Updated FAQs for QI / WP / WT
Updated FAQs for QI / WP / WT
The IRS updated a set of “frequently asked questions” (FAQs) concerning qualified intermediaries (QI), withholding foreign partnerships (WP), and withholding foreign trusts (WT).
The updated FAQs (Q1 and Q9) concern the topic “Certifications and Periodic Reviews.”
Read text of the updated FAQs
Q1. Can a QI that is a QDD apply for a waiver of the periodic review with respect to its QI activities that are not QDD activities if its applicable certification period ends before calendar year 2023 and it otherwise meets the requirements of section 10.07 of the QI agreement?
A1. Yes. Section 10.07 of the QI agreement provides that a QI may apply for a waiver of the periodic review requirement if it is a QI that is not acting as a QDD and it meets the other requirements of section 10.07. Under Notice 2020-2, 2020-3 I.R.B. 327, a QI that is a QDD is not required to perform a periodic review with respect to its QDD activities for a certification period ending in any calendar year prior to 2023. Also see FAQ Q19 under the heading “Certifications and Periodic Reviews” for information regarding the periodic certification required of a QDD for calendar years before 2023. A QI that is a QDD (whether or not it acted as a QDD) may, however, still be required to conduct a periodic review of its QI activities that are not QDD activities for those years. Thus, the IRS will permit a QI that is a QDD and that has a certification period ending in any calendar year before 2023 to apply for a waiver of the periodic review when it otherwise meets the requirements of section 10.07 of the QI agreement with respect to its QI activities that are not QDD activities (including when the QI has no non-QDD activities during the certification period). To request a waiver, the QI should complete Parts 1 and 2 of the certification taking into account both its QDD and non-QDD activities. The QI should refer to FAQ Q9 under the heading “Certifications and Periodic Reviews” regarding the year to indicate as the periodic review year in the case of a QI applying for a waiver. After completing parts 1 and 2, in some instances, the system will then take the user to Part 3 (Waiver). The QI should complete Part 3 taking into account only non-QDD QI activity. In Part A (step 1 of 3 - Eligibility for Waiver) the QI should check the box titled "QI is an FFI that is not also acting as a QDD." The QI should complete the remainder of Part 3 as it applies to the QI. The system will then take the QI to Part 7 (Additional Information). There, the QI should attach a document that states the QI is a QDD applying for a waiver with respect to its non-QDD activities and then submit the waiver application.
In most instances where a QI that is a QDD applies for a waiver, the system will, however, bypass Part 3 and take the user to Part 4 (Periodic Review: QI Factual Information). If this occurs, the user should then complete part 4 as follows:
1. The QI must answer “no” to the following two questions:
Did QI use an external reviewer to conduct any portion of its periodic review?
Did QI use an internal reviewer to conduct any portion of its periodic review?
2. The QI must answer the following two questions as it applies to their operation for the calendar years covered by the certification cycle:
Did QI assume primary chapters 3 and 4 withholding responsibility for any accounts for the calendar year reviewed provided on the previous page?
Did QI assume primary Form 1099 reporting and backup withholding responsibility for any accounts for the calendar year provided on the previous page?
3. The QI should answer “not applicable” to the following question:
Did QI use a statistical sampling method in conducting the review of its accounts?
4. The QI should answer all questions requiring a numeric response (e.g., number of accounts, amounts) with zeroes.
5. The QI should skip text boxes that allow the QI to provide further explanations.
6. The system will then guide the QI to Part 6 (Substitute Interest). The QI should answer all questions with zeroes.
The system will then take the QI to Part 7 (Additional Information). There, the QI should attach a document that states the QI is a QDD applying for a waiver with respect to its non-QDD activities. The document should also list all the questions from Part III (Waiver of the Periodic Review) of Appendix I to the QI Agreement, along with the QI’s answers to those questions, considering only non-QDD activities. The QI will then be guided through the normal sequence of answer, review, and submission.
If the waiver is accepted, the QI will receive a confirmation message on its home page. If the waiver application is not accepted upon initial review, the QI will be contacted by the QI team.
Q9. When is the deadline for QI/WP/WT entities, with a certification due date of July 1, 2021, to select the periodic review year of their certification?
A9. All QI/WP/WT entities with a periodic certification due date of July 1, 2021, which includes entities with an agreement effective date later than 1/1/2017 and earlier than 1/2/2018, must select the periodic review year of their certification period by July 1, 2021. This includes those entities selecting 2020 as their periodic review year. This FAQ does not apply to termination certifications.
If a QI/WP/WT entity is applying for a waiver of the periodic review when making its periodic certification, it must select 2018 for its periodic review year, complete Parts I, II, and III of the certification and submit its waiver application by July 1, 2021. The entity will not be required to perform a periodic review if its waiver application is approved.
The IRS will notify the entity when a request for a waiver of the periodic review is approved or denied. If such request is denied with less than six months remaining before the certification due date, including any extensions, the entity will be granted a six-month extension from the date of denial of the waiver to complete the periodic review and resubmit the certification. At that time the entity may select a year other than 2018 as its periodic review year. If the entity encounters any issues modifying the year the entity should contact the FI Team at firstname.lastname@example.org. The resubmitted certification should include a completed Part IV and Part VI (if applicable).
QI/WP/WT entities should consult Publication 5262, Qualified Intermediary, Withholding Foreign Partnership, and Withholding Foreign Trust Application & Account Management User Guide PDF before beginning their certification on the system to verify that their account login credentials are up to date and for login assistance, if needed. QI/WP/WT entities should also reference additional FAQs under the heading Certifications and Periodic Reviews for answers to further questions.
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