QI Responsible Officer Certification FAQ

Apart from rare exceptions, all ROs of QIs are required to perform the Periodic Certification of Effective Internal Controls or the Qualified Certification. The certification can only be performed by the QI’s RO.

The certification deadline is dependent on when the QI entered into its QI Agreement: For example, if the QI Agreement has been in place since January 1, 2016, the QIs initial certification period is the period from this date until December 31, 2018 (2016-2018). For those QIs, the deadline for the certification is July 1, 2019 (except if the QI elects to perform the Periodic Review for review year 2018 and specifies that review year before July 1, 2019 in the QI/WP/WT system. In that case, the deadline for the certification is December 31, 2019).
A QI's periodic certification period is the three-year-period after the last QI RO certification. If, for example, the QI certified the period before December 31, 2017 in their last certification, the following QI certification period will be the period from January 1, 2018 until December 31, 2020, which in turn has to be certified on July 1, 2021 (or December 31, 2021 respectively).

The IRS extended the deadline for QIs certifying the full three-year certification period 2021-2023. Responsible Officers of QIs with the certification period 2021-2023 which request a waiver or have a QI periodic review performed for years 2021 or 2022 will now have to perform the certification until September 1, 2024, (previously July 1, 2024). Equally, QIs with that certification period which have a QI periodic review performed for the year 2023 will now have to certify until March 1, 2025, (previously December 31, 2024). The extensions are automatic and require no further action by the QI.

You can (and should) verify your certification due date on the dashboard of the QI/WP/WT system under “Certification Due Date”.

If you are a Compliance QI of a Consolidated Compliance Group (CCG), please contact us for specific instructions.

Be advised that for the calendar years before 2027, QIs that are QDDs can fulfil the certification requirements by taking into account whether they made a good faith effort to comply with the section 871(m) regulations. To be able to do so, the QDD is required to retain information supporting such good faith effort. QDDs should therefore expect the IRS to request documentation on how they made a good faith effort to comply with the QDD requirements.

Formally, the QI certification can be initiated on the QI/WP/WT system under “QI, WP, or WT certification” in the Activity Center on the dashboard. The certification process mainly consists of checkboxes which need to be checked by the RO (and only the RO). 

In addition to adequately documenting the certification process, we strongly recommend that you make sure that you have supporting documentation on file to document the decisions made during the certifications. For example, the first statement of the certification of internal controls (Step 1 of Part 2) requires the RO to certify that the QI has established a compliance program that meets the requirements of the QI Agreement. If a RO certifies to this, we recommend sufficiently documenting how, when, and in what way such a program has been implemented and how it is being maintained.

Before starting the certification, you need to be aware and make sure that:

• You are able to log into the QI/WP/WT system and that the information contained in the system is current and accurate. If you are not able to log in, please contact the QI/WP/WT system support desk.
• You have verified that the QI Agreement has been renewed and the renewal status approved. You can verify the renewal status on the dashboard of the QI/WP/WT system under “Renewal of Agreement Information”. The “Renewal Status” should not be anything other than “Approved”.
• If you intend to apply for a Waiver of the Periodic Review for your QI, you have selected the first calendar year of your certification period as the year for the Periodic Review before starting the certification. Also refer to Question 8.

The QI/WP/WT system is very straightforward and will guide you through the certification process. Generally speaking,

• If you performed a periodic review, fill out Parts 1, 2, 4, 6, 7 & 8
• If you did not perform a periodic review and are applying for a waiver, fill out Parts 1, 2, 3, 6, 7 & 8.

Part 5 for QDDs has been postponed until the next certification.

In Step 1 of the Certification (Part 2), certify ONLY those statements that you can either

1. certify because you are able to certify that you fulfilled the requirements of the statement you have to confirm, OR

2. certify because the statement is not applicable to your QI.

If you cannot certify every statement in this step under either reason (1) or (2), you are required to perform a qualified certification and will by guided automatically to such a certification by the QI/WP/WT system.

Under (2), for example, you may certify statement number 5 (where the RO certifies with respect to PAI and agency accounts that they have provided documentation to review or a certification) if you do not have accounts held by PAIs or accounts where you apply the agency option. 

