WASHINGTON—Last week, the Acting Director of IRS of Field Operations for the LB&I Foreign Payments Practice announced the IRS will launch a compliance campaign this summer focused on foreign financial institutions (FFIs) that are not satisfying their reporting obligations under the Foreign Account Tax Compliance Act (FATCA).
Speaking at a tax controversy forum at New York University, Kimberly Schoenbacher indicated that the IRS will be sending notices to FFIs that failed to file Forms 8966 (FATCA Report) reporting assets held in accounts by U.S. persons.
FFIs are generally required to file Forms 8966 if they are not in a jurisdiction that has entered into an intergovernmental agreement (IGA) with the Treasury Department or in a Model 2 IGA jurisdiction, Covington reported.
FFIs that fail to file the required form may result in the FFI losing its status as a participating FFI or Reporting Model 2 FFI. If an FFI loses its status and is treated as a nonparticipating FFI, it is subject to 30% withholding on payments of U.S. source FDAP income made to it, Covington said.
Schoenbacher’s warning last week was her second such warning in recent weeks regarding compliance failures in as many weeks, Covington said.