This past month we co-hosted our first partnership event with Sovos. The partnership between Comply Exchange and Sovos will provide the first and only end-to-end tax information reporting and withholding offering on the market! These integrated solutions will reduce costs and effort, while mitigating the risk and liability associated with noncompliance. For more information on the Comply Exchange and Sovos partnership, check out the official press release here.
Our partnership program enables us to collaborate with a multitude of organisations allowing us to provide market leading U.S. Information Reporting and Withholding solutions. Documentation collection and validation is generally best suited to work alongside onboarding applications, AML/KYC collection and directly in line with year-end reporting solutions. We are here to help make your customer lifecycle as seamless and centralized as possible. Enhance your product suite today by integrating with the Comply ecosystem.
Mark your calendars as we will be sponsoring this year’s Tax Reporting & Withholding Conference from May 2nd – 4th. You can register here now if you haven’t already!
Key Updates and Reminders
Forms 1042-S are due to be filed and furnished by 4/14/2022, if you filed an extension of time with the IRS.
Forms 1042, if an extension of time was requested to the IRS by submitting Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns, are due by 9/15/2022. Please note that Form 7004 does not extend the time for payment of tax.
On February 28, 2022, the IRS published Instructions for Form 941 (Rev. March 2022), Employer’s QUARTERLY Federal Tax Return. Among the new updates related to COVID-19, social security and Medicare tax for 2022, there is an interesting note regarding deposit schedules.
- This applies to filers that became a semi-weekly schedule depositor in 2022 under the $100,000 Next-Day Deposit Rule only because of the relief provided in Notice 2021-65 regarding the early termination of the employee retention credit for the fourth quarter of 2021. For more information on the changes, click here.
On March 3, 2022, the Internal Revenue Service released Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, for use in 2022.
- Changes include the updates to Form 1042-S Income and Chapter 3 Status Codes, a new Limitation on Benefits Code, changes to Forms W-8BEN, BEN-E, ECI, and IMY, changes to Forms 8288 and 8288-A and a new form for reporting under section 1446(f)(4) that is under development! Check out the 2022 Pub. 515 here.
On March 21, 2022, the Internal Revenue Service published an important Covid Tax Tip 2022-43 regarding incorrect or missing Forms W-2 or 1099. Filing season is here and taxpayers must be sure that they include all of their tax documents prior to submitting their tax returns.
- By the end of January 2022, most taxpayers should have received their Form W-2, Wage and Tax Statement, Form 1099-MISC, Miscellaneous Income, Form 1099-NEC, Nonemployee Compensation, Form 1099-INT, Interest, among other forms related to certain government payments, economic impact payments, and child care credit payments. If they have not received a Form W-2 or 1099 where they should have, then they should contact their employer, payor, or issuing agency, and request the missing documents. The same rule applies where taxpayers believe that their Form W-2 or 1099 is incorrect.
- Taxpayers that are not able to obtain these forms must file their tax return on time or request an extension of time to file. In certain instances, they may need to use Form 4852, Substitute for Form W-2, Wage and Tax Information, or Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit Sharing Plans, IRAs, Insurance Contracts, Etc. Taxpayers use these forms to estimate the wages or payments made to them and any taxes withheld. By filing Form 4852, taxpayers are able to report this information on their federal tax return and avoid filing an incomplete or amended return.
- When taxpayers receive the missing or corrected Form W-2 or Form 1099-R after filing their return and that information is different from the previous estimate, then they must file Form 1040-X, Amended U.S. Individual Income Tax Return.
Check out the Tax Tip here.
Beginning in calendar year 2022, crowdfunding websites or their payment processors may be required to report certain distributions of money raised if the contributor receives goods or services for its contribution and the amount distributed meets Form 1099-K reporting thresholds. For calendar years 2022 and later, the threshold for filing Form 1099-K will be met where the total of all payments distributed to a person exceeds $600 in gross payments, regardless of the number of transactions or donations. You can find out more information here.
