IRS communication is not getting any easier for QIs
Published: August 16, 2021
For Qualified Intermediaries (QIs) around the world, communication with the IRS was already a difficult endeavour. The IRS still largely communicates via paper mail which can take weeks to arrive and sometimes well past the requested timeframe for the QI to respond. Locating a fax machine can be difficult for QI staff in countries that moved into the digital age years ago. Earlier this year, QIs were shocked to discover that the IRS Instructions to Form 1099 and 1042-S were updated to mandate that extension requests for statements to payees could only be made by fax machine where previously these requests could be mailed in on paper.
TCCs and IRS E-Services - is going digital a good thing?
Starting in September 2021, the IRS is making changes to how TCCs can be applied for as they try to move away from paper and into a secure and digital world. Moving away from paper and fax is a welcome move, but the move towards digital has really only been made available to US taxpayers (and not QIs which usually have limited US connection).
What’s a TCC?
A TCC is a Transmitter Control Code. Parties that wish to submit IRS information returns (on behalf of themselves or on behalf of others) must obtain one before they can file such returns. For example, if a service provider that files Forms 1042-S wishes to file on behalf of 10 clients then they will need 1 TCC in order to make the submissions. In another example, if a QI wishes to submit their own Form 1042-S to the IRS then they need 1 TCC. In another example, if a QI has different 5 different business units and each wishes to separately file their Forms 1042-S with the IRS then they will 5 TCCs. Starting in September 2021, the IRS will only allow for TCC applications to be submitted through their secure digital portal called E-Services.
Why can’t QIs use IRS E-Services?
Well, they can - if they have a person on their staff that happens to be a US citizen or resident with a taxpayer filing history (e.g. the US citizen has filed US tax returns under their Social Security Number). Additionally, to get access to the system in the most efficient way, that staff needs to be either an attorney or a Certified Public Accoutant (CPA). There are a few limited ways around this but they tend to lead no where. As you can see in the link above, to create an account with IRS E-Services the person must have an SSN, a current US tax filing history, a US financial account, and a US mobile number that can access text messaging. Most QIs will be hard pressed to find someone on their staff that both a) meets these requirements and b) is willing to create an account in their personal name and be responsible for accessing the portal. Creating an E-Services account is very time consuming and can take 6+ weeks or longer in some cases (assuming nothing gets lost or crossed in the paper mail, which it frequently does for QIs).
Are there any other benefits to using IRS E-Services?
Absolutely. It is critical that QIs have access to IRS Transcripts regarding their accounts (Form 945 and 1042 transcripts) in order to perform their reconciliations every year. This way they can confirm their payment records against what the IRS has (which frequently do not match). This mitigates notices/disputes/fixes later. In a non-digital world, if you want a copy of a transcript then you must call the IRS and request it be faxed or paper mailed. During the call, the QI may staff need to fax in a copy of a signed Power of Attorney (IRS Form 2848) to prove they have the capacity to speak on behalf of the QI. With the digital IRS E-Services solution, you can simply login and download any transcript that you need. This saves a lot of headache and time on the phone, or waiting for paper mail to arrive weeks late.
So for QIs - what now?
Most QIs will not face any imminent trouble. Most QIs already have the TCCs that they need in order to operate. That being said, sometimes QIs open new subsidiaries or undergo organisational restructuring which could mean that they need to apply for a TCC sometime in the future. For example, all Form 1042-S reporting may be centralised among 5 business units but then it is decided that all 5 business units will start file separately, then new TCCs must be obtained for the new transmitters.
QIs should consider what they will do going forward with this change, either by locating a qualified staff to create an account (and start that process today) or by hiring a third-party service provider to act on their behalf. Industry groups have raised this issue to the IRS but it is not a high priority for them to fix the issue.
How can Dune Consultants help?
We already have an IRS E-Services account and can act on your behalf to apply for TCCs or to access the IRS Transcript Delivery Service. We simply have to execute an IRS Power of Attorney (Form 2848) and shortly thereafter we can begin applying for TCCs or downloading transcripts on your behalf. Contact us today to discuss at info@duneconsultants.com.
