January 2019 JD Supra
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Is it time for Foreign Financial Institutions to hire IRS Representation? published by JD Supra on 1/23/19.

The Responsible Officer (RO) of a Participating Foreign Financial Institution (PFFI) or Reporting Model 2 FFI is required to

file the FFI’s FATCA certification of an Entity’s preexisting accounts (COPA) and its Periodic Certification (PC) relating to an Entity’s compliance with various FATCA requirements by December 15, 2018.  This is the first round of required FATCA Certifications of Foreign Financial Institutions (FFIs).

FATCA Certifications will be challenging

A RO has the responsibility of ensuring and collecting supporting information to substantiate a FFI’s IRS certification, and with notifying the IRS regarding FATCA compliance material failures. A RO, with his/her many responsibilities and obligations, is the only person authorized to act on behalf of a FFI to certify its FATCA status. A RO ought to keep in mind that:   

  • FATCA certifications must be made online through the FATCA registration system.
  • A certification cannot be edited once it is submitted.
  • All displayed questions are mandatory and must be answered.
  • If unable to complete the certification, a RO is indicating that the reporting FFI is not compliant with its FATCA obligations.  
  • ROs are encouraged to utilize all of the time provided to complete a certification, rather than “not certify” because certain necessary activities are not completed.  
  • All ROs should review Draft FATCA Certifications that apply to a RO’s entity in order to gather information and confirm that certain actions are taken.  

There will be mistakes made by the FFIs and the IRS will begin sending NOTICES

FFIs and their ROs could face burdensome IRS Notices. FFIs ought to determine if they are equipped with the FATCA tools to respond to IRS inquiries regarding:

  • requests for additional information
  • mistake notifications
  • lack of clarification notifications
  • inability to prove FATCA compliance notifications
  • lack of agreement with remediation plan notifications
  • lack of reserve account notification

FFIs can designate a CPA or an Enrolled Agent or an Attorney as its IRS Authorized Representative

FFIs can utilize IRS Form 2848, Power of Attorney and Declaration of Representative to designate an IRS Authorized Representative (AR).  Having an AR permits an FFI to:

  • Be represented before the IRS by a qualified U.S. tax practitioner.
  • Be represented in tax matters that include audit and appeal matters, collection issues, and penalty abatement requests.
  • Reduce burdens associated with responding to IRS notices as the Representative is notified as the same time as the FFI when notices are received from IRS service centers. Since the Initial contact for examinations (office and field) is only done by mail, the Representative is properly notified.  
  • Reduce the burden of obtaining IRS related reports, finding copies and IRS transcripts. The  representative can obtain transcripts directly from the IRS.
  • Direct an unsolicited IRS call to its Representative.  
  • Have the Representative communicate with the IRS on behalf of an FFI regarding the FFIs rights, privileges, or liabilities under laws and regulations administered by the IRS.
  • Be represented at conferences, hearings, or meetings with the IRS.
  • Have the Representative prepare, file or submit documents, or advise on the preparation, filing or submission of documents, including tax returns, with the IRS on behalf of an FFI.
  • Obtain written tax advice on one or more Federal tax matters.

Don’t be a Victim of your own making

FFIs ought to consider eliminating the risk of not being able to respond to IRS Notices by consulting and appointing a specialized FATCA Tax Representative to represent them before the IRS.  If an FFI is not able to respond to an IRS Notice, the FFI could jeopardize compliance with its obligations under FATCA. The consequences of being non-compliant may include revocation of an FFIs FATCA compliant status and the FFIs Global Intermediary Identification Number (GIIN) and being removed from the FFI list.