Convey responds to FATCA transitional relief for 2014 and 2015
MINNEAPOLIS, May 19, 2014 /PRNewswire/ — The IRS recently announced in Notice 2014-33 that it would regard 2014 and 2015 as a period of transitional relief for financial institutions complying with the Foreign Account Tax Compliance Act (FATCA). However, the IRS will continue to enforce the law and only grant penalty reprieve for those institutions that meet the “good faith” reporting criteria in compliance with FATCA. Notice 2014-33 does not , however, extend the effective dates of FATCA regulations.
“Since this announcement from the IRS, many financial institutions and other FATCA-impacted organizations are under the impression that FATCA is delayed for another year,” said Jeff Cronin, vice president of product strategy at Convey Compliance Systems, Inc. “However, this is not the case. FATCA reporting obligations are still in place for this year and penalties could be assessed for organizations that are unable to demonstrate positive progress on their FATCA reporting obligations.”
While the IRS has not provided a cumulative definition of a “good faith” effort for purposes of FATCA, Notice 2014-33 provides guidance for the factors that the IRS will take into account prior to assessing penalties. The IRS will consider whether reasonable effort was made to modify procedures for the documentation of account holders’ status during the transition period and to what extent the foreign financial institutions (FFIs) have attempted to identify and facilitate registration procedures for FATCA compliance. In the past, the IRS has determined “good faith” for identification, withholding and reporting on a case-by-case basis, taking into account all relevant facts and circumstances, including whether the payer acted within reasonable cause.
Therefore, financial institutions should use this period of transitional relief to continue to implement a FATCA solution, such as preparing internal operations and establishing a process to meet the new reporting requirements.
Given the complexity of the reporting, withholding and data privacy requirements, many organizations are struggling to understand the requirements and deal with the shear scope of their reporting obligations. With deadlines quickly approaching, seeking help from an experienced information reporting partner can help define a clear path to compliance and demonstrate the mandatory “good faith” effort for the IRS.