This article applies to foreign financial institutions (FFIs) that are required to submit a U.S. taxpayer identification number under the Foreign Account Tax Compliance Act. This article refers to the recently updated IRS procedure to resolving errors in format for submitting a U.S. taxpayer identification number.

Sometimes foreign financial institutions that are required to submit a U.S. taxpayer identification number under the Foreign Account Tax Compliance Act do so in the wrong format. This brief article discusses a recently updated IRS procedure to resolve such an issue.

Reporting Rules Have Been Updated

Mistakes happen. Sometimes foreign financial institutions (FFIs) that are required to submit a U.S. taxpayer identification number (TIN) under the Foreign Account Tax Compliance Act (FATCA) do so in the wrong format. The IRS recently updated the procedure to resolve such an error.

Congress intended the FATCA to improve U.S. taxpayer compliance with reporting foreign financial assets and offshore accounts. The Hiring Incentives to Restore Employment Act of 2010 added Chapter 4 to the Internal Revenue Code. In general, Chapter 4 requires withholding agents to withhold and deduct 30% from certain payments made to a foreign financial institution (FFI) unless the institution has entered into an “FFI agreement” with the United States to, among other things, report certain information regarding U.S. accounts.

The International Compliance Management Model (ICMM) is the IRS system that ingests, validates, stores and manages FATCA information — including FATCA reports received both electronically and on paper from FFIs. An FFI sends information about its account holders, including a U.S. TIN if the account holder has one. The information submitted, including the TIN, must be submitted in a specific format. The ICMM will notify the FFI if the TIN isn’t in the required format.

Before this latest update, the IRS said in an FAQ that, if the ICMM replies to an FFI that a TIN isn’t in the specified format then, “If [the FFI] has confirmed that the Account Holder is not required to have a U.S. TIN in the agreed upon format, then the [FFI] does not need to re-file to correct this specific error.”

In a revised FAQ, the IRS now says that, if the ICMM replies to an FFI that a TIN isn’t in the specified format then:

If [the FFI] has confirmed that the Account Holder is not required to have a U.S. TIN in the agreed upon format, the [FFI] should enter their own country code in the “TIN Issued by” element and include “NA” (indicating “Not Available”) for the TIN element. If the [FFI] has already submitted the record and received an error notification for the TIN element, then the [FFI] does not need to re-file to correct this specific error.

The agency hopes the change will improve reporting efficiency. For further information or explanation, contact your CPA.

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