Reporting Nonresident Alien Interest in 2013; Meet my Twins

Written By JiJi Bahhur, Regulatory Compliance Counsel

With the New Year right around the corner, I thought it would be fitting to remind you all of the IRS’s Nonresident Alien Interest requirements.  Although the final regulations were effective as of April 19, 2012, the rule applies to payments of interest made on or after January 1, 2013. 

The final regulations require credit unions to report interest of $10 or more in the aggregate, paid to certain nonresident aliens, for that particular year.  That means at the end of 2013, credit unions will be required to report interest paid on or after January 1, 2013.  Credit unions are only required by the regulations to report payments made to residents of countries listed in IRS Revenue Procedures 2012-24, which was published contemporaneously with the final regulations.  However, to alleviate potential burden, credit unions may choose in the alternative to report interest paid to all nonresident aliens rather than just those that are residents of countries found on the list.   

The regulations require that reporting is conducted using the same form that is currently used to report interest payments made to nonresident aliens who reside in Canada.  IRS Form 1042-S, “Foreign Person’s U.S. Source Income Subject to Withholding,” can be located here.   

As mentioned before, the IRS published a list of countries that require reporting to the IRS where the interest meets the $10 or more criteria.  A credit union may rely on the permanent residence address provided on a valid Form W-8BEN to determine the country of residence, unless the credit union knows or has reason to know that the documentation is unreliable.  

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While I was out on leave, I received several emails asking about the birth of my twins – a boy and a girl.  Well, I’d like to introduce them to you all:  meet Kyse (rhymes with rice) and Ava, born August 20, 2012. 

Comments

[Peter]

Has the IRS ever clarified if "China" (presumably not the flatware) is suppose to be the "People's Republic of China" or the "Reupblic of China" aka Taiwan? There is a difference, afterall, and those countries REALLY care about that!

[Anthony Demangone (The old guy)]

Love those twins! Two more compliance officers on their way...

[Joyce]

You NAFCU folks sure know how to kick out some adorable sets of twins! What the heck is in your water - lol? Uh, Steve...you're next :-)

[JiJi Bahhur]

Hi Peter, the IRS's tax treaty page gives a listing of all countries the United States has a tax treaty with. If you click on "China," it will take you to a page with the actual tax treaty document with China. Those papers state that the treaty is with the "People's Republic of China." You can find the treaty documents here: http://www.irs.gov/Businesses/International-Businesses/United-States-Income-Tax-Treaties---A-to-Z.

[JiJi Bahhur]

Thanks to all for your kind compliments on my twins!

[Peter]

Thanks Jiji for doing all the "extra" research the IRS requires compliance officers to do to implement their "simple" regulation!