Comply Updates

With the 2021 October Revisions now final for the Forms W-8BEN, W-8BENE, W-8IMY and W-8ECI, we have produced a series of form walkthrough videos explaining all the new changes. You can find them over at our brand new Comply Corner which houses all of our Comply Catch-Up’s, along with informative videos and other useful materials.

With these new Forms now available, the team at Comply have been working hard to design and implement the forms and logic into our Comply Admin and Comply eForms solutions. These new updates will be available next month to all our current and future clients.

With year-end fast approaching, we have tools and resources prepared to help make this reporting season as easy as possible. Follow us on LinkedIn for these year-end updates and more surprises throughout the holiday season!

Key Updates and Reminders

• On November 5, 2021, the House of Representatives passed a $1.2 trillion infrastructure bill. The Infrastructure and Jobs Act includes information reporting requirements for brokers and digital assets. This impacts the broker reporting rules in Internal Revenue Code (IRC) sections 6045, 6045A, and 6050I and their corresponding regulations. For a list of changes, please click here to read our prior write-up on the infrastructure bill.
  • The Infrastructure and Jobs Act provided a range of provisions that look at bringing digital assets and cryptocurrencies in scope for purposes of Information Reporting and Withholding. This includes a definition of “digital assets” and redefining the definition of “broker”.
  • With Form 1099-B reporting being brought into scope for crypto companies, it is important to consider your Form W-8/W-9 collection and validation obligations.

• On November 8, 2021, the IRS published Revenue Procedure 2021-45, which includes information return penalties for tax year 2022. We have prepared a chart that includes the increases from tax year 2020 to tax year 2021 and finally the new penalties adjusted for inflation for reporting 2022 information in the year 2023. Click here for our full report!

• On November 9, 2021, the IRS published a third early release of DRAFT Form W-4R, Withholding Certificate for Nonperiodic Payments and Eligible Rollover Distributions – primarily as a companion to the DRAFT Form W-4P and for taxpayer review and feedback.

 The coversheet to this form includes a note that the IRS published a fourth early release of DRAFT Form W-4P,   Withholding Certificate for Periodic Pension or Annuity Payments on November 5, 2021, although this form   has not been available.

• On November 15, 2021, the IRS announced the availability of its Form 1042-S Data Integrity Tool. This software program provides a no-cost standalone tool to withholding agents that will assist them in complying with their Form 1042-S information reporting and withholding responsibilities. Withholding agents will use the tool in order to perform a quality review of data prior to submission to the IRS. Although use of the tool will not change any obligations to file Forms 1042-S with the IRS and furnish a copy of the Form 1042-S to the payee, the IRS will consider whether a withholding agent is using the tool when making enforcement and penalty determinations.

• On November 16, 2021, the IRS published DRAFT 2021 Instructions for Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons. The DRAFT Instructions include subtle changes and updates for the 2021 tax year. One clarifying edit to Line 63d is that it now states that the amount on Line 63d should equal the sum of all amounts reported in box 11 of all Forms 1042-S sent to recipients. Check out the DRAFT 2021 Instructions here.

• On November 18, 2021, the IRS published the final updated Form W-8IMY (Rev. October 2021). The final instructions were previously posted on November 3, 2021. Check out the updated form here and the updated instructions here.

FATCA / CRS Key Dates & Reminders – Select Jurisdictions

IRS

• On November 17, 2021, the IRS reminded users that the Public Key for FATCA filing will expire soon. There is a new key that the IRS will replace on December 3, 2021. After that date, users will have to download the new IRS Public Key from the International Data Exchange System (IDES). When purchasing a new digital certificate or replacing one that is about to expire, users must remember that IDES recognizes and accepts only the digital certificates issued by IRS approved Certificate Authorities (CAs).

OECD

• On November 17, 2021, the Organisation for Economic Development and Cooperation (OECD) published its 2021 Peer Review of the Automatic Exchange of Financial Information (AEOI). In it, the OECD sets forth three chapters in order to present its conclusions of the 2021 peer reviews of the legal frameworks each participating jurisdiction has in place to implement the AEOI standard. The OECD has also prepared a number of helpful charts and figures to demonstrate the details in the report.

Bahamas

• The Bahamas Competent Authority published an updated list of CRS reportable jurisdictions. The Republic of Korea has been added to the list. Click here to see a complete list of jurisdictions.

Bermuda

• The Bermuda Ministry of Finance (the “Ministry”) published an updated Tax Information Reporting Portal User Guide Version 6.0. The changes to the User Guide include:
  • New Section 4.6 Creating and Submitting a CRS Compliance Certification Form
  • Updated Section 14 Deactivating a Reporting Entity
• The Ministry also published an updated Annual CRS Compliance Certification Form Guidelines Version 3.0. The changes to the Guidelines include:
  • Updated Glossary
  • Updated Section 1.4 Timing
  • New Section 4.3 Trustee-Documented Trusts (TDTs)