The implementation of the Foreign Account Compliance Act (FATCA) has presented new operational demands for U.S. and foreign financial institutions. As such, many of these organizations have ranked FATCA tax reporting obligations as a high priority.
This sentiment was revealed during a recent webinar hosted by Convey Compliance’s Vice President of Product Strategy Jeff Cronin and EY’s Financial Services Partner Neil Bromberg. During the webinar, an international audience of more than 400 attendees was asked, “On a scale from one to 10, how urgent would you rank FATCA reporting as a priority for your organization?” All respondents gave an answer of eight or higher.
Given the 30 percent withholding penalty on all U.S. source income for recalcitrant accounts, it is understandable that FATCA compliance is a major concern for most organizations. July 1 is the start date for mandatory reporting, which means FFIs have little time left to prepare.
The IRS recently announced in Notice 2014-33 that 2014 and 2015 will be transitional relief periods for FFIs. This will allow FFIs time to create an internal strategy for their FATCA reporting. However, these institutions are still required to put forth a “good-faith” effort during this transitional relief period.
“Many organizations view the recent IRS changes as yet another delay in the implementation of the FATCA reporting program,” Cronin said. “In reality the relief is more of a realization that mistakes will be made in the early going and that additional time and effort will be required to correctly implement a compliance program of this magnitude. The IRS has provided relief for these situations but only for those organizations who can demonstrate progress in their compliance efforts. This situation is reflected in our survey result and in the importance that FATCA compliance programs are receiving in the marketplace.”
To help expedite the process of implementing a FATCA reporting solution, many organizations are seeking the expertise of a third-party provider. Third-party tax information reporting services can provide technology and documented processes to demonstrate a “good-faith” effort for FATCA compliance, while also offering a platform to efficiently manage evolving multinational reporting requirements.