On March 28, 2022, President Joe Biden released the FY2023 Budget and the U.S. Department of the Treasury released a document to explain the Administration’s revenue proposals included in the budget, called the General Explanations of the Administration’s FY2023 Revenue Proposals, or “Greenbook.”
- In it, there is a proposal for certain financial institutions (FIs) and digital asset brokers to report information for purposes of exchanging that information with other countries under the Foreign Account Tax Compliance Act (FATCA) and Intergovernmental Agreements (IGAs). Find out more here.
- One proposal is related to electronic filing of forms and returns with the intention of supporting the broader goals of improving IRS service to taxpayers, enhancing compliance, and modernizing tax administration. The proposal would require electronic filing for certain returns.
- The proposal would also treat all information returns subject to backup withholding the same way, such that the IRS would be permitted to require payees of any reportable payments to furnish their Taxpayer Identification Numbers to payors under penalty of perjury. The proposal would be effective for payments made after December 31, 2022.
We will continue to add context around the changes, but check out the General Explanations of the Administration’s Fiscal Year 2023 Revenue Proposals here.
FATCA / CRS Key Dates & Reminders – Select Jurisdictions
On March 15, 2022, the Internal Revenue Service (IRS) published a 2022 revision of Publication 5190, International Data Exchange Services (IDES) User Guide (02-2022). Pub. 5190 has not been updated since July 2020. In the 2022 revision, we see the following changes:
- Section 2.4, System Availability. Updated supported browser section to include only Apple Safari (only on macOS), Google Chrome, Microsoft Edge, and Mozilla Firefox.
- Sections 13.1-13.6, IDES Reports. Updated Items.
- Section 13.7.4, Examples of Transmission Alerts. Updated Model 1 Option 2, RC030, Downloaded by the Host Country Tax Authority (HCTA) Reviewer. Here, the reviewer (sender country’s HCTA) must MOVE the file made available in the pending folder based on the expected action of .approved or .rejected. The update changes ‘rename the file’ to ‘move the file.’
- Appendix F, IDES Testing Window. Updated to state that there is one annual open test window per year regardless of whether there have been changes to the FATCA Reporting process.
Check out the 2022 revision of Pub. 5190 here.
On March 22, 2022, the Organisation for Economic Cooperation and Development (OECD), published a public consultation document regarding a new global tax transparency framework for reporting and exchange of crypto-asset information and proposed amendments to the Common Reporting Standard (CRS).
- This is due to the increase in use of crypto assets, which may be exploited to undermine the CRS and other global initiatives. The proposals seek to provide provisions that improve due diligence procedures and reporting outcomes.
- There will be a public consultation meeting at the end of May 2022. In the meantime, the OECD invites interested parties to send comments by April 29, 2022, by e-mail to email@example.com.
- Check out the OECD Public Consultation Document here and the OECD notice here.
On March 23, 2022, the Internal Revenue Service (IRS) published FATCA Certification FAQ number 22 regarding how to submit a FATCA certification if the registration status has been changed to under review with a message indicating “For more information contact the Treasury Department Office of Foreign Asset and Control (OFAC).” In this situation and at this time, no FATCA certification will be able to be submitted. The financial institution will no longer have access to the periodic certification and certification of pre-existing accounts link. In the event that the account is placed back into registration approved status, then the FI will receive a message on its message board informing them of the registration status change to approved. At this time, the FI will have access to submit the applicable certification or certifications. If this happens prior to or subsequent to the certification date, then the FI will receive additional time to submit FATCA certifications.
Check out FATCA Certifications FAQ 22 here.
United States (FATCA):
- Form 8966 is required to be filed for the 2021 calendar year on or before March 31, 2022. A Reporting Model 2 FFI must file Form 8966 on the same filing dates that apply to a Participating Foreign Financial Institution (PFFI), unless a different reporting date is specified in an applicable Model 2 Intergovernmental Agreement.
- Important note: Responsible officer certifications are due by July 1, 2022, for the FATCA certification period ending December 31, 2021.
