2022_ss_1545-1725

SUPPORTING STATEMENT

Internal Revenue Service

(TD 9584) Guidance on Reporting Interest Paid to Nonresident Aliens

OMB #1545-1725

1. CIRCUMSTANCES NECESSITATING COLLECTION OF INFORMATION

Sections 1441, 1442 and §1.1441-1(b)(1) generally require a person that makes a payment of an “amount subject to withholding” to a beneficial owner that is a foreign person to deduct and withhold 30 percent of the payment. Unless it can reliably associate the payment with documentation upon which it can rely, to treat the payment as made to a beneficial owner that is a U.S. person or as made to a beneficial owner that is a foreign person entitled to a reduced rate of withholding under the Code, regulations, or an income tax treaty.

Recent global events have demonstrated that greater cooperation among taxing authorities to achieve robust information reporting, collection, and exchange is a critical component in combating the evasion of tax and implements the fundamental purpose of tax information exchange articles in U.S. tax treaties. Regulations currently in effect require reporting of U.S. bank deposit interest if the interest is paid to a U.S. person or a nonresident alien individual who is a resident of Canada. These regulations extend routine reporting to the Internal Revenue Service (IRS) for all bank deposit interest paid within the United States to all nonresident aliens. This reporting will help to ensure voluntary compliance by U.S. taxpayers by minimizing the possibility of avoidance of the U.S. information reporting system (such as through false claims of foreign status) and, where appropriate, will permit the United States to implement exchange of information in respect of the information.

2. USE OF DATA

The information collected by the IRS will be used for audit and examination purposes.

In §1.6049-6(e)(4) any person who makes a Form 1042-S under §1.6049-4(b)(5) must furnish a statement to the recipient in person or by first class mail to the recipient’s last known address. The statement must include a copy of the Form 1042-S and a statement that the information on the Form 1042-S is being furnished to the IRS and may be furnished to the government of the foreign country where the recipient resides.

3. USE OF IMPROVED INFORMATION TECHNOLOGY TO REDUCE BURDEN

Electronic filing of Forms 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, is available to satisfy the withholding agent’s reporting responsibility, and it is estimated that 90% of the information will be reported electronically.

4. EFFORTS TO IDENTIFY DUPLICATION

The information obtained through this collection is unique and is not already available for use or adaptation from another source.

5. METHODS TO MINIMIZE BURDEN ON SMALL BUSINESSES OR OTHER SMALL ENTITIES

The collection of information requirement will not have a significant economic impact on a substantial number of small entities.

6. CONSEQUENCES OF LESS FREQUENT COLLECTION ON FEDERAL PROGRAMS OR POLICY ACTIVITIES

Consequences of less frequent collection on federal programs or policy activities, could result in noncompliance and tax evasions. Taxpayers would try to hide income and assets offshore. It would be easier for U.S. taxpayers to falsely claim to be nonresidents in order to avoid U. S. taxation on their deposit interest income.

7. SPECIAL CIRCUMSTANCES REQUIRING DATA COLLECTION TO BE INCONSISTENT WITH GUIDELINES IN 5 CFR 1320.5(d)(2)

There are no special circumstances requiring data collection to be inconsistent with Guidelines in 5 CFR 1320.5(d)(2).

8. CONSULTATION WITH INDIVIDUALS OUTSIDE OF THE AGENCY ON AVAILABILITY OF DATA, FREQUENCY OF COLLECTION, CLARITY OF INSTRUCTIONS AND FORMS, AND DATA ELEMENTS

In response to the Federal Register notice December 12, 2021 (86 FR 70608), we received no comments during the comment period regarding TD 9584.

9. EXPLANATION OF DECISION TO PROVIDE ANY PAYMENT OR GIFT TO RESPONDENTS

No payment or gift has been provided to any respondents.

10. ASSURANCE OF CONFIDENTIALITY OF RESPONSES

Generally, tax returns and tax return information are confidential as required by 26 USC 6103.

11. JUSTIFICATION OF SENSITIVE QUESTIONS

No sensitive personally identifiable information (PII) is collected.

12. ESTIMATED BURDEN OF INFORMATION COLLECTION

The collections of information are in §§1.6049-4(b)(5) and 1.6049-6(e)(4).

In §1.6049-4(b)(5) a payor must make an information return on Form 1042-S, “Foreign Person’s U.S. Source Income Subject to Withholding” for the calendar year in which a payment of deposit interest is made to a foreign person. It is estimated that it will require approximately 15 minutes of additional recordkeeping to complete a Form 1042-S. The total recordkeeping burden is estimated to be 250 hours.

In §1.6049-6(e)(4) any person who makes a Form 1042-S under §1.6049-4(b)(5) must furnish a statement to the recipient in person or by first class mail to the recipient’s last known address. The statement must include a copy of the Form 1042-S and a statement that the information on the Form 1042-S is being furnished to the IRS and may be furnished to the government of the foreign country where the recipient resides. It is estimated that it will require approximately 15 minutes to furnish this information to the recipient. The total reporting burden is estimated to be 250 hours.

Authority	Description	# of Respondents	# Responses per Respondent	Annual Responses	Hours per Response	Total Burden
Treasury Regulation §§1.6049-4(b)(5); 1.6049-6(e)(4)	TD 9584	2000	1	2000	.25	500
Total				2000		500

13. ESTIMATED TOTAL ANNUAL COST BURDEN TO RESPONDENTS

To ensure more accuracy and consistency across its information collections, IRS is

currently in the process of revising the methodology it uses to estimate burden and

costs. Once this methodology is complete, IRS will update this information collection to

reflect a more precise estimate of burden and costs.

14. ESTIMATED ANNUALIZED COST TO THE FEDERAL GOVERNMENT

To ensure more accuracy and consistency across its information collections, IRS is

currently in the process of revising the methodology it uses to estimate burden and

costs. Once this methodology is complete, IRS will update this information

collection to reflect a more precise estimate of burden and costs.

15 REASONS FOR CHANGE IN BURDEN

There is no change in the paperwork burden previously approved by OMB. IRS is making

this submission to renew the OMB approval.

16. PLANS FOR TABULATION, STATISTICAL ANALYSIS AND PUBLICATION

There are no plans for tabulation, statistical analysis, and publication.

17. REASONS WHY DISPLAYING THE OMB EXPIRATION DATE IS INAPPROPRIATE

IRS believes that displaying the OMB expiration date is inappropriate because it could

cause confusion by leading taxpayers to believe that the regulation sunsets as of the

expiration date. Taxpayers are not likely to be aware that the Service intends to request

renewal of the OMB approval and obtain a new expiration date before the old one expires

18. EXCEPTIONS TO THE CERTIFICATION STATEMENT

There are no exceptions to the certification statement.

Note: The following paragraph applies to all of the collections of information in this

submission:

An agency may not conduct or sponsor, and a person is not required to respond to, a

collection of information unless the collection of information displays a valid OMB

control number. Books or records relating to a collection of information must be retained

as long as their contents may become material in the administration of any internal

revenue law. Generally, tax returns and tax return information are confidential, as

required by 26 U.S.C. 6103.

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