It’s that time of year again! Tax season is rearing its ugly head again, and we’re all trying to figure out what’s changed since last year and how on earth we’re going to get it all done in time. Luckily, we’re here to do a quick review.

1042-s Reporting

First things first, we’ve got the usual nine-month project that is 1042-S reporting for US income paid to non-US personas. This starts with asking for an extension of time to file. That might sound odd, but it’s necessary because so many firms fail to provide their clients with recipient copies in time. Getting those reports ready takes until September, when it’s time to submit your 1042 tax return. You should consider the 1042 to be the summary report, and the 1042-s to be the more detailed breakdown.

Hopefully at this point you won’t have any amended reporting to do. But if your clients have invested in US REITs or US mutual funds, then it’s quite possible that what was reported in April as a dividend will have to be re-classified as something else, which means you’ll have to go through an amended reporting cycle.

Then, there’s 1099 reporting, which is for payments of US sourced income to American clients, and 945 reporting if there was any backup withholding. CRS and FATCA reporting is now on the horizon too, so you’ll need to grapple with due diligence on non-resident account holders and American account holders, as well as keeping up with changes in CRS partner jurisdictions.

Reporting Frameworks

As the number of tax reporting frameworks increases, so does the format of the reports and the delivery mechanisms for them. It can all get very confusing! For example, here are the formats and delivery mechanisms we’re currently working with:

• 1042-S reporting is submitted as an ASCII text file using the FIRE Portal.
• FATCA and CRS reports from Model 1 IGA jurisdictions are submitted in XML format to your local competent authority.
• 1042 tax returns for the 2024 tax year are still submitted on paper. For the 2025 year, you will be able to submit them in XML format at the MeF portal.
• FATCA reports for firms in Model 2-IGA and non-IGA jurisdictions are submitted to the IRS in XML format at the IDES portal.

The FASTER Directive

If all of that isn’t enough to keep track of, there are some new incentives on the horizon too. Mainly, the EU FASTER Directive and the crypto-asset reporting frameworks (CARF). While these are still a work in progress, the IRS has already released the new form 1099-DA for digital assets reporting, and the European Commission has a large working group who are considering the practical issues of implementation of FASTER.

If you’re not up to date, FASTER is, in theory, a simple system. Similar to the US QI and OECD TRACE regimes, FASTER allows non-resident financial firms to register with each EU Member State to be a withholding agent, certified financial intermediary (CFI). Once they’re registered, CFIs can grant tax treaty rates to entitled beneficial owners as long as they have a declaration, as well as an electronic tax residency certificate (eTRC) issued by their home jurisdiction. When it comes to reporting, it’s similar to the QI system again. There are reporting and compliance obligations, but as always, the devil is in the details. There are legitimate concerns that this new system will just replace one type of complexity with another, but in general hopes are high that some extra standardisation and automation will help and have a positive impact on all investors in EU markets. The new Directive comes into effect on January 1^st 2030, so it’s time to start getting ready!

If you’re not sure where to start, or you’re struggling to keep up with your reporting obligations, then there’s no shame in asking for help. At TConsult we specialise in supporting financial institutions in understanding their obligations under all of these regulations, and helping them put policies and practices in place to manage them. If you’d like to find out more, just get in touch with one of our team today to book a consultation with one of our experts.