A proposal by the Internal Revenue Service, published in Monday's Federal Register, would force banks with foreign customers to fill out two new tax forms.
Form W-8 would help the government track foreign depositors by requiring a bank to indicate that a customer is a noncitizen.
Banks investing in bonds in a fiduciary capacity for foreigners also would have to fill out Form 1001, certifying the investor is a citizen of a country that has a tax treaty with the United States. The IRS will accept public comment on the proposal until July 22.
"This would be bad news for the back office of any bank because they've already developed their own systems to keep track of these interest payments," said Richard Andersen, a partner at Jones, Day, Reavis & Pogue, New York City.