On April 19, the Internal Revenue Service published a final rule that requires U.S. banks to report annually the deposit interest paid to nonresident alien account holders. The reporting requirement will apply to interest payments made on or after January 1, 2013. The IRS is intending to collect this information to help combat offshore tax evasion by (i) ensuring that the IRS can exchange information with other jurisdictions, (ii) supporting implementation of the Foreign Account Tax Compliance Act, and (iii) making it more difficult for U.S. taxpayers to falsely claim to be nonresidents in order to avoid taxes on deposit interest income. To address concerns about the confidential treatment of collected information, the final rule limits the IRS’s exchange of the reported information to those countries with which the U.S. has an exchange-of-information agreement. The IRS believes that those agreements contain legal limitations and administrative safeguards to ensure confidential treatment of the information.
Recently, the Internal Revenue Service issued Electronic Signature Requirements that will allow applicants to electronically sign and submit IRS Forms 4506-T and 4506T-EZ (4506-T) beginning January 7, 2013. IRS regulations permit taxpayers to order a tax transcript using a form 4506-T through the IRS Income Verification Express Services (IVES). Under the Requirements, IVES participants may accept and submit an electronically signed 4506-T if the electronic signature process includes: (i) a structure that places creation of the signature under the signer’s sole control; (ii) a signature technology that permits the signature to be verified, either through the use of software algorithms or forensic analysis; (iii) the ability to establish that the signature was created by a specific individual; (iv) a signature block on the document with a symbol, logically associated with the 4506-T, that allows validation of the signer’s name against the name listed on the 4506-T; (v) a process flow or communication with the signer establishing the intent to sign and the purpose of the signature; and (vi) application of the signature in a tamper-evident manner. In addition, the process used to present and sign the 4506-T must include each of the following: (i) authentication, (ii) consent, (iii) tamper-proofing, and (iv) an audit log. Each IVES participant accepting electronically signed 4506-Ts must determine that the electronic signature process adheres to the Requirements, and must also retain a copy of each signed 4506-T and accompanying audit log for at least two years. Such participants also must implement a third-party audit program and comply with specific monthly and annual third-party audit and reporting requirements. BuckleySandler’s Electronic Signatures and Records Team has substantial experience assisting entities seeking to comply with electronic signature requirements.