Updated IRS FAQs – QI Due Dates for Compliance Certifications and Period Review Year Selection

The IRS has updated two FAQs on the Frequently Asked Questions web page for qualified intermediaries (QIs), withholding foreign partnerships (WFPs) and withholding foreign trusts (WFTs). The updated FAQs (Q. 9 and Q. 10 under the section on Certifications and Periodic Reviews) provide guidance on the due dates for selecting a periodic review year, periodic review waiver requests and certifications of effective internal controls for the 3-year period ending December 31, 2019. The first due date for certification (and selecting the review year) will be July 1, 2020, and thus, in a related announcement, the IRS alerted QIs, WFPs and WFTs that they should ensure all filings (including Forms 1042, 1042-S, 945, 1099 and 8966) and related payments are up-to-date.

Under their agreements with the IRS, the responsible officer of QIs, WFPs and WFTs must periodically provide compliance certifications to the IRS, together with certain information gathered as a result of a periodic review. The certification period generally runs for three calendar years, with the first certification period ending at the end of the third full year after the relevant QI or WFP/WFT Agreement is effective. The QI, WFP, or WFT must select one of those three full calendar years in the certification period as the subject of a "periodic review" and include the results of the review in its compliance certification. In some cases, though, the QI/WFP/WFT can apply for a waiver of the periodic review.

The two updated FAQs generally apply to QIs, WFPs and WFTs with agreements effective after 1/1/2016 and before 1/2/2017. The FAQs provide that responsible officers of such QIs/WFPs/WFTs must make their selection for the periodic review year by July 1, 2020. If the periodic review year selected is 2017 or 2018, the certification is also due July 1, 2020. If the periodic review year selected is 2019, the due date for the certification is extended to December 31, 2020. These actions are generally conducted through the IRS QI/WFP/WFT Application and Account Management System.

QIs/WFPs/WFTs applying for a waiver of periodic review must initially select 2017 as the periodic review year and submit the certification and waiver request by July 1, 2020. If the waiver request is approved, no periodic review would be required for that year. If the waiver request is subsequently denied, the QI/WFP/WFT can select any other year in the certification period for periodic review and would have at least 6 months from the date of waiver denial to complete the review and resubmit the certification.

As these due dates are fast approaching, responsible officers at QIs, WFPs and WFTs may find it an opportune time to assess the status of their periodic reviews and internal tax due diligence, withholding and reporting procedures and controls so that there are no surprises at certification time.

The IRS QI/WFP/WFT Frequently Asked Questions page may be found here: https://www.irs.gov/businesses/corporations/qualified-intermediary-general-faqs#Certifications

Posted 19 February 2020 by William Sheridan, Managing Director, Tax Solutions, S&P Global Market Intelligence

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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.