Form 8966: What It Is and Who Is Required to File

Form 8966, also known as the FATCA Report, is an information return used for compliance with the Foreign Account Tax Compliance Act (FATCA). This law is designed to combat tax evasion by U.S. persons holding accounts and other financial assets offshore. The form facilitates the reporting of specific information about U.S. accounts held by foreign financial institutions and other foreign entities to the Internal Revenue Service (IRS). The information collected is used by the IRS to verify that U.S. taxpayers are properly reporting their foreign financial assets and associated income.

Who Must File Form 8966

The obligation to file Form 8966 falls upon foreign entities, not U.S. persons. The primary filers are Foreign Financial Institutions (FFIs), which include:

• Foreign banks
• Custodial institutions like mutual funds
• Investment entities such as hedge funds or private equity funds
• Certain insurance companies with cash value products or annuities

Several classifications of FFIs have a filing requirement, including Participating FFIs (PFFIs), Registered Deemed-Compliant FFIs (RDCFFIs), and Reporting Model 2 FFIs. These institutions must report on financial accounts held by U.S. taxpayers.

Other foreign entities may also need to file. A Passive Non-Financial Foreign Entity (NFFE) with one or more substantial U.S. owners (generally a U.S. person with more than a 10% ownership interest) may have a reporting obligation. Withholding agents making payments to these NFFEs may be required to file Form 8966 to report on those owners, and Sponsoring Entities that file for other entities must also file.

Information Required for Completion

Completing Form 8966 requires gathering specific details organized across several parts of the form. The process involves compiling identifying information for the filer and detailed data for each reportable account.

Part I of the form is dedicated to the filer’s information. This section requires the filer’s legal name, address, country of residence, and Global Intermediary Identification Number (GIIN). This unique identifier is assigned to an entity upon registration on the IRS FATCA portal and confirms its status within the FATCA framework.

Part II requires detailed information for each reportable financial account. For every account, the filer must provide the account holder’s full name, address, and U.S. Taxpayer Identification Number (TIN). The form also requires the specific account number and the account balance or value as of the end of the calendar year. If an account was closed during the year, the value immediately before closure must be reported.

For filers that are Passive NFFEs or withholding agents reporting on them, Part III must be completed. This section focuses on the substantial U.S. owners of the entity, requiring their name, address, and U.S. TIN.

Part IV is used for pooled reporting, which is applicable in specific situations. For instance, a Reporting Model 2 FFI might use this part to report on a pool of non-consenting U.S. accounts. This occurs when an account holder does not provide the necessary consent to have their information reported, and the FFI reports the aggregate information for these accounts as a pool.

The Filing Process

Submission of Form 8966 is a strictly electronic process, and paper filing is not permitted unless a specific waiver is granted by the IRS. The designated system for this electronic submission is the International Data Exchange Service (IDES), a secure web portal established by the IRS for FATCA reporting.

Before a filer can submit their report, they must first enroll with IDES. This registration process involves obtaining a digital certificate from an IRS-approved certificate authority, which can take several weeks. Once enrolled, the filer must prepare the reportable data in a specific Extensible Markup Language (XML) format, following the detailed instructions and XML schema provided by the IRS.

After the XML file is created and validated against the IRS schema, it must be encrypted and packaged for transmission. The IDES system provides tools and detailed procedures for encrypting the file using the filer’s digital certificate and the IRS’s public key, ensuring the data is secure during transit. The final step is to upload the resulting compressed and encrypted zip file through the IDES gateway.

The annual deadline for filing Form 8966 is March 31 of the year following the reporting calendar year. However, an automatic 90-day extension to file can be obtained by submitting Form 8809-I on or before the March 31 due date, which moves the deadline to June 29.