IRS Issues Draft Revised Form 1042
The IRS released a draft revised Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons. This draft form is a revision of the form historically used by withholding agents (whether U.S. or foreign) as an annual return to summarize certain U.S. source income paid to non-U.S. recipients.
Highlights of the draft revised form:
- At first glance, it appears that the form has been shortened.
At closer look, we note that the form has become two pages with a signature at the end of page 1, and the remainder of the form following on page 2
- Chapter 3 and Chapter 4 Status Code boxes – at the top identification section of the form, status boxes have been added. Without instructions, it is envisioned that these pertain to classification of the withholding agent, such as: U.S. Withholding Agent, Qualified Intermediary, Withholding Foreign Partnership, Withholding Foreign Trust or Nonqualified Intermediary for Chapter 3 and Participating Foreign Financial Institution, Registered Deemed Compliant C Foreign Financial Institution for Chapter 4
- Breakdown of income in lines 62a through 62d
- Breakdown of manner of withholding in lines 63a through 63e
- Accounting for adjustments in lines 64a through 64e
- Breakdown of the credit for withholding by other withholding agents (current form line 66): the draft form divides the line for withholding on substitute payments and all other payments.
- Section 2: Reconciliation of payments – without the benefit of instructions, these new line items are not readily clear, however it does appear that amounts excluded from FATCA will be reportable (nonfinancial payments, grandfathered obligations, exempt status)
For your reference
The draft form can be accessed by clicking here: draft form 1042 (PDF, 110 KB)
Nishida Joins KPMG IRP Team
In KPMG’s quest for the best for its Information Reporting and Withholding Practice (IRP), we are pleased to announce the addition of former IRS attorney, Danielle Nishida.
Danielle joins KPMG as director in the International Corporate Tax Services Group of KPMG’s Washington National Tax practice. Danielle will be devoting her initial time with KPMG’s IRP practice, which amongst other things, is focused on QI and FATCA matters.
Prior to joining KPMG, Danielle was IRS attorney in the Office of Chief Counsel (International) where she focused on income tax withholding and Subpart F, and was a principal draftsperson of the FATCA regulations, the pending proposed chapter 3 and 61 conforming regulations, and other published guidance under sections 1441, 1442, 1471 through 1474, and 6050W. Danielle is a frequent speaker both in the United States and internationally regarding FATCA and other information reporting issues.
We are pleased that Danielle has joined her former IRS attorney colleagues who provide leadership in information reporting matters at KPMG, Laurie Hatten-Boyd and Carl Cooper.
QI and FATCA Administration Deadlines Announced by IRS
Foreign financial institutions that are interested in becoming a Qualified Intermediary (QI), Withholding Foreign Partnership (WP), or Withholding Foreign Trust (WT) before tackling the new FATCA registration process, need to submit applications no later than 3 May 2013.
FATCA Registration Portal
The IRS will be unveiling its FATCA registration portal and making it available to all foreign financial institutions (FFIs) to register their FATCA status beginning on 15 July 2013. In an Announcement that lead to confusion, the IRS stated QIs, WPs and WTs needed to obtain that status before using the registration portal. Upon further discussion with IRS officials, it appears that interpretation is not what was intended. The IRS thought FFIs would benefit from completing QI, WP, WT applications, then moving on to FATCA status – avoiding angst over whether to become a QI first or register for FATCA status first.
Applications will continue to be accepted from FFIs wishing to obtain QI, WP, or WT status for the 2013 year until 15 November 2013. An application received on or before 15 November 2013 will be processed in time to permit the desired registration status prior to 31 December 2013.
To apply for QI, WP, or WT status, an FFI must submit a Qualified Intermediary Application, or Withholding Foreign Partnership/Withholding Foreign Trust Application to:
Qualified Intermediary Program
290 Broadway, 12th Floor
New York, New York 10007
Attention: QI Applications
According to an IRS posting, new Qualified Intermediary (QI), Withholding Foreign Partnership (WP), and Withholding Foreign Trust (WT) Agreements will be expanded to incorporate a foreign financial institution’s requirements under Foreign Asset Tax Compliance Act (FATCA) with its QI, WP, or WT responsibilities. These Agreements will be effective on 1 January 2014.
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