Every now and again, taxpayers should have a look at the Large Business and International Division list of currently active campaigns. Now that there is a bit of downtime between filing seasons and year-end reporting, taxpayers should consider whether any of the active campaigns impact them. Below are a few to consider in the information reporting and withholding space, but be sure to check out the entire list at: https://www.irs.gov/businesses/corporations/lbi-active-campaigns
Virtual Currency Campaign. Focuses on compliance related to the use of virtual currency. The Service will take action in the form of outreach and examinations. Taxpayers should review Notice 2014-21 for the general tax principles applicable to all transactions in property. The Service urges those with unreported virtual currency transactions to correct their returns as soon as practical. At this time, there no voluntary disclosure program that addresses tax non-compliance involving virtual currency.
FATCA Filing Accuracy Campaign. Focuses on entities that are required to report non-U.S. assets held by their U.S. account holders and substantial U.S. owners under FATCA, but do not meet all of their compliance responsibilities. Noncompliance may result in termination of FATCA status in addition to other potential penalties.
Offshore Private Banking Campaign. Focuses on noncompliance related to failure to report income generated and information reporting associated with offshore banking accounts. The Service will also review individual FATCA compliance, by reconciling FATCA records, including those received under intergovernmental agreements (IGAs), with U.S. domestic reporting. This includes information exchanged under Model 1 and 2 IGAs, such as identifying omissions (failure to disclose accounts), account holders with missing information (taxpayer identification numbers), account holders from pooled reporting under Model 2 IGAs. To start, the Service will address tax noncompliance through the examination and soft letter treatment streams.
Offshore Service Providers Campaign. Focuses on U.S. taxpayers who engaged Offshore Service Providers that facilitated the creation of foreign entities and tiered structures to conceal the beneficial ownership of foreign financial accounts and assets, generally, for the purpose of tax avoidance or evasion. The treatment stream for this campaign will be issue-based examinations.
Form 1042 and 1042-S Compliance Campaign. Focuses on withholding agents that make payments of U.S. source fixed, determinable, annual, or periodical income to certain non-U.S. persons. It reviews whether withholding agents meet all of their compliance obligations. The Service addresses noncompliance and errors in this regard through a variety of treatment streams, including examination.
Loosely Filed Forms 5471 Campaign. Focuses on taxpayers loosely filing Forms 5471 by sending it to the IRS without attaching it to a tax return, partnership return, or exempt organization return. This is incorrect, and as such, this campaign seeks to improve compliance with the requirement to attach a Form 5471 to these returns. Where a taxpayer does not attach a Form 5471 to an original return, it must file an amended return with the Form 5471 attached.
Verification of Form 1042-S Credit Claimed on Form 1040NR Campaign. Focuses on verifying the amount of withholding credits or refund/credit elect claimed on Forms 1040NR, U.S. Nonresident Alien Tax Return, and determining whether the taxpayer reported the income correctly on Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding. The Service will not issue a credit or refund unless the amounts reconcile. It will address noncompliance through examinations, among other avenues.
Non-U.S. Service Entities Engaged in a U.S Trade or Business Campaign. Focuses on non-U.S. investors and whether they were subject to U.S. federal tax on effectively connected income from lending transactions engaged through a U.S. trade or business. Generally, non-U.S. investors who trade stocks and securities for their own account are not engaged in a U.S. trade or business under the safe harbor rule; however, this rule is not available to dealers in stocks or securities, including entities engaged in a lending business or to non-U.S. investors in partnerships engaged in such activities.