Withholding Tax on Cross-Border Transactions Under Heightened IRS Scrutiny

Strategies to Improve Compliance and Minimize Audit Risks

Recording of a 100-minute CPE/CLE webinar with Q&A

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Conducted on Wednesday, June 24, 2009

Course Materials

This seminar will identify the more complex U.S. withholding obligations on cross-border transactions, explain the heightened IRS oversight in this area, and present best practices for improving compliance and preparing for audits.


The IRS is significantly ramping up enforcement of required withholding of tax from cross-border business transactions. How significantly? Proper reporting and withholding of U.S.-sourced fixed, determinable, annual or periodic (FDAP) income was elevated to Tier 1, the IRS' highest priority.

Form 1042 and 1042-S filers must anticipate where the new IRS audit teams will focus as they scrutinize payments to foreign entities and individuals. A new Internal Revenue Service Manual provision reveals its targeted interest in certain industries and specific payments like original issue discounts.

A proactive approach to improving withholding compliance on cross-border payments and to planning your company's positions in withholding audits will go a long way toward ensuring proper compliance and avoiding interest and penalties.

Listen as our expert panel analyzes the cross-border withholding challenges and the associated IRS enforcement initiative and offers alternatives for remedial actions and advance planning.



  1. Overview of IRS Actions in Cross-Border Withholding Enforcement
    1. IRS Voluntary Compliance Program (VCP)
    2. IRM audit manual provisions
    3. Withholding tax elevated to Tier I level
  2. Best Practices to Improve Compliance and Minimize Audit Risks
    1. Detailed review of current withholding practices
    2. Remedial measures to correct deficiencies
    3. Use IRM audit guidelines to conduct internal audit
    4. Experience of participants in VCP
    5. Preparing for an IRS audit
  3. Potential Changes in Withholding Transactions
    1. Qualified intermediaries
    2. Obama’s proposals for withholding agents


The panel will review these and other key questions:

  • What industries are primary targets of the IRS audit initiatives?
  • What transactions will be given heightened scrutiny in an audit?
  • Why is the IRS focusing heavily on audits of financial institutions' withholding?
  • What information and documentation will companies need to produce in an audit to justify compliance with their withholding obligations?


Cyrus Daftary
Cyrus Daftary

Burt Staples & Maner

He specializes in international taxation and regulatory compliance. He has extensive experience with the United States...  |  Read More

Laurie Hatten-Boyd
Laurie Hatten-Boyd

She is a Principal in KPMG’s Information Reporting Practice and specializes in cross-border withholding and...  |  Read More

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