Institute that, he clarified that the IRS is only negotiating with jurisdictions that have both an information exchange instrument and adequate information safeguards.  Mr. O’Donnell did not provide a definitive timeline for those negotiations, but he said that they would be completed in a timely manner.  The IRS’s approach to negotiating information exchange agreements is consistent with the United States’ existing approach to negotiating IGAs and related agreements under FATCA.… Read More

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