Have you ever had to manually validate CRS & W8 forms? Or validate tax forms with an automated solution that isn’t actually automated? Well after 18 years in Tax Operations… I’ve been there and done that, and it isn’t pretty or fun. After 4 years on the other side of the fence, I am really wanting to help those still going through challenges of having a manual tax validation process, especially those pain points that don’t even get considered or are normally overlooked BUT are extremely painful.
Here are 2 examples of such pain points:
1. Managing Change In Circumstances manually for CRS and FATCA.
2. Expiring W8-BEN-E Tax forms
Managing Change in Circumstances (CiC)
This was a tough one indeed! The challenging lengthy process starts by having to export or request reports from IT. This is followed by review and reconciliation. This is then followed by scheduled, diarized checks for my team and I to check for any Indicia or KYC updates….PAINFUL!
Expired W8-BEN-E Tax forms:
Have you ever had to pull a report or asked IT for one, only to then have to put a filter on the expiry date? Because of Treaty Relief, the source system has to know when a W8-BEN-E has expired, as this will mean a change in tax rate given. In the case of an entity receiving relief due to entitlement of domicile and elections on tax form. All of a sudden IRS payable jumps to 30% instead of the previous 15% withholding tax.
This is captured and in some cases actually used as the trigger for tax operations to get a new W8BEN-E. This is clearly reactive, yes it works, however the results of it being done this way has incorrect IRS payables and tax deduction made weekly for these clients because of the mentioned jump to 30% w/h from 15%.
For expiry already gone by, tax operations need to request, receive and validate new tax forms, with the new tax rate having to be changed again to reflect the entitled 15% w/h and no longer 30%. With all the adjustments to IRS payable, this could require multiple 1042’s depending on how long the W8 took to come back. All of this could have reputational risk for the Institution.
Alternatively solicitation can be done by using the report extracted or requested form IT, putting a filter by expiry date, and then scheduling in teams diary for 90 days prior to request new form, 60 days to follow up if not received, then 30 days before expiry to highlight if new tax form is not received then they client will go into the higher tax rate.
From my experience of being on both sides of the fence, I know and we all know that the Tax Operations process does not have to live or operate like this in today’s evolving Tax Digital, Tax Technological and Tax Compliance world right now. Especially for this forever growing and regulated world of Tax around CRS, FATCA and Chapter 3 and up incoming requirements for solving for 1446(f) and and tax due diligence and reporting for Crypto Assets.
Automated Ongoing Monitoring of CTC and Form Expiry:
By automating the process you can remove reactive controls from the tax validation process reducing your operational costs, time spent and risk. Not to mention how clean the tax reporting process will become, as the first step to ensuring you have good data is having all year monitoring automatically in place and running efficiently. With good year end data your 1042's, 1099's, CRS and FATCA schema rejections and amendments will reduce and you will provide good filing to tax authorities all year round.
Find out more about how the TAINA platform can help you transform your FATCA and CRS tax validation process with its ongoing CTC and expiry monitoring and other powerful capabilities.