• Skip to primary navigation
  • Skip to main content
  • Skip to footer
Tipalti
  • PRODUCT
        • PRODUCT
          • Overview
          • Supplier Management
          • Invoice Management
          • PO Matching
          • Tax and VAT Compliance
          • Global Payments
          • Self-Billing Module
          • Payment Reconciliation
          • Tipalti Detect
        • PLATFORM
          • Overview
          • Multi-Entity Architecture
          • Financial Controls
          • Payment API
          • Secure Cloud
          • Money Services Business
          • Pi Payables Intelligence
        • WHY TIPALTI
          • Overview
          • Benefits by Role
          • AP Automation
          • Mass Payments
        • WORKFLOWS
          • Invoiced-Based
          • Performance-Based
        • ADDITIONAL SERVICES
          • Tipalti Multi-FX Currency Management
          • NetNow Accelerated Payments
          • FX Hedging
          • Implementation Services
          • Supplier Onboarding Services
        • INTEGRATIONS
          • Overview
          • NetSuite
          • Sage Intacct
          • Sage Accounting
          • QuickBooks
          • Microsoft Dynamics
          • Affise
          • Cake
          • Everflow
          • HitPath
          • LinkTrust
          • Paladin
          • Tune (HasOffers)
          • Vidooly
  • CUSTOMERS
        • BY INDUSTRY
          • Overview
          • Business Services
          • Software and Technology
          • Ecommerce and Retail
          • Marketplaces and Gig Economy
          • Video and Digital Media
          • Video Gaming
          • Financial Services
          • Online Services
          • Education
          • Healthcare
          • Advertising Technology
          • Affiliate and Influencer Networks
          • Manufacturing and Wholesale
        • Case Studies
          • Overview
        • bluTonic

          “Tipalti provides an efficient, transparent system that allows us to be more reliable with our publishers.”

          Sensei

          “Partnering with Tipalti as our accounts payable solution was one of the best things we could have done.”

          Sovrn

          “AP can be difficult, even though it shouldn’t be—Tipalti makes it simple and easy.”

  • RESOURCES
        • BLOGS
          • BoldCFO Blog
          • Financial Advisor Blog
        • PODCASTS
          • BFF Podcast
        • CALCULATORS
          • Cost Per Invoice Calculator
          • Payment Error Calculator
          • ROI Request
        • Recent Articles

          24 Companies Shaping the Business World

          Driving Payables Scalability with Tipalti CMO, Rob Israch

          The Top Finance Communities to Join in 2021

          How to Build the Ultimate Finance Tech Stack

          How Procurify and Tipalti Modernize Procure-to-Pay

          Building a SaaS Business With Tipalti Co-Founder, Chen Amit

        • GUIDES
          • Compare Payment Methods
          • Cross-Border Payments
          • Invoice Workflow
          • QuickBooks AP Challenges
          • The Total Guide to ERP Integration
        • FAQs
  • COMPANY
    • About Us
    • Careers
    • Partnerships
    • Support
    • Events
    • Press
    • In The News
    • Contact Us
  • Payer Login
  • Get Started

FATCA Compliance Summary

According to KPMG, the US government has been hiring and training over 3,000 IRS examiners with process verification and tax audit efforts. Why? Most organizations know about the need to report 1099 income, but the Foreign Account Tax Compliance Act (FATCA) is requiring greater compliance to report payments made to foreign entities. Form 1042-S filings will be a part of the standard tax return examination.

Tax compliance as a part of accounts payable is also important due diligence to limit fraud as part of a “know your supplier” program, similar to a KYC (know your customer) program. By validating tax information, particularly for global partners, it can reduce the likelihood of payments made to fraudsters or other known bad entities.

Risks to Non-Compliance

The IRS has put into place policies that put more of the responsibility on the payor, not the supplier, for reporting.

