U.S. tax reform includes important information reporting and withholding changes

The 2017 tax reform and reconciliation act (the Act), enacted on December 22, 2017, makes important changes to information reporting and withholding tax rules, including:

  • A change in the backup withholding rate from 28% to 24%;
  • A new federal tax withholding requirement relating to certain transfers of partnership interests;
  • New reporting requirements relating to:
    • the sale of certain life insurance contracts, and
    • the receipt of fines, penalties, and other amounts from certain taxpayers; and
  • Changes to various non-payroll withholding tax rates that are tied to individual and corporate income tax rates.

Observations: Taxpayers may need to implement changes immediately to their policies and procedures to conform to the new rules. Also, taxpayers reorganizing or restructuring in light of US tax reform should consider the impact the tax reform changes have on their tax withholding and reporting profile. Restructuring could cause changes in the source of income being paid or the status of a taxpayer (e.g., from non-US payor to US payor, or vice versa). Taxpayers should determine whether they are subject to new or additional tax withholding or information reporting obligations as a result of restructuring efforts due to US tax reform.

For more information on these updates, please see our recently published Tax Insight.

Published by

Melanie Taosuwan

Melanie Taosuwan

melanie.taosuwan@ch.pwc.com

Melanie Taosuwan is a Tax Director in the Financial Services practice at PwC. Melanie is the Swiss FATCA, QI and Section 871(m) Knowledge Manager and has more than five years of experience in supporting and advising Swiss financial institutions on these topics.