IRS Instruction 8957 – In the world of international tax compliance, the Foreign Account Tax Compliance Act (FATCA) plays a crucial role in preventing tax evasion by U.S. persons holding assets abroad. One key component of this framework is Form 8957, used for FATCA registration, and its accompanying IRS Instruction 8957. This article delves into the details of these instructions, explaining their purpose, applicability, and step-by-step guidance. Whether you’re a foreign financial institution (FFI), a sponsoring entity, or a direct reporting non-financial foreign entity (NFFE), understanding these guidelines is essential for maintaining compliance and obtaining a Global Intermediary Identification Number (GIIN).
Note that as of April 2023, the IRS has announced that Form 8957 and its instructions will no longer be revised, with registration now handled exclusively through an online system. This shift emphasizes digital efficiency, but the core concepts from Instruction 8957 remain relevant for understanding the registration process.
What is FATCA and Why Does It Matter?
FATCA, enacted in 2010, requires foreign financial institutions to report information about U.S. account holders to the IRS. Non-compliance can result in a 30% withholding tax on certain U.S.-sourced payments. Registration under FATCA allows eligible entities to become participating FFIs (PFFIs), registered deemed-compliant FFIs (RDCFFIs), or other compliant statuses, enabling them to avoid withholding and appear on the IRS’s monthly FFI List.
Form 8957 was originally designed as a paper form for this registration, but today, the process is fully online via the FATCA Registration System, compatible with browsers like Microsoft Edge, Google Chrome, and Mozilla Firefox. The system’s user guide, Publication 5118, serves as the modern equivalent to Instruction 8957, providing detailed steps for electronic submission.
Who Must File Form 8957 or Register Under FATCA?
FATCA registration applies to a range of entities seeking compliant status:
- Participating Foreign Financial Institutions (PFFIs): FFIs that enter into an agreement with the IRS to identify and report U.S. accounts.
- Registered Deemed-Compliant FFIs (RDCFFIs): Including reporting FFIs under Model 1 or Model 2 Intergovernmental Agreements (IGAs).
- Sponsoring Entities: Entities that register and manage compliance for sponsored FFIs or NFFEs.
- Direct Reporting NFFEs: Non-financial entities that elect to report directly to the IRS.
- Trustees of Trustee-Documented Trusts: Specific trusts under FATCA rules.
- U.S. Financial Institutions (USFIs): In certain sponsoring or lead roles.
- Limited FFIs and Branches (Historical Note): These statuses expired after December 31, 2016, and are placed in “registration incomplete” status.
Entities in an Expanded Affiliated Group (EAG) may register as a Lead FI (managing members) or Member FI. Sponsored entities are registered by their sponsors post-approval. Direct reporting NFFEs can use the instructions by substituting “direct reporting NFFE” for “financial institution.”
If your entity is under a Model 1 IGA, registration may still be required for certain classifications, but consult the specific IGA for details.
How to Register: Transition from Paper Form 8957 to Online System?
Originally, Instruction 8957 guided users through paper submission of Form 8957. However, since the launch of the online system, paper filings are obsolete. The online process mirrors the form’s structure but adds automation, such as immediate FATCA ID issuance and email notifications.
Step-by-Step Online Registration Process (Based on Publication 5118)
- Access the System and Create an Account:
- Visit the FATCA Registration landing page and select “Create a New Account” for Single, Lead, or Sponsoring Entities (Members cannot create accounts independently).
- Declare authorization, choose your FI type, and receive a FATCA ID (alphanumeric; record it securely as it’s not the GIIN).
- Authenticate using Login.gov or ID.me with multi-factor authentication (MFA).
- Complete Part 1: My Information (All FI Types):
- Provide legal name, tax residence jurisdiction, FATCA classification (e.g., PFFI, RDCFFI), mailing address, and tax ID (optional).
- Indicate QI/WP/WT status if applicable, list branches outside your tax residence, and note any U.S. tax residency.
- Enter Responsible Officer (RO) details (name, title, contact) and up to five Points of Contact (POCs).
- Save progress; the system auto-saves on navigation.
- Complete Part 2: Expanded Affiliated Group Information (Lead FIs Only):
- List member FIs’ details: legal names, jurisdictions, classifications.
- Specify if the Lead is the EAG’s common parent; if not, provide parent details.
- Add multiple members and download lists in PDF or CSV format.
- Submit the Registration (Part 4: All FI Types):
- Electronically sign as the RO, certifying accuracy and compliance with FATCA obligations.
- Submit; receive confirmation. The IRS processes the application, notifies via email upon approval, and issues a GIIN.
Post-submission, monitor status on the home page. Lead FIs distribute FATCA IDs to members for their registrations. Sponsoring Entities add sponsored entities via XML uploads or manual entry after approval.
Key Differences from the Original Instruction 8957
- No Paper Submission: Unlike the old form, no mailing is required; everything is digital.
- Part 3 Obsolete: Renewal of QI/WP/WT agreements now uses a separate system, not Part 3 of the registration.
- Automated Features: Real-time edits, transfers between EAGs, and certifications (e.g., Certification of Pre-Existing Accounts (COPA) and periodic certifications) are handled online.
- Status Management: Track statuses like “Initiated,” “Submitted,” “Approved,” or “Overdue” via the dashboard.
Important Notes and Updates
- Renewals and Certifications: FFI agreements may require renewal during specified periods; self-determine eligibility using system tables. COPA and periodic certifications are due July 1 following relevant periods.
- Limited Status Expiration: No new limited FFI or branch registrations after 2016; existing ones are incomplete.
- GIIN and FFI List: Approved entities receive a GIIN (e.g., effective on issuance date) and are added to the monthly IRS FFI List.
- Support Resources: Use the FATCA Registration User Guide (Publication 5118) for troubleshooting. For forgotten FATCA IDs, contact IRS support after failed attempts.
Conclusion
IRS Instruction 8957 provided foundational guidance for FATCA registration via Form 8957, but the process has evolved into a streamlined online system since its last revision in 2018. By following the steps in Publication 5118, entities can efficiently obtain GIINs and ensure compliance. Always consult the latest IRS resources or a tax professional for jurisdiction-specific advice, as FATCA rules can vary under IGAs.
For more details, visit the IRS FATCA page or download Publication 5118. Staying compliant not only avoids penalties but also facilitates smoother cross-border financial operations.