- The Bahamas Competent Authority announced that the AEOI portal will be open for FATCA, CRS, and CbC registration and submissions starting Monday, July 18, 2022, and will close on Friday, August 26, 2022.
- Bermuda FIs must report the details of their 2021 FATCA and CRS accounts to the Ministry by May 31, 2022.
- Important note: In 2022, the Ministry will begin issuing notices to certain Bermuda FIs. These notices will require an Independent CRS Compliance Review (“CRS Review”). Registered Primary Users for Bermuda FIs should be on the lookout for these e-mailed notices. The Ministry of Finance also published CRS Independent Compliance Review FAQs to assist FIs in understanding the activities planned by the Ministry.
- Here is the link to a helpful Bermuda AEoI site and you can find the list of Bermuda CRS Reportable Jurisdictions here.
British Virgin Islands (BVI):
- BVI FIs must report the details of their 2021 FATCA and CRS accounts to the International Tax Authority by May 31, 2022.
- You can access some helpful BVI AEoI sites here and here. You can find the list of BVI CRS Reportable Jurisdictions here.
- On March 10, 2022, the Canada Revenue Agency (CRA) published revisions to its Guidance on the Canada-U.S. Enhanced Tax Information Exchange Agreement (the Agreement). This guidance is meant to assist financial institutions (FIs) with their due diligence and reporting obligations under the Agreement.
- Canadian FIs must report the details of their 2021 FATCA and CRS accounts to the Canadian Revenue Authority by May 1, 2022.
- Here is a link to a helpful Canada AEoI site and you can find the list of Canada CRS Reportable Jurisdictions here.
- Cayman FIs must report the details of their 2021 FATCA and CRS accounts to the Department of International Taxation and Cooperation by July 31, 2022.
- Here is a link to a helpful Cayman Islands AEoI site and you can find the list of Cayman CRS Reportable Jurisdictions here.
- On March 10, 2022, the States of Guernsey Revenue Service published Supplementary FAQs 1.0 Compliance Information Notice which consolidates FAQs that are relevant to the practical administration of the provisions contained in section 171F of the Law.
- Irish Financial Institutions must report the details of their 2021 FATCA and CRS accounts to Revenue by June 30, 2022.
- Here is a link to a helpful Ireland AEoI site and you can find the list of Ireland CRS Reportable Jurisdictions here.
- On March 8, 2022, the Government of Jersey published practical guidance notes to assist Financial Institutions submitting FATCA and CRS reports to Jersey. The guidance replaces previous practical guidance issued and applies in respect of all FATCA and CRS reports submitted to Jersey from 8 March 2022 until further notice:
- On 14 March 2022, the Luxembourg tax authorities announced some changes in the way Passive Non-Financial Foreign Entities (“NFFEs”) with US Controlling Persons are reported under FATCA. The Luxembourg tax authorities intend to update the Luxembourg FATCA reporting requirements whereby a controlling person who may not have a US TIN for valid reasons could be reported with their foreign TIN rather than with a US TIN, or with ‘NA’ in the absence of a foreign TIN.
- The deadline to file FATCA and CRS reports with respect to the calendar year 2021 is set as 30 June 2022.
- On March 17, 2022, in an effort to inflict economic pain on President Putin and his regime, the United Kingdom (UK) suspended the exchange and sharing of tax information with Russia and Belarus under the UK’s exchange of information agreements. This means that Russia will not receive information under an Exchange of Information on Request, the Common Reporting Standard, or Country-by-Country Reporting. Check out the UK announcement here.
- With various automatic exchange of information deadlines approaching in the next months, we may see more countries choosing to suspend information sharing with Russia, thereby making it more difficult for Russia to collect taxes from its tax residents through these programs and agreements.
- UK FIs must report the details of their 2021 FATCA and CRS accounts to HMRC by May 31, 2022.
- Here is a link to a helpful UK AEoI site and you can find the list of UK Reportable Jurisdictions here.