We have also received confirmation from the IRS that you can and should certify statement number 8 (where you certify that a Periodic Review in accordance with section 10.04 was conducted), even though you intend to apply for a waiver and have therefore not performed such a review.

For the QI certification 2021-2023 the IRS introduced Part 8 of the QI certification. In the updated QI Certification, the QIs are required to submit a reconciliation of Forms 1042 and 1042-S issued to and filed by the QI.

The IRS has provided additional guidance regarding the requirement to provide the reconciliation described in Appendix III to the QI Agreement (Part 8 of the certification). It confirmed that QIs performing the QI certification for the certification period from January 1, 2021 to December 31, 2023 will be required to provide the reconciliation for all three years of the certification period. Contrary to the guidance provided in the QI Agreement, the QIs will not be required to attach excel spreadsheets to their QI certification. Instead, the QIs will be required to insert the reconciliation data directly into fields shown in Part 8 of the certification. We remind that the reconciliation must reflect the last amended return filed. Therefore, to avoid any adjustments post-certification, we recommend scheduling the submission of the QI certification after filing the amendments to the 1042-S and 1042 returns if possible. If this is not feasible (e.g. because the Form 1042 has not yet been filed by September 1, 2024), QIs should update the certification by selecting the "Edit Certification" button in QAAMS and enter the final/amended numbers in Part 8 of the certification.

Furthermore, the IRS strongly encourages QI ROs to upload further documentation to support certifications and statements made during the certification.

Even though it is not mandatory to upload further files, we nevertheless recommend providing supporting documentation in the following instances:

• If there have been material failures and/or events of default, and the description made in the certification may not be sufficient and/or in need of further evidence or a remediation plan.
• If the Periodic Review was performed by using a sampling method other than the Safe Harbor Method.
• If the QI RO certifies for a Consolidated Compliance Group (CCG).

If the Periodic Review Report identified accounts where the QI underwithheld (for example due to uncured errors in documentation), you are required to amend the Form 1042-S/1042 reporting for the review year to report the underwithholding to the IRS, and to subsequently pay the amount to the IRS. 

You disclose the underwithholding and amendment in Step 3 of the Certification (Part 2), where you check “Yes” to confirm that you amended the Form 1042 based on the results of the Periodic Review, and in fields “Additional withholding required under chapter 3/4 based on results of periodic review” in Section “Withholding” of Part 4 of the certification. Please note that the amount you have to amend may not be that same as the amount of additional withholding, because the information disclosed in Part 4 of the certification is based on the review and not results obtained after curing.

If you are applying for a waiver, the IRS has indicated that you should select the first year of the certification period as the periodic review year before starting the certification. Should you have erroneously selected a different year as the periodic review year and apply for a waiver of performing a QI Periodic Review, we have received comments by the IRS that the waiver application will not be denied for (only) selecting the incorrect year.

You apply for a waiver of performing a QI Periodic Review in Part 3 of the certification. Check all the boxes that apply in Part A to verify the QI’s waiver eligibility. If you unable to check all the boxes in the eligibility part, you are not eligible to apply for a waiver and are required to perform a Periodic Review. Please also refer to Question 10 of this FAQ when certifying statement number 5 with respect to the periodic certifications and reviews required under FATCA.

Part B of the waiver application requires a RO to fill in the applicable data for the most recent calendar year. Please also take into consideration the following comments for Part B:

• In the first statement, you are required to provide the “total number of accounts”. The number of accounts is NOT the total number of accounts held by the QI, but instead the total number of accounts for which the QI acts as QI, or those accounts to which the QI has represented to be acting as QI. This rule applies to all the information you have to provide under Part B.

• Under Step 3 you are requested to indicate “the total number of such accounts that have valid documentation”. It is unclear what original number is referenced with “such”. We assume that the IRS wishes to know how many of the total number of account holders that received U.S. reportable payments or amounts (both U.S and non-U.S.) have valid documentation.

