IRS Form 8966

What is Form 8966

FATCA or The Foreign Account Tax Compliance Act (FATCA) was enacted to deter offshore tax evasion of U.S. taxpayers. Forming part of the IRS initiative for international data exchange, certain payments to foreign financial institutions (FFIs) or certain nonfinancial foreign entities (NFFEs) made after June 20, 2014, are subject to 30% tax withholding unless the FFI or NFEE registers with the IRS. Upon registration to the IRS, the FFI or NFEE agrees to provide information on its U.S. accounts, including accounts of foreign entities with substantial U.S. owners.

Who Files Form 8966

Foreign Financial Institutions and Non-Financial Foreign Entities in the U.S. are required to file Form 8966.

FFIs required to file this form include banks, mutual funds, investment entities, and certain types of insurance companies. FFIs exempted from Form 8966 include most government entities, most non-profits, some small and local financial entities, and some retirement entities are a bit more complicated and must first determine if they are considered an FFI or NFFE for FATCA reporting requirements.

Foreign trusts and private investment companies which are Non-U.S. trust structures, and are professionally managed and have mainly investment income will usually be considered FFIs that are subject to FACTA reporting requirements. If not professionally managed, these structures will likely be considered NFFEs.

For tax purposes, an NFFE is defined as any foreign entity that is not an FFI. An NFFE usually holds assets for itself and not for others. NFFEs that do not provide information about their U.S. owners may be subject to withholding. Active NFFEs, territory entities, and publicly traded corporations that are the beneficial owner of the payment are not subject to these rules.

In most cases, Form 1042-S will also be required to report withholdable payments to NFFEs.

When to File Form 8966:

Form 8966 used for the FATCA reporting is due by March 31st of the year following the reporting calendar year.