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IRS issues draft FATCA report form

BY SALLY P. SCHREIBER, J.D.

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On Thursday, the IRS released a draft Form 8966, FATCA Report, which will be used by foreign financial institutions (FFIs) and withholding agents to comply with their FATCA reporting and withholding requirements.

Under the Foreign Account Tax Compliance Act (FATCA), enacted as part of the Hiring Incentives to Restore Employment Act of 2010, P.L. 111-147, U.S. withholding agents are required to withhold tax on certain payments to FFIs that do not agree to report certain information to the IRS regarding their U.S. accounts and on certain payments to certain nonfinancial foreign entities (NFFEs) that do not provide information on their substantial U.S. owners to withholding agents.

In the preamble to the FATCA final regulations (T.D. 9610), the IRS stated that Form 8966 “will be used by FFIs (including QIs [qualified intermediaries], WPs [withholding foreign partnerships], WTs [withholding foreign trusts]) and withholding agents (in limited circumstances) to comply with their [FATCA] reporting obligations. This new Form 8966 will set forth all the information that must be reported with respect to financial accounts in accordance with these regulations.”

The draft form, which is just over a page long, contains sections for identifying the filer, the account holder or recipient, and U.S. owners that are specified U.S. persons, and for providing financial information, including account number and balance, and information for pooled reporting. The IRS has not yet posted draft instructions for the form.

The final regulations provided for a phased-in implementation of these withholding requirements beginning Jan. 1, 2014. In July, the IRS postponed by six months the start of FATCA withholding (Notice 2013-43). Withholding agents will be required to begin withholding on withholdable payments made after June 30, 2014, using Form 8966, to payees that are FFIs or NFFEs for obligations that are not grandfathered under the rules unless the payments can be reliably associated with documentation on which the withholding agent can rely to treat the payments as exempt from withholding.

—Sally P. Schreiber (sschreiber@aicpa.org) is a JofA senior editor.