Daily Tax Update - June 27, 2014: IRS Issues Updated Qualified Intermediary Agreement Under FATCA

IRS Issues Updated Qualified Intermediary Agreement Under FATCA:  The IRS issued Revenue Procedure 2014-39, updating previous guidance for entering into a qualified intermediary (QI) withholding agreement with the IRS under Treas. Reg. § 1.1441-1(e)(5) to reflect the enactment of FATCA and the related regulations under chapters 3, 4 and 61, and section 3406 of the Internal Revenue Code.  The revenue procedure includes revised QI agreement provisions that apply to any QI agreement with an effective date on or after June 30, 2014.  The revenue procedure also provides new procedures for prospective and existing QIs to obtain a chapter 4 FATCA status and apply for a new or renewed QI agreement.

IRS Releases Final Instructions to FATCA Reporting Form 1042-S:  The IRS today released final instructions to Form 1042-S, modified to accommodate reporting of payments and amounts withheld under FATCA.  Form 1042-S is used by withholding agents, and certain other payers, to report payments to foreign persons of certain amounts from US sources, including fixed or determinable annual or periodical (FDAP) income and foreign reportable payments paid by participating foreign financial institutions.  When a financial institution reports a payment made to its financial account, Form 1042-S requires the reporting of additional information about a recipient of the payment, such as the recipient's account number, date of birth, and foreign taxpayer identification number, if any.  For withholding agents, intermediaries, flow-through entities, and recipients, when the payment reported is a withholdable payment, Form 1042-S also requires that the chapter 4 FATCA status be reported according to codes provided in the instructions.

United States and China Reach Agreement in Substance Regarding FATCA:  The Treasury Department has added China to its list of jurisdictions that have reached agreement in substance to enter into a Model 1 FATCA intergovernmental agreement. 

The list of jurisdictions can be accessed here

IRS Issues 2014-17 Strategic Plan:  The IRS issued its four-year strategic plan today, which lays out the IRS’s “primary goals and objectives” through 2017.  The plan describes how the IRS anticipates that it will “ensure high performance in a more streamlined footprint of work” in the face of “the challenge of declining resources.”  The plan focuses on high-level objectives, such as investments in workforce and technology, greater involvement of stakeholders ranging from tax practitioners to software providers to community coalitions, improved customer service, and anti-fraud efforts.

The strategic plan can be accessed here.