Subject: Non-resident aliens: My question is, can we open an interest bearing account for an alien that does not have a SS# or ITIN#? We have a customer in Sweden, that provided us with a Foreign TIN#, but not a US number? Can they keep this interest bearing account and us still report a 1042S form without a TIN#?


I am thinking they can have an interest bearing account WITHOUT an ITIN# or SS# as long as we have a W-8BEN signed. I think what the regulation is meaning was in order for the W-8BEN to be valid indefinitely, we have to have a SS# or ITIN#. I think the fact of having OR not having a SS# or ITIN# has to do with the W-8BEN validity (indefinitely) and NOT the reporting of a 1042S form.

Is that how you interpret this?

Yes you can, just make sure the W8BEN is completed accurately and include the foreign TIN on it.

If an individual does not have a U.S. TIN, your bank can satisfy the Bank Secrecy Act by obtaining an identifying number assigned by the individual's home country. It may or may not be a number related to taxes; a passport number would be the most common offering. On an interest bearing account, you bank can satisfy the Internal Revenue Service (via the W-8BEN) by obtaining a tax identifying number assigned by the individual's home country; a passport number will not suffice.

Consider whether opening interest bearing accounts for non U.S. persons is a good business decision as it triggers a 1042S reporting whether you have one account of this type or a thousand. Some banks offer only non interest bearing accounts to non U.S. persons.

I'd like to ask a follow up question on this. Under Chapter of the IRC it would appear that interest paid on a Bank deposit is not FDAP Income and as such, there is no withholding requirements. In that case, would a bank still need to file 1042-S?

Have you read this:

https://www.irs.gov/pub/irs-drop/rp-12-24.pdf

Not yet. Thanks for sharing Randy. I guess there are no quick and easy answers regarding tax matters?

OK. I need this in 'Mississippi' language. As a bank that pays interest on an interest bearing account to a non-resident alien, I understand I must file a 1042S form. Am I correct that that person can have a SS# or ITIN# or a # from their foreign country (not a passport #).

I have vacillated back and forth in trying to understand where this list of countries comes in to play with our bank reporting interest. My understanding was it had to do with the Tax Treaty and it did not apply to a bank just paying interest on an account. So am I wrong again? Do I just ignore this list of countries and report all accounts regardless of what country (excluding SDN list, etc) or do I need to ONLY open interest bearing accounts from individuals FROM this list of countries?

If you have accounts for NRAs that pay interest, you must report on 1042S if the permanent address is in one of the treaty countries. You also have the option of reporting all such accounts.

Need advice regarding a Canadian citizen who was the beneficiary of a US person's IRA. We have the signed W-8. I believe we have to report both the withholding and the distributions on 1042-S (based on IRS information below). Canada has a 15% withholding tax treaty rate but this individual has requested that we withhold 30% (?). What I'm really struggling with is the Income Code in Box 1 on the 1042-S. No where in the IRS 2016 instructions for form 1042-S does it specifically state what code to use for "IRA Distributions". I've narrowed my choices to 15 - Pensions, annuities, alimony, and/or insurance premiums or 54 - Other income. Any and all advice would be greatly appreciated.

Oops - forgot the IRS guidance.

Excerpt From the instructions for Forms 1099-R and 5498

Nonresident Aliens

If income tax is withheld under section 3405 on any distribution to a nonresident alien, report the distribution and withholding on Form 1099-R. Also file Form 945 to report the withholding. See the Presumption Rules in part S of the 2016 General Instructions for Certain Information Returns. However, any payments to a nonresident alien from any trust under section 401(a), any annuity plan under section 403(a), any annuity, custodial account, or retirement income account under section 403(b), or any IRA account under section 408(a) or (b) are subject to withholding under section 1441, unless there is an exception under a tax treaty. Report the distribution and withholding on Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, and Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding.

For guidance regarding covered expatriates, see Notice 2009-85, 2009-45 I.R.B. 598, available at www.irs.gov/irb/2009-45_IRB/ar10.html.