MINNEAPOLIS, April 16, 2014 /PRNewswire/ -- While the start of the reporting mandate of the Foreign Account Tax Compliance Act (FATCA) approaches, the IRS announced a final, completely revamped version of the Form 1042-S for 2014. The 1042-S is a tax information return that is provided to foreigners who earn income in the U.S. Given the extent of the changes, completing the form will become significantly more complicated and generate new challenges for businesses supplying 1042-S returns to customers or vendors (recipients).
"The complete reworking of the form to accommodate the changes to nonresident alien (NRA) reporting under FATCA means that you have to [report] under the recipient's new status codes and exemption codes under both NRA rules and FATCA," said Jeff Cronin, vice president of product strategy for Convey Compliance Systems Inc. "This new requirement along with the new W8-BEN and W8-BEN-E requires you to know more about your recipient as well as new rules around transaction types."
Changes and additions to Form 1042-S
On the final 2014 Form 1042-S, only three boxes - Boxes 1, 2 and 7 - were unchanged. All other boxes were altered, including 27 that were renumbered and 21 that were added. Renumbered boxes require time and effort remapping data, and new boxes will require the collection and processing new data. The new required information includes payment recipient's account number, date of birth, foreign taxpayer identification number, payments subject to Chapter 4 (FATCA requirements) and tax assumed by withholding agent.
"New requirements to collect and report more data than ever before on activity by nonresidents will mean both more volume of 1042-S reporting and more complexity as well," he said. "It will be important that businesses have systems that automatically validate data against the new 1042-S reporting rules to guarantee that you have met the requirements of compliance."
Convey offers a range of comprehensive solutions and services that can help financial services organizations remain compliant and avoid penalties related to FATCA and NRA reporting, including a cloud-based platform for meeting reporting obligations. Tax reporting remains a complex task, and the recent changes to Form 1042-S don't make the endeavor easier. Luckily, however, Convey is available to assist.
SOURCE Convey Compliance Systems Inc.