Qualified Intermediary – IRS view
So basically, through the “know your client” rules, the IRS provides the few perks listed above – pooled rate and reduced withholding rate, and the QI must receive valid W8’s or W9’s in order to confirm to the IRS that there are no Americans pretending to be foreign and avoid paying taxes. For performing this duty for the IRS, you must also have performed 2 external audits and a yearly internal audit of the QI program.
If found in violation of this agreemnt, there is a fine of up to $100,000 per offense.
Make sure to keep all records in order – provide the IRS with one main contact for the QI program and have your yearly internal audits performed. Charging extra to clients for being their QI makes sense in order to cover the costs of the external audits.
More to come…
It’ s been hard getting to post here because I want to add technical content, but in my tax group, we’ve been dealing with smaller, less technical issues, such as discrepancies from the CRA, a change in T5 reporting resulting in FN numbers being given to businesses which transfer agents will need in order to report on their behalf, more QI stuff and changes to the online W-8BEN form.
All fun, just different.
I am working on a presentation outlining the responsibilities of a Qualified Intermediary in Canada.