Entities Are Encouraged to Obtain or Renew the QI Agreement by 31 July 2014
The IRS has recently announced that entities are encouraged to obtain or renew the QI Agreement by 31 July 2014. QI Agreements not renewed by 31 July 2014 are not retroactive and a 90-day deadline is prescribed for new QIs to register for their chapter 4 statuses (when required) to obtain a QI agreement applicable for 2014.
For more information, please follow this link to the IRS QI News 2014-03 (PDF, 92KB)
Instructions for Form 1042-S re-released; withholding and reporting foreign person’s U.S. income paid in 2014
The IRS has re-posted final instructions for Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding.
A version of the Form 1042-S instructions was released in late June 2014. It appears that the IRS re-released these instructions to correct a couple of errors. For example, see the references to line 17—the former version of the instructions mistakenly had this line listed as recipient country code and not recipient GIIN.
New version of instructions
The 26-page instructions (PDF, 395 KB) explain that Form 1042-S for 2014 has been revised to add the reporting of payments and amounts withheld under the FATCA provisions of chapter 4 as well as amounts required to be reported under the withholding rules of chapter 3.
Form 1042-S requires the reporting of an applicable exemption to the extent withholding under chapter 4 did not apply to a payment of U.S source fixed or determinable annual or periodical (FDAP) income (including deposit interest) that is reportable on Form 1042-S.
When a financial institution reports a payment made to its financial account, Form 1042-S also requires the reporting of additional information about a recipient of the payment—e.g., the recipient's account number, date of birth, and foreign taxpayer identification number.
For withholding agents, intermediaries, flow-through entities, and recipients, Form 1042-S requires that the chapter 3 status (or classification) and, when the payment reported is a “withholdable payment,” the chapter 4 status be reported.
Final Regulations on use of Truncated TINs
The Treasury Department and IRS released Treasury Decision 9675 (T.D. 9675) for publication in the Federal Register providing final regulations on the use of a “truncated taxpayer identification number” (TTIN).
The regulations implement a pilot program (initially announced in Notice 2009-93 and extended and modified by Notice 2011-38) that allowed filers of certain information returns to truncate an individual payee’s nine-digit identification number on specified paper payee statements furnished for calendar years 2009 through 2012. The pilot program was implemented in response to concerns about the risk of identity theft stemming from the inclusion of a payee’s full TIN on a statement.
In an effort to reduce the risk of identity theft when a taxpayer’s entire identification number is used on payee statements or other documents (generally including a Schedule K-1 issued to a partner, S corporation shareholder, or trust beneficiary), the final regulations adopt the 2013 proposed rules with certain changes. The final regulations allow displaying only the last four digits of a payee’s TIN with either asterisks (*) or with Xs, replacing the first five digits of the identifying number.
The use of a TTIN is allowed on any federal tax-related payee statement or other document required to be furnished to another person unless prohibited by the Code, regulations, other guidance published in the Internal Revenue Bulletin, forms, or instructions. TINs that can be truncated on payee statements and certain other documents are:
- A taxpayer’s social security number (SSN)
- IRS individual taxpayer identification number (ITIN)
- IRS adoption taxpayer identification number (ATIN)
- Employer identification number (EIN)
The IRS and Treasury announced there is no need to amend every information reporting regulation to permit the use of a TTIN.
The use of a TTIN, however, is not allowed on every document, such as tax returns and statements filed with the IRS, because taxpayer identifying numbers on returns and statements filed with the IRS are necessary for the IRS to determine compliance with the tax laws and validate the information provided.
The final regulations were published in the Federal Register on Tuesday, 15 July and generally are effective for payee statements due after 31 December 2014.
For Your Reference
T.D. 9675 can be accessed by clicking here (PDF, 103 KB)
For further information, please do not hesitate to contact us.
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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.