Updated FAQs under FATCA regime; penalty relief for withholding agents
Updated FAQs under FATCA regime; penalty relief
The IRS today issued a release announcing that a set of “frequently asked questions” (FAQs) has been updated to reflect extended penalty relief for 2020 and 2021 for situations when a withholding agent withholds and reports on Forms 1042 and 1042-S by September 15, 2021 (for the 2020 calendar year), or September 15, 2022 (for the 2021 calendar year), a dividend equivalent payment made with respect to a derivative referencing a partnership.
Read updated FAQ (Q23) (March 12, 2021) as found on the “FATCA - FAQs General” webpage, under the topic: “General Compliance.”
Text of the updated FAQ
Q23. For calendar years 2017 through 2021, will a withholding agent be subjected to interest, penalties, or additions to tax for failing to withhold and report by March 15 of the subsequent year, on a payment of a dividend equivalent made with respect to a derivative referencing a partnership?
For calendar years 2017 through 2021, a withholding agent will not be subject to interest, penalties, or additions to tax with respect to a dividend equivalent payment made with respect to a derivative referencing a partnership provided that the withholding agent withholds and reports on Form 1042 and Form 1042-S with respect to the payment by September 17, 2018 (for the 2017 calendar year), September 16, 2019 (for the 2018 calendar year), September 15, 2020 (for the 2019 calendar year), September 15, 2021 (for the 2020 calendar year), or September 15, 2022 (for the 2021 calendar year). In a case in which a withholding agent withholds after March 15 of the subsequent year, the withholding agent should file a Form 1042 (if the dividend equivalent payments are the only payments reportable for the year) or an amended Form 1042 by September 17, 2018, September 16, 2019, September 15, 2020, September 15, 2021, or September 15, 2022 (as applicable), and write “Dividend Equivalent—Partnership” in the top center portion of the 2017, 2018, 2019, 2020, or 2021 Form 1042. The withholding agent should also file Form(s) 1042-S or amended Form(s) 1042-S by the applicable date noted above with respect to the dividend equivalent payment. Finally, when depositing the tax withheld for a dividend equivalent payment made in 2017, 2018, 2019, 2020, or 2021 the withholding agent must designate the payment as being made for the applicable calendar year in accordance with the instructions to Form 1042.
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