A question was posted on BoqueteNing.com about whether FATCA will require banks to withhold 30% of Social Security Deposits made to Banks in Panama that as not signatories to FATCA. Steven Mopsick, the tax attorney who spoke in Boquete earlier this year did some investigation on this and here is the information from him.
Hello to Lee and all my friends in Boquete:
I finally heard back from my contacts in the IRS National Office on the question of whether payments to recipients of Social Security benefits living abroad will be subject to 30% FATCA withholding. In other words, is there withholding on people who are now receiving their Social Security checks by either direct deposit to a foreign bank, (as in a bank in Boquete) or getting the checks mailed directly to them?
I knew the answer was “no,” but I wasn’t sure of the legal authority for it.
The proposed FATCA Regulations say, at §1.1471-2(a) “….. a withholding agent must withhold 30 percent of any withholdable payment made after December 31, 2013, to a payee that is” a Foreign Financial Institution (FFI.)
Since the payee on Social Security checks is the person receiving the benefit and not an FFI, no withholding is required.
Federal Tax Attorney
Not admitted in California
Practice Limited to Matters before the
Internal Revenue Service
United States Treasury Department
United States Tax Court