  • Reporting fines – For 1042-S and 1099, fines range from $50 to $500 per incident for not reporting payments.
  • 30% penalty on payment amounts – For Fixed, Determinable, Annual, or Periodical (FDAP) income payments made cross border, if the payor doesn’t withhold the proper amount, they’re liable for a major fine.
  • Risk exposure – Tax audits in one area can open up scrutiny and exposure to other areas of the business.
  • Form complexity – The W-9 form for US based suppliers is fairly straight forward, mostly focused on the tax identification number (TIN) of the payee – either their Social Security Number or Employer Identification Number. However, for overseas suppliers and partners is more complex with forms including W-8BEN, W-8BEN-E, W-8EXP, W-8IMY, W-8ECI, and Form 8233. Navigating and completing these forms, especially for a foreign entity, can be confusing and frustrating.

Automating the Tax Compliance Process

While tax compliance is falling more on the shoulders of accounts payable, there are few solutions that make it easier for both the AP practitioner and the supplier. In fact, tools continue to be an afterthought or they’re bolted on as a separate process.

Adding tax form collection to the standard supplier onboarding process is ideal. By collecting the information prior to invoices and payments being submitted, the risk is lower.

  • Collect tax forms for every supplier – Rather than picking and choosing which suppliers need to provide a tax form, the best policy approach is to require forms from everyone. This meets the basic documentation requirement that the IRS will not dispute.
  • Guide the supplier – From within the supplier portal or through supplier communications, guide the supplier to provide their tax identification and forms during the onboarding process.
  • Validate – Verify TINs that are submitted as part of onboarding. While this is primarily to minimize errors when it’s time to report to the IRS, it also makes good sense to reduce typos and even false identities.
  • Think globally – If many suppliers are from specific regions, consider localizing the supplier portal in their native language to include tax form collection and validation. Depending on the country of operation, it may be necessary to consider European and LatAM VAT tax IDs as part of the process.
  • Be flexible – The tax code is always changing and the IRS requirements may also change. Ensure that the portal can easily adapt to new requirements.
  • Link payments – To streamline reporting and withholding, connect tax ID information to payments. This can reduce the need to cross-reference supplier accounts and streamline required withholding at the point of payment.

Recommended Reading

  • FATCA & CRS Alert 2020-03 (KPMG)

Footer

WHY TIPALTI

  • Overview
  • Benefits by Role
  • AP Automation
  • Mass Payment
  • Bill.com Alternative

COMPANY

  • About Us
  • Careers
  • Partnerships
  • Support
  • Events
  • Press
  • In The News
  • Contact Us

CUSTOMERS

  • Overview
  • Business Services
  • Software and Technology
  • Ecommerce and Retail
  • Marketplaces and Gig Economy
  • Video and Digital Media
  • Video Gaming
  • Financial Services
  • Online Services
  • Education
  • Healthcare
  • Advertising Technology
  • Affiliate and Influencer Networks
  • Manufacturing and Wholesale

PRODUCT

  • Overview
  • Supplier Management
  • Invoice Management
  • PO Matching
  • Tax and VAT Compliance
  • Global Payments
  • Self-Billing Module
  • Payment Reconciliation
  • Tipalti Detect
  • Invoice-Based
  • Performance-Based

RESOURCES

  • BoldCFO Blog
  • Financial Advisor Blog
  • BFF Podcast
  • The Total Guide to ERP Integration
  • FAQs

PLATFORM

  • Overview
  • Multi-Entity Architecture
  • Financial Controls
  • Payment API
  • Secure Cloud
  • Money Services Business
  • Integrations
  • Pi Payables Intelligence

ADDITIONAL SERVICES

  • Tipalti Multi-FX Currency Management
  • NetNow Accelerated Payments
  • FX Hedging
  • Implementation Services
  • Supplier Onboarding Services
CONTACT US
LinkedIn Instagram Facebook Twitter YouTube
Tipalti
We Handled It.™
Privacy Policy
|
Payer / Sender Rights
|
Customer Assistance Policy
© 2010–2021 Tipalti Inc.