Comply Exchange 2024 Year-End Reporting Guide

Overview of 2024?

Recent updates in tax information reporting and withholding underscore a rapidly evolving regulatory landscape, where increased transparency in financial transactions is a top priority. Around the world, tax authorities are adapting their frameworks to meet the challenges presented by various types of transactions—ranging from traditional financial activities to modern, digital, and cross-border interactions. This trend impacts compliance requirements across multiple sectors and industries, demanding that businesses stay informed and agile in their approach to tax compliance.?

Comply Insight?

At Comply Exchange, we view this shift as both a challenge and an opportunity. From enhanced reporting standards to new withholding requirements and expanding regulatory oversight, businesses today face complex obligations that require dynamic, robust compliance strategies. Tax authorities are increasingly focused on capturing accurate data across activities. With the OECD’s Common Reporting Standard (CRS), the EU’s DAC directives, and evolving IRS requirements, the goal is clear: achieve comprehensive, transparent reporting that ensures accountability and minimizes tax evasion.?

As tax regimes continue to grow in complexity, Comply Exchange remains committed to helping businesses navigate compliance with confidence. Our advanced solutions automate tax form management, provide real-time validation, and offer secure data storage, empowering businesses to meet new and existing regulatory requirements efficiently. Whether you’re dealing with reporting, withholding taxes, or other cross-border obligations, we help clients transform tax compliance from a burdensome task to a streamlined, efficient process.?

In a landscape marked by growing regulatory demands, Comply Exchange provides the expertise, tools, and support businesses need to thrive. Let us be your partner in compliance, equipping you to handle the demands of a diversified, globalized economy with ease and precision.?

Noteworthy Updates?

Form W-9?

In March 2024, the IRS issued the latest revision of the Form W-9 (Rev. March 2024). The latest form revision includes two notable changes:?

• Language was added to Line 3a to clarify how disregarded entities should complete the Form W-9: “Note: Check the “LLC” box above and, in the entry space, enter the appropriate code (C, S, or P) for the tax classification of the LLC, unless it is a disregarded entity. A disregarded entity should instead check the appropriate box for the tax classification of its owner.”?

• Line 3b, which appears identical to the draft version, has been incorporated into the final form. This requires flow-through entities to indicate if they have direct or indirect foreign partners, owners, or beneficiaries in order to satisfy any applicable reporting requirements.?

Comply Insight?

Make sure your procedures include the latest revision of this form as the six-month transition period ended in October 2024. If you are using substitute W-9s and the new Line 3b is not applicable, then in line with other fields on substitute forms, you can hide/remove this one.?

Form 1042-S?

Form - https://www.irs.gov/pub/irs-pdf/f1042s.pdf?

Instructions - https://www.irs.gov/instructions/i1042s?

Filing Deadline - Due to the IRS and recipients by March 15, 2025, unless an extension is filed. Use Form 8809 to request a 30-day extension for furnishing recipient copies or filing with the IRS. For recipient copies, the request must be submitted by March 15 (original due date for furnishing recipient copies). For IRS filing, the request must be submitted by March 15 (original filing deadline). A second 30-day extension may be available for filing with the IRS, but not for furnishing recipient copies, and must be requested in writing with a valid reason.?

2025 draft Form 1042-S and Form 1042-S instructions:?

Form - https://www.irs.gov/pub/irs-dft/f1042s--dft.pdf?

Instructions - https://www.irs.gov/pub/irs-dft/i1042s--dft.pdf?

Based on the draft forms that have been released, the updates noted are as follows:?

• New Box 7d: A checkbox has been added to indicate when a Form 1042-S is being filed to revise an amount subject to withholding in a withholding rate pool, specifying it for an individual recipient. More details can be found under Box 7d in the instructions.?

• New Chapter 3 Status Code 40: A new status code (40) has been introduced for partnerships that are qualified derivatives dealers (QDDs), or have a QDD branch. Use this code when reporting allocations to partners specifically related to QDD items. For other partnership allocations, continue using status codes 8, 9, or 38 as applicable. If the partnership is operating in a QDD capacity, use status code 35. Keep in mind, status code 40 is not for reporting payments made to a QDD.?

... More details inside the full guide.

Things to Consider – Common Errors and Best Practices for 2024?

As regulatory scrutiny intensifies, penalties for errors on Forms 1099 and 1042-S are on the rise, underscoring the importance of accuracy and timely filing. Here are some of the most common issues businesses face:?

1. Incorrect or Missing Tax Identification Numbers (TINs): TIN mismatches or missing TINs are a frequent cause of IRS penalties. These errors can lead to backup withholding requirements and increase the likelihood of rejected filings.?
2. Inaccurate Withholding Amounts: Form 1042-S requires precise withholding rates, particularly for payments to foreign vendors. Common errors under-withholding due to a misclassification of the recipient's status or an invalid tax treaty claim. Ensuring the correct rate for each type of income and treaty benefit is critical as the IRS looks for anomalies and mismatches in data.?

Find out more with the full guide.

With the increase in penalty rates for tax compliance errors, it’s more important than ever to invest in systems and practices that support accurate reporting. Tools like Comply Exchange can streamline TIN matching at the time of form collection, automate withholding calculations, and validate data before submission, helping businesses avoid costly errors and penalties. To stay compliant and avoid penalties, implementing best practices for Forms 1099 and 1042-S reporting is essential.

Download the Full Year-End Guide

For even more insights and updates follow this link to download the full guide - https://www.complyexchange.com/year-end-guide-2024

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