• Please note that all the information with respect to valid or invalid/no documentation must reflect the situation during the most recent calendar year within the certification and not the situation after curing.

This question has been answered by the IRS in its FAQ. If a waiver request is denied, the QI will be granted a six month extension from the date of denial of the waiver to complete the periodic review and resubmit the certification.

The QI RO Certification references in various sections the QI’s responsibilities under FATCA. For instance, Step 8 of the certification in Part 2 requires a QI RO to indicate the Chapter 4 eligibility of the QI and the certification type the QI as an FFI has made. 

As the FATCA certifications are not yet due, and due to the fact that for this period many QIs will certify under QI before they certify under FATCA, the IRS has indicated that the QI RO may indicate in Step 8 what type of FATCA certification the QI/FFI intends to make. The IRS stated that it will compare the statement made in the QI certification with the certification made under FATCA after both certifications have been performed by the respective ROs.

We assume that this approach is applicable to all elements of the QI certification where references to the QI’s FATCA compliance exist.

The QI Agreement distinguishes between so-called Material Failures and Events of Default. A Material Failure is generally a failure of the QI to fulfill the requirements of the QI Agreement (or the FATCA requirements). The QI Agreement provides an extensive list of possible failures under Section 10.03(B)(1). If you identify a Material Failure, you are required to disclose it during your certification either: 

1. as part of the certification of effective internal controls in Step 4 of Part 2 of the certification, if you have corrected the failure before the certification, or

2. as part of the Qualified Certification if the Material Failure has not been corrected yet or cannot be corrected and you are therefore rendered unable to certify Statement 3 of the Certification of Effective Internal Controls in Step 1 of Part 2 of the certification.

An Event of Default occurs if the QI failed to perform any material duty or obligation required by the QI Agreement and the RO had actual knowledge of that failure, or should have known of the facts relevant to that failure to perform any material duty. There is an extensive (but not conclusive) list of Events of Default under Section 11.06 of the QI Agreement. Either the occurrence of an Event of Default or not correcting a Material Failure requires the RO to perform a Qualified Certification (which in turn makes the QI ineligible to apply for a waiver of performing a Periodic Review).

Distinguishing Material Failures from Events of Default will require a QI RO to make judgement calls. For example, a failure to withhold an amount required to be withheld could be considered a material failure under 10.03(B)(1)(iv)(a) or an Event of Default under 11.06(B). The difference in wording between the two referenced paragraphs is the word “material”, which is not defined in the QI Agreement. It is therefore within the responsibility (but also within the authority) of the RO to decide what is “material” and adequately disclose to the IRS the occurrence in a way the RO deems necessary and adequate.

The IRS has made very clear that disclosing a failure is better than omitting it and having the IRS find out afterwards. We recommend that you disclose any event during the certification period which might have had an effect on your compliance with the QI Agreement (or your FATCA requirements, if applicable). Our message is that if you are in doubt whether to disclose an event or not, you should disclose it. 

If events occurred during the certification period which you deem necessary to disclose, you can do so by either making a qualified certification (if the event is considered an Event of Default or could not be corrected before the certification), or, if it is a material failure, by disclosing the failure in Step 4 of Part 2 of the certification. If you have supporting documentation, we recommend attaching it in Part 7 of the certification.

A Material Failure or Event of Default under FATCA may have a significant impact on the QI Certification in that:

• It may render you unable to make the required certification under Statement 3 of the Certification of Effective Internal Controls (Step 1, Part 2).

• It may be considered a Material Failure under QI, as illustrated in 10.03(B)(1)(i) or 10.03(B)(1)(iv)(g) of the QI Agreement.

• It may be considered an Event of Default as illustrated in Section 11.06(F) of the QI Agreement.

• You must disclose that the QI had (or will have) a Qualified Certification under FATCA in Step 8 of Part 2 of the QI certification.

Please be advised that for all elements of the certification, a QI certifies its compliance with FATCA ONLY where it acts as QI. If, for example, you have FATCA failures on accounts for which you are not acting as QI, you are not required to include these failures in your QI certification. You will, however, have to consider them for your FATCA certification.