2014 brought many new forms and regulatory updates to the world of tax information reporting, and some of these changes will be pertinent during the 2015 tax season. Many organizations should review the new regulations to ensure compliance in 2015 and the following years.
Here is a look back at some of the big updates that came about in 2014:
IRS makes a rules on virtual currencies
During 2014, digital currencies such as bitcoin and Lite coin took off in popularity. Not only were individuals converting their funds into this new currency, but some individuals also received payment in this form.
Given the emerging nature of cryptocurrencies, the IRS wanted to get ahead of the trend and published Notice 2014-21 in April 2014 to provide guidance on how it would treat digital currencies for tax purposes. The agency said it considers virtual currencies to be property with a fair market value rather than currency. As such, companies that made digital currency payments are beholden to standard tax compliance requirements that come with other forms of payment.
IRS issues various new forms and changes
Throughout the past year, the IRS published several new tax forms, and many of these revisions included information relating to two laws that the IRS is gradually implementing. Here are examples:
- Affordable Care Act (ACA) reporting forms: Starting in the 2016 tax season, certain organizations will have to report to the IRS about their health insurance offerings under the health care law. The IRS designated a few new forms for the task, with draft versions appearing in July 2014 and draft instructions following in August 2014:
- Form 1095-A, Health Insurance Marketplace Statement
- Form 1095-B, Health Coverage
- Form 1094-B, Transmittal of Health Coverage Information Returns
- Form 1095-C, Employer-Provided Health Insurance Offer and Coverage
- Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns.
- Changes to 1099 series: As part of reporting under the Foreign Account Tax Compliance Act (FATCA), some entities must designate their Chapter 4 filing status on certain 1099 forms. The IRS published revised versions, which included:
- Form 1099-MISC, Miscellaneous Income
- Form 1099-OID, Original Interest Discount
- Form 1099-INT, Interest Income
- Form 1099-DIV, Dividends and Distributions
- Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding
- New form instructions: In addition to changing forms for the international law law, the IRS published updated instructions for forms specifically tied to FATCA. The agency revealed final instructions for Form 8966, FATCA Report and Form W-8BEN-E, Certification of Foreign Status of Beneficial Owner for United States Tax Withholding (Entities). Also, the IRS published a supplement to the Form W-8BEN-E instructions in November 2014.
FATCA reaches new milestones
2014 was a busy year for the U.S. tax information sharing legislation. The past year saw the deadlines for foreign financial institutions (FFIs) to begin withholding and to obtain a global intermediary identification number (GIIN).
Furthermore, the U.S. garnered a lot of support for the law, with many new countries signing intergovernmental agreements (IGAs) to comply and implementing local legislation to facilitate the data collection and transfer processes. In July 2014, the IRS announced almost 70 countries and 77,000 FFIs showed their support for FATCA regulations, and those numbers only increased as the year went on.
IRS announces final regulations for TTINs
With growing concerns surrounding identity theft, the IRS published its final rules for using truncated tax identification numbers (TTINs) on tax forms in July 2014. These regulations allow for TTINs on certain forms that are not sent to the IRS. Rather than listing an entire TIN, filers can mask the first five digits with asterisks or Xs.
Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipts of Certain Foreign Gifts, and Form 3520A, Annual Information Return of Foreign Trust With a U.S. Owner, were among the exclusions.
