The United States has maintained a longstanding policy of not taxing interest on deposits of nonresident aliens as a way to encourage foreign investment in U.S. banks. Except with respect to nonresident aliens from Canada, the U.S. has not required the reporting of interest on deposits to the IRS. On April 19, 2012, however, the IRS reversed this policy of the non-reporting of interest on deposits. Interest on deposits will still not be taxed, but when paid to certain nonresident aliens, it must be reported to the IRS. The final regulations under Treasury Regulations § 1.6049-4(b)(5)(i) and § 1.6049-8 will require U.S. financial institutions to report interest aggregating $10 or more paid to nonresident aliens commencing on or after January 1, 2013. Read more in the
Backup Withholding chapter of
The Gold Book.
Article originally appeared on Banking Spectrum (https://www.bankingspectrum.com/).
See website for complete article licensing information.