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News Now

Washington
CUNA to IRS Withdraw nonresident interest proposal
WASHINGTON (4/11/11)—The Credit Union National Association (CUNA) has asked the Internal Revenue Service to withdraw a proposed rule that would expand reporting requirements for interest paid to nonresident aliens, saying that the proposal’s costs to financial institutions and consumers “will far outweigh any benefit to the IRS.” The IRS proposal, which was released in January, would require credit unions and other financial institutions to report on their Form 1042-S interest of $10 or more earned annually on deposit accounts held by nonresident aliens who are residents of any foreign country. The current nonresident reporting requirement only applies to Canadian expatriates. CUNA Deputy General Counsel Mary Dunn said that this reporting expansion “could be setting a precedent that credit unions do not want to see repeated.” The proposal would apply to any covered institution that pays interests on accounts for nonresident aliens anywhere. Dunn said that CUNA could not specifically estimate how many credit unions this proposal would impact if it came into effect. CUNA in a comment letter to the IRS said that credit unions, as financial institutions, already shoulder a significant compliance burden as the result of current IRS reporting requirements and are among the most heavily regulated financial institutions. In addition, the letter noted that the IRS has not “provided a compelling reason why the expanded reporting requirements are necessary.” The IRS has abandoned two previous attempts to introduce similar reporting requirements. The first attempt happened in 2001, with the second coming in 2002.


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