We are still waiting for Foreign Account Tax Compliance Act—FATCA—and Common Reporting Standard—CRS—reporting to be business as usual, but the landscape continues to evolve with regulators providing new guidance that is focused on accurate reporting and new compliance requirements. Here are a few tips that can help financial institutions prepare for the upcoming reporting season.
Data quality continues to be a primary focus of tax authorities. Many of our clients have received notifications regarding missing Taxpayer Identification Numbers, or TINs, and—or in some cases—dates of birth.
- When facing this issue, follow the IRS FAQ on TIN codes for missing TINs. The IRS FAQ provides that a financial institution may use these TIN codes that will explain the reason for missing TINs. Using these TIN codes will address, to some extent, IRS inquiries as to why TINs are missing. Further, many jurisdictions are requiring the use of these TIN codes.
- Where there are missing TINs and—or in some cases —dates of birth, financial institutions should ensure that they are documenting their actions to follow up with clients.
Confirm account balance information. Due to a lack of final information before the filing deadline, some financial institutions have reported the total value of their financial accounts as zero. However, we have seen the tax authorities question the use of zeros. Therefore, a better approach may be to use estimates based on a reasonable determination.
Several jurisdictions have implemented CRS compliance form reporting that requires inclusion of information not disclosed on CRS reports. We expect additional jurisdictions to implement this type of reporting in future years. Financial institutions should structure and maintain their data in a format that allows them to retrieve reportability determinations and other information that supports their reporting conclusions.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Tara Ferris is a principal in the financial services office of EY Americas. In this role, Ferris advises multinational financial institutions and asset managers on customer tax reporting and withholding.
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