Tax Reporting & Withholding 2024 Conference Takeaways

By Sean Sutton
Read Time: 3 minutes
TAINA, Conference Takeaways, tax withholding, information reporting, global tax, tax reporting, digital asset regulations, CARF regulations, 1042 electronic filing, 871(m)

Tax Reporting & Withholding 2024 Conference

The week of May 6th, TAINA representatives attended and spoke at the Tax Reporting and Withholding Conference in Washington, D.C. In addition to Jake Braun speaking on a great panel about NRA customer onboarding, there were some key takeaways of noteworthy topics that interested the audience of tax professionals and experts.


Conference Key Takeaways

  • Digital Assets and CARF regulations under review
  • 1042 electronic filing issues
  • 871(m) in full effect


Further highlights which may result in future impacts:

  • New form W-9 with revision date of March 2024 is available and currently accepted in TAINA’s validation platform.
  • State withholding and reporting requirements continue to cause operational issues in light of more frequent enforcement.
  • With new QI Agreement in effect, expect to see similar updates to the Withholding Partnership agreement.
  • 1099-K reporting threshold for third party network transactions will be updated in 2024 to a lowered $5,000 amount, gradually transitioning to the $600 threshold as outlined in the American Rescue Plan Act of 2021.
  • Securities settlements have been updated to a “T+1” cycle, increasing the need for automated tax operations to avoid costly delays and burdens to customers.
  • Taiwan and US tax convention to mirror a treaty benefit eliminating dual taxation on certain income payments has passed through Committee review but still waiting on votes in Congress.
  • Hungary and US tax treaty expired at the end of 2023; however, a new tax treaty has been proposed and needs to go through the standard approval process which may take many years.


Digital Assets and CARF regulations under review

While many Financial Institutions in the US and abroad do not facilitate the use of digital assets, there is no denying the growth in digital asset popularity seen worldwide. In reaction to existing gaps in tax law, the IRS and OECD have issued preliminary guidance on how “brokers” in the digital asset world are to identify and report transaction activity of individuals.

There was also verbal speculation about long term impacts to existing requirements. With the US adopting CARF in an effort to have a more uniform worldwide tax compliance regime, is this the start of the US also adopting CRS and a more globally uniform automatic exchange of information? Will this result in a change to the series Form W-8 to more closely align to the self-certification forms with the added tax treaty section? As always with tax regulations, more to come.

There were two one-hour long sessions during the Conference in which multiple experts discussed the proposed regs and implementation considerations:


Proposed Regulations

  • Outline “broker” and what are their requirements.
  • Timeline of events including when to start tracking the basis, as well as when to start reporting on new form 1099-DA.
  • Items which need more information/clarity from the IRS:
    • The recently drafted 1099-DA form does not appear to reflect public comments and will change:
      • Filer is identified, not the Payer like all other 1099 forms.
      • Can’t easily indicate why the asset is considered uncovered.
      • Free form field for 'Explanation if no recipient TIN'.
      • Number of units will have to allow for up to 15 decimal places.
    • Since the US has agreed to also implement CARF, the IRS needs to coordinate the Digital Asset regulations to eliminate duplicate reporting from foreign brokers with US holders.
    • Transfer statements are not defined; however this impacts if a digital asset is considered covered vs. non-covered.
      • Currently many firms do not allow transfers.
      • Will wash sales be allowed?
    • US indicia now include Internet protocol (IP) address; however this can be avoided through use of VPN so changes are expected.
  • Items impacting CARF rollout:
    • Collecting self-certification forms at account opening
    • XML schemas are not available.
    • The XML and deadlines are not uniform across participating jurisdictions.
    • What is overlap considerations with EU’s Directive on Administrative Cooperation (DAC8)?


1042 Electronic Filing Issues:

In February 2023, the IRS announced that many withholding agents were required to electronically file form 1042 as a reconciliation of withholding and reporting activity for TY2023. Failing to file electronically would have resulted in harsh failure-to-file penalties.

However, in February 2024 the IRS issued a delay in this requirement because of the operational issue of utilizing an IRS-approved provider. Additionally, the delay will allow QI’s more time to update systems and XML schema to support request for refunds on over-withholding. For US based withholding agents, the new filing requirement starts next year, while non-US withholding agents (including QIs) won’t be required until TY2025 reporting is completed in calendar year 2026.

Note: this delay does not include 1042-S filing requirements for recipients. If that has not been completed, a 6 month extension can be requested for a September 15th deadline.


871(m) in Full Effect?

In 2019, the IRS published finalized regulations under section 871(m) related to withholding tax on ‘dividend equivalents’ paid to non-US taxpayers on derivatives of US equities. There have been multiple Notices issued to provide transition rules and provide relief since, but those most recent guidance shows that relief is up at the end of 2024.

QDDs are required to still show good faith efforts in their implementation for delta-one and non-delta-one transactions. Under current rules, a QDD would have been required to compute its net delta exposure beginning in 2023. Notice 2022-37 provides that a QDD will be required to compute its Section 871(m) amount using the net delta exposure method beginning in 2025.

However, the IRS is considering further extending due to industry concerns.


How Can TAINA Help?

In summary, many items discussed will drive a change in policies and procedures, plus create new documentation requirements. Now more than ever it is important to think of an automated solution in the tax operations space. There are limits to how much we can stretch internal resources.

Let's focus on automating repetitive processes. The TAINA Platform takes care of your Form W-8 and W-9 collection and validation, as well as maintaining FATCA and CRS reporting compliance in a seamless end-to-end process. Attending these types of events ensures TAINA is maintaining an up to date, robust and detailed ruleset meeting our clients' needs. 


We would love to talk to you more about your current documentation validation process and how our award-winning Forms W-8 and W-9, FATCA and CRS self-certification form Validation platform may add value to your organization.

For more information on how our fully automated platform can add value to your business, get in touch or request a demo to see it in action.

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