Foreign Financial Institutions Must Renew Agreement With IRS
The Internal Revenue Service (IRS) is not relaxing its crackdown on the proper taxation of foreign financial accounts. Part of the agency’s efforts include requiring foreign financial institutions (FFIs) to provide the agency with information about persons from the United States that hold accounts within their institutions.
The agency recently announced that the process required for these FFIs to register with the agency has changed.
Why do foreign financial institutions register with the IRS? FFIs are required to report information to the IRS on accounts held by U.S. taxpayers. The requirement is part of the Foreign Account Tax Compliance Act (FATCA). As part of compliance efforts, the FFI must register with the FATCA FFI Registration system.
Institutions that fail to register face steep penalties. These penalties translate to a 30 percent withholding tax on U.S. source payments.
How has the system changed? The online registration system was recently updated. According to a report by Accounting Today, the system now has additional fields for renewing the Foreign Financial Institution (FFI) agreement. These fields include an area to enter the renewal and submission dates. The new process also calls for information about the account home pages.
A failure to renew registration is taken seriously. The IRS will view registration as terminated for those institutions that qualify for renewal and fail to do so before July 31, 2017.
What happens to those who do not comply? As noted above, FFIs that do not comply face steep monetary penalties. Taxpayers who are accused of a failure to comply can face even more harsh consequences. In addition to civil penalties like monetary fines, the individual could also face criminal charges including potential jail time.
Those who are concerned that they may not be in compliance with current reporting requirements are wise to seek legal counsel. An experienced voluntary disclosure lawyer can provide counsel on the best way to come into compliance while mitigating the risk of penalties.