United States

Top 5 reporting and withholding actions to take before year-end

INSIGHT ARTICLE  | 

As we close 2019 and prepare to file information returns in January 2020, there are a few quick, but critical steps to take now to ensure that you are prepared:

1.    Review your structure and register entities that are foreign financial institutions (FFIs) as needed

New funds or entities launched, acquired or created during the calendar year that are FFIs in countries that have adopted the Common Reporting Standard or implemented FATCA will impact your filing obligations.

Steps and considerations:
  • Register new funds or entities launched during the calendar year that are FFIs
  • De-register FFIs that were liquidated, sold, or dissolved during the calendar year
  • Review your overall structure to confirm the filing obligations of entities in the group
Complete by: Dec. 1
 

2.    Review tax withholding certificates and refresh any expired forms as needed

Verify that the forms you have on file meet IRS requirements.  IRS Forms W-8BEN and W-8BEN-E are generally only valid for three years and should be reviewed and updated regularly.

Steps and considerations:
  • Request new W-8 forms from any vendors, customers, or investors with forms that are invalid, or more than three years old
  • Analyze forms on record to proactively determine lead time needed to request and receive forms before they expire
  • Financial institutions in countries that have adopted CRS or implemented FATCA must also collect self-certification forms
Complete by:    Dec. 15
 

3.    Submit any unfiled 1042, 1042-S, 1099, FATCA or CRS reports

The IRS has launched FATCA compliance and NRA withholding campaigns.

Steps and considerations:
  • Check out the IRS’ new procedures for filing delinquent information returns here
  • Determine whether making a voluntary disclosure to the IRS is appropriate for you (see alert)
  • If you’ve received a notice from the IRS consult your tax advisor to determine what options are available for penalty abatement
Complete by:    Dec. 31
 

4.    Respond to IRS notices and review messages on the FATCA portal

Tax controversies involving reporting and withholding issues including penalty assessments have increased significantly

Steps and considerations:
  • Check your FATCA message board and respond to any IRS notices or inquiries before Dec. 31.
  • Respond to all issues timely and track deadlines
Complete by: Dec. 31
 

5.    Evaluate the impact of changes and new developments to your 1099 and 1042 processes

The IRS has announced a new Virtual Currency Campaign, published a new 1099NEC form, and released final regulations under new section 6050Y requiring reporting of sales and acquisitions of certain life insurance policies.

Steps and considerations:
  • Reallocate resources now to handle new Jan. 31 due date of 1099 forms reporting nonemployee compensation
  • Request budget now to modify systems for new 1099-NEC form reporting starting in 2021
  • Train your employees or engage a third party service provider to handle filing any required Forms 1099-B reporting gains from virtual currency transactions
  • Develop procedures for tracking sales and acquisitions of reportable life insurance contracts now in order to prepare new Forms 1099LS and 1099SB as required under TCJA’s newly added section 6050Y 
Complete by:    Jan. 31
 

And one more action item to consider as you roll into the new year:

Perform a withholding tax assessment

Conducting a self-assessment to identify and remediate gaps in your processes for complying with reporting and withholding requirements before year-end ensures that you file accurate and complete returns and do not under or over withhold taxes next year.

Steps and considerations:
  • Your organization would likely benefit from a rapid assessment to identify quick hits with high risk for things that can be addressed now before year-end or within a short time-frame.
  • Identify high-risk business areas in your organization with processes impacting tax reporting and withholding obligations (such as accounts payable, onboarding, tax, or treasury)
  • Test the operating effectiveness of controls for collecting and reviewing tax withholding certificates, for identifying payments subject to reporting, and for timely withholding and depositing taxes
  • Develop a short-term plan to remediate prioritized gaps before year end or within 90 days
Complete by: Feb. 28

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