Takeaways from the Kaplan International Tax Withholding & Information Reporting Conference

By Sean Sutton
Read Time: 3 minutes
Takeaways Kaplan International Tax Withholding & Information Reporting Conference

November 2023 Tax Withholding and Reporting Conference (Formerly EEI)

The 2023 Kaplan Internal Tax Withholding and Information Reporting Virtual conference took place on November 9-10. This event brought together the Internal Revenue Service (IRS) along with financial services tax operations, tax advisory and corporate tax professionals. Two days of informative presentations and robust panel discussion highlighted takeaways from the conference which include:  


  • New Proposed Digital Asset Reporting Regulations in the US
  • Revised QI Agreement
  • Draft form W9
  • Draft form W8-EXP
  • Hungary Tax Treaty Termination
  • Audit enforcement by the IRS


New Proposed Digital Asset Reporting Regulations in the US

On the second day of the Conference, we were informed that the US, along with the UK and 46 other jurisdictions, were adopting the new CARF Framework, an OECD tax transparency standard. There was also discussion between presenters and IRS representatives speculating on the impact of a US broker having to follow both the IRS regulation as well as CARF, key points from this discussion is below:

  • There is a requirement to collect basis for reporting of digital assets by a broker enacting the sale or disposal of the asset.
  • Requirement to collect and store basis is retroactive to 1/1/2023.
  • Reporting on new form 1099-DA is not required until 2026 at the earliest.
    • The draft of the 1099-DA has yet to be released, but TAINA will be monitoring for potential impacts.
  • The IRS introduces a new form of KYC US indicia to include IP address.
  • There were also multiple sessions to highlight the regulatory need to withhold taxes when absent a valid W9, in a scenario when a digital asset is exchanged for another, there is no cash with which to withhold and remit to the IRS.

There were over 120,000 public comments on the proposed IRS regulation. This led to the postponement of the scheduled public hearing until November 13th. The significant impact of this regulation has left many unanswered questions for the IRS to address. With the implementation date approaching rapidly, affected firms have limited time to adapt. Some expect relief through the U.S. alignment with CARF, potentially easing the complexities of compliance.


Revised QI Agreement

  • The revised Agreement required consent for the IRS to publish a list of EIN/Name combinations.
  • Updated communication was that due to competing priorities this is not close to being published.


Draft form W9

  • Final form coming soon, Draft W-9 Form listed a revision date of October, 2023, but likely to come in December if the Draft Instructions recently published can guide us.
  • New line added to the Tax certification section is to be checked by a domestic partnership to indicate they have foreign partners when submitting this form to a higher tier partnership.
  • On Day 2 of the conference, there was further discussion that since the new box 3b is not required in all cases, the 2018 version of the W9 would be considered a valid Substitute form and can still be considered valid.


Draft form W8-EXP

  • On June 28, 2023 the IRS released a draft version of the new W8-EXP form, and the accompanying draft W-8 EXP instructions have been posted with an October 17 date.
  • Final form should be released soon.
  • A new Chapter 3 status was added, for “Withholding Qualified holders” and only applicable for 1445 transactions. An item to point out is the period of validity of 2 years, instead of the standard 3 for a W8 form.


Hungary Tax Treaty termination

  • The termination of the tax treaty with Hungary is effective on January 1st, 2024. Since the treaty is no longer valid, any W8 forms for accounts with a tax treaty claim with Hungary will no longer result in a valid claim of reduced withholding rates.


Audit enforcement by the IRS

The investment the US Government has given to the IRS in the Inflation Reduction Act has allowed for an increase in IRS Enforcement. Key Areas the IRS have focused on include:

  • There has been an increase in hiring to expand compliance territories for audits, as well as hiring people from private sector with a stronger knowledge of where the gaps exist to supplement exam teams.
  • The FATCA Compliance team has been re-established with a refined scope checking form 1042S errors with data analytics.
  • New industries are being reviewed by the auditors, including Managed Funds and REITs.
  • Without official guidance from the IRS, auditors have been challenging the acceptance of W8 forms with FTIN indicating “not legally required”.
    • Examiners have asserted that Payers have a “reason to know” which jurisdictions issue TINs.
  • The AEOI branch of the FATCA Compliance team is also reviewing financial institution reporting when they do not provide a TIN for an account holder. The examiners are asking for the reason for non-collection of the self-certification form as well as evidence of the efforts made to obtain a self-cert. form.


Accounts Payable functions of firms are also receiving Examiner scrutiny;

  • Examples of what the IRS has looked for:
    • Payments to vendors; what is the source of funds, i.e. onshore versus offshore work, a firm needs to establish where work was completed or else have to presume US sourced, impacting tax withholding and reporting requirements.
    • Identifying Business Profits and ensuring the correct treaty article has been applied to the special treaty rate claim on the form.
  • Also related to Accounts Payable, the Green Book proposals address the need to certify a TIN from form W9, and perform backup withholding as applicable with respect to any payments eligible for 1099-MISC and 1099-NEC reporting.

It was recommended emphatically that there be a comprehensive review of Policy and procedures by firms as Examiners have been asking for and reviewing them to look for areas to focus on.


We would value to discuss with you more about your compliance process and how our award-winning FATCA and CRS Validation platform can help you manage the latest regulatory updates. 

For more information get in touch or request a demo to see it in action. 

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