There are a number of forms generated by the Internal Revenue Service that are key to the proper implementation of its Information Returns Program. For this program to work successfully, banks and other financial institutions are required to file correct and complete information returns on a timely basis. This third-party reporting information is used by the IRS as confirmation for sources of income or deductions from taxable income. The key to the Information Returns Program is found in the proper obtaining and reporting of Taxpayer Identification Numbers (TINs), consisting of a nine digit code, that is either a social security number or employer identification number. The following is a list of IRS forms used in obtaining TINs from customers.
A related article contains a list of bank reporting requirements, including IRS information returns, is found in the NBA Compliance Handbook, Volume III, Lending section, “Internal Revenue Service: Bank Reporting Requirements” article.
FORM SS-4: APPLICATION FOR EMPLOYER IDENTIFICATION NUMBER
This form is Used for applications for an employer identification number (EIN) comprised of a nine digit number assigned to sole proprietors, corporations, partnerships, estates, trusts, and other entities for filing and reporting purposes.
FORM SS-5: APPLICATION FOR A SOCIAL SECURITY CARD
This form is used for natural persons born in the U.S. who have never had a Social Security number, a person who wants to replace a lost card or a person who has a name change. The form must be completed with documentation of age, citizenship and proof of identity.
FORM W-7: APPLICATION FOR IRS INDIVIDUAL TAXPAYER IDENTIFICATION NUMBER
IRS regulations establish procedures for requesting a TIN for certain foreign or alien individuals for whom a Social Security Number (SSN) is not available. The TINs issued to foreign or alien taxpayers are referred to as “IRS individual taxpayer identification numbers” or “TINs”. An “alien individual” is an individual who is not a citizen or native of the United States. Examples include: nonresident alien individuals not eligible for an SSN who are required to file a U.S. tax return or who are filing a U.S. tax return only to claim a refund; nonresident alien individuals not eligible for an SSN who elect to file a joint U.S. tax return with a spouse who is a U.S. citizen or resident; U.S. resident aliens who file U.S. tax returns and who are not eligible for an SSN; alien individuals claimed as dependents on U.S. tax returns and who are unable or not eligible to obtain an SSN; and alien individuals claimed as spouses for exemptions on U.S. tax returns and who are not eligible to obtain an SSN.
Banks may serve as “acceptance agents” which provide applications for an ITIN. To qualify as an acceptance agent, the bank must establish, to the satisfaction of the IRS, that it has adequate resources and procedures in place to comply with the terms of an agreement that it must enter into with the IRS.
FORM W-8: CERTIFICATE OF FOREIGN STATUS
The purpose of the W-8 forms, as described below, is to provide a statement to a payer, mortgage interest recipient, middleman, broker or barter exchange that the person filing the form is a nonresident alien individual, foreign entity or exempt foreign person not subject to certain U.S. information return reporting or backup withholding rules.
W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding – Any foreign person or organization that is the beneficial owner of income should use this form, whether or not it is claiming a reduced rate of, or exemption from, withholding. This form is also used when a payee may claim an exemption from domestic information reporting as a foreign person or to establish that certain income is not effectively connected with the conduct of a U.S. trade or business. Generally, a TIN is required for a beneficial owner that is a foreign trust or estate and for any other beneficial owner that is claiming benefits under an income tax treaty. When provided without a TIN, the W-8BEN generally remains in effect from the date it is signed until the last day of the circumstances making any information on it incorrect. If the form is provided with a TIN, it is valid as long as the information on it remains unchanged.
W-8ECI, Certificate of Foreign Person’s Claim for Exemption from Withholding on Income Effectively Connected With the Conduct of a Trade or Business in the United States – A person or foreign organization that is the beneficial owner of income that is effectively connected with the conduct of a trade or business within the U.S. should use Form W-8ECI. The form must be provided with a TIN and generally remains in effect until the last day of the third succeeding calendar year or until a change in circumstances makes it incorrect.
W-8EXP, Certification of Foreign Government or Other Foreign Organization for United States Tax Withholding – A foreign government, international organization, foreign central bank of issue or foreign tax-exempt organization should use Form W-8EXP to establish foreign status, claim that the person is the beneficial owner of the income and, if applicable, claim a reduced rate of, or exemption from, withholding. A Form W-8EXP that is provided without a TIN generally remains effective from the date it is signed until the last day of the third succeeding calendar year. If furnished with a TIN, it remains effective until a change in circumstances makes any of the information on it incorrect. A TIN is required if the beneficial owner is claiming an exemption based solely on a claim of tax-exempt status under § 501(c) or private foundation status.
W-8IMY, Certificate of Foreign Intermediary, Foreign Partnership, orCertain U.S. Branches for United States Tax Withholding – An intermediary foreign person or organization should use Form W-8IMY if acting as a custodian, broker, nominee, trustee or executor, or other type of agent for another person.
FORM W-9: REQUEST FOR TAXPAYER IDENTIFICATION NUMBER AND CERTIFICATION
Banks and other persons who are required to file an information return with the IRS must obtain a correct TIN to report income paid, real estate transactions, mortgage interest paid, acquisition or abandonment of secured property, cancellation of debt, or contributions made to an IRA. This form is used to give the correct TIN to the person requesting the TIN and, when applicable, certifies that the TIN given is correct (or awaiting TIN), certifies that the W-9 filer is not subject to backup withholding or that the W-9 filer claims an exemption from backup withholding if an exempt payee. Form W-9 serves as a representation of U.S. status and should only be furnished by a U.S. person (including a resident alien). Part III, Number 3 which states: “I am a U.S. person (including a U.S. resident alien).” A copy of Form W-9 may be downloaded from the IRS web site: http://www.irs.gov/pub/irs-pdf/fw9.pdf?portlet=3. Note: Some bankers have asked if they should be certifying TINs with loans? IRS regulations require a financial institution to obtain the proper TIN on its loans, but there is no requirement that the customer certify the TIN. Generally, the customer has a “vested interest” in making sure that his or her TIN is noted because the customer will want all interest paid to be correctly reported to the IRS. Paragraph 5 of the 1098 instructions discusses the issue of verification.
NOTICE 972 CG: RESPONSE PAGE TO NOTICE OF PROPOSED CIVIL PENALTY
A response to a Notice 972 CG must be submitted to the IRS within 45 days from the date on the Notice. The response page is to be completed by the bank showing whether it agrees – totally or in part – with the IRS proposed penalty. For a penalty to be waived, an explanation showing reasonable cause must be submitted.