NRA information reporting.

At a recent meeting of the Information Reporting Program Advisory Committee, IRS personnel emphasized the Service's increased interest in nonresident alien (NRA) reporting and announced two programs applicable to colleges, universities and financial institutions with respect to compliance in the NRA reporting area.

The IRS's increased interest in NRA reporting is a result of its determination that many payments made to NRAs are either not reported or are reported incorrectly.

* Colleges and universities: Due to the complexity of withholding tax and reporting issues affecting foreign students and professors, many colleges and universities have inadvertently been noncompliant in this area. Toward correcting these past errors, the IRS will issue a revenue procedure within the next few months announcing a Voluntary Compliance on Alien Withholding Program. Under this program, universities and colleges will be able to avoid penalties for incorrect reporting by voluntarily amending returns. They will also be able to enter into installment agreements to pay outstanding tax liabilities resulting from corrected filings.

* Financial institutions: In the past, few of the Forms 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, filed by banks and brokerage houses have been examined by the Service. To determine whether financial institutions are properly withholding from and reporting payments made to NRAs, the IRS will begin, in the near future, to increase the number of Forms 1042 they examine for colleges, universities and financial institutions. These examinations will include a review of the income and exemption codes reported, treaty rates applied and the presence of completed exemption forms.