WASHINGTON (11/01/12)--The U.S. Internal Revenue Service (IRS) and the U.S. Treasury have pushed back the compliance date for key aspects of the Foreign Account Tax Compliance Act (FATCA) until 2014 and, in some cases, as far as 2017.
FATCA is designed to create a tax information reporting and withholding system for certain payments that are made to foreign financial institutions (FFIs) and other entities.
The IRS's proposed regulations to implement FATCA would require FFIs, including credit unions, to register with the IRS and detect taxable account activity by U.S. citizens in foreign countries. The FATCA rules would also require U.S.-based credit unions and financial institutions to file Forms 1042-S for payments of deposit interest or dividends in amounts of $10 or more that are made to nonresident alien members and customers. These financial institutions must also conduct due diligence regarding whether credit union members' payments to overseas FFIs are to an FFI that is not FATCA compliant.
The rules were scheduled to apply to payments made on and after Jan. 1, 2013. However, the IRS and Treasury in a release noted that many commenters said they would have issues following that implementation timeline. The Credit Union National Association earlier this year also noted that the compliance burdens and overhead costs credit unions would face as a result of these proposed changes would far exceed any benefit to the IRS.
As a result of these comments, the IRS and Treasury announced they are:
- delaying the compliance date for FATCA due diligence procedures until January 1, 2014; and
- delaying the date by which withholding agents which are not participating FFIs must document payees that do not comply with FACTA until July 1, 2014.
The compliance date for portions of FATCA that would require U.S. credit unions and other financial institutions to withhold 30% of any funds that are transferred to non-FATCA compliant FFIs will be pushed back until Jan. 1, 2017, the agencies added. Withholding on other types of payments is still expected to commence Jan. 1, 2014.
The delayed compliance dates will apply to U.S. and foreign credit unions, as well as other financial institutions.
Portions of the rule that impact Form 1042-S filings will still become effective on Jan. 1, 2013.
For the IRS/Treasury release on the FATCA changes, use the resource link.