IRS Notice 2012-2 has just been issued providing new guidance to payment settlement entities (typically banks issuing payment cards) that are U.S. payors regarding the circumstances under which an information return is required under IRC §6050 with respect to a payment made to a Non-US account.

The corresponding regulations will be amended to reflect the new guidance contained in this Notice which supplements previous guidance issued late last year via Notice 2011-71. The IRS had previously laid out four criteria for determining the circumstances under which a payment is considered made outside the United States to an offshore account for purposes of section §6050. However, the IRS received feedback that this was confusing. It has thus sought to clarify the process by providing an alternative method for a payment settlement entity to determine whether it must make the return of information required under §6050 of the Internal Revenue Code.

First, any banks seeking to qualify for the alternative method must follow a new three step process to be applied to the facts and circumstances of the bank in question. Assuming these requirements are met then there is a supplemental set of criteria that need to be reviewed when a payment settlement entity is confronted with a Non-U.S. account; and the existing §6050 requirement to complete an information return. If you are a subscriber to the TIR Answer Center then you can expect to see in the near future our analysis of this process, what you need to do to qualify, and what it means for your compliance and reporting efforts.