IRS announces that lack of tax ID number will not automatically result in foreign bank account closure
The IRS amended guidance to its FATCA regulations telling foreign financial institutions (FFIs) that lack of a US tax identification number should not force FFIs to automatically close accounts of US citizens. Question 3 under FATCA guidance “Reporting” now states that failure to obtain an accountholder's US TIN is not necessarily serious non-compliance and does not imply that the client's account must automatically be closed.
The exact language from the IRS site states, “The IRS will not automatically conclude that the absence of a TIN leads to a determination of significant non-compliance. Instead, the IRS will take account of the facts and circumstances leading to the absence of the TIN, such as the reasons why the TIN could not be obtained, whether the FI has adequate procedures in place to obtain TINs and the efforts made by the FI to obtain them. If the U.S. determines that an FI is in significant non-compliance, the U.S. would notify the exchange partner and will work with the partner, to include further appropriate consideration of the facts and circumstances, over the next 18 months to address the non-compliance. The FI would have at least 18 months from the date of the notification of noncompliance to correct the TIN error before the IRS took any other further action, such as removing the FI’s Global Intermediary Identification Number from the IRS FFI List. An FFI that no longer has a valid GIIN risks being subject to withholding on certain U.S. source payments made to the FI.”
ACA is pleased to see that the IRS and Treasury understand the hardship that US citizens are under in trying to provide their foreign financial institutions with the US Social Security numbers. The process for first time applications for Social Security numbers has been significantly expedited as ACA learned from our sources at the Social Security Administration. However, first time applications require an in-person visit with Social Security Administration, normally managed through the Federal Benefits Units (FBUs) at US Embassies and Consulates. This can cause delays, in particular for those who need to travel distances to the nearest US Embassy or Consulate. More on the process can be found here.
Social Security also noted that the most problematic cases are for those individuals born in the US prior to 1990 who returned at early age to live in a foreign country. Prior to 1990 US states did not routinely issue Social Security numbers along with a US birth certificate.
ACA continues to advocate for the adoption of Same Country Exclusion for FATCA reporting, see: https://www.americansabroad.org/same-country-exemption-for-fatca-reporting/ and for a definitive solution to the tax compliancy issues for US citizens overseas through adoption of Residence-based taxation (RBT).