IRS Issues New Acceptance Agent Application Procedures
On December 19, 2005, the IRS issued Rev. Proc. 2006-10 providing guidance for qualifying as an acceptance agent and executing an agreement with the IRS to facilitate the issuance of certain IRS taxpayer identification numbers (TINs) to foreign nationals and foreign entities. Under Rev. Proc. 2006-10 all existing acceptance agent agreements will expire as of December 31, 2006. Therefore, acceptance agents subject to the expiring agreements must reapply to retain their acceptance agent status. All new acceptance agent agreements issued after the publication date of this revenue procedure in the IRS Bulletin 2006-2 on January 9, 2006 will be governed by these new procedures. Since the IRS estimates that 8,000 respondents are covered by this procedure, current acceptance agents wishing to continue their acceptance agent status should apply as soon as possible.
IRS procedures generally require foreign nationals who are not eligible to apply for a social security number (SSN) but require a TIN for tax administration purposes (such as claiming exemption from tax under an income tax treaty or being claimed as a dependent on a Form 1040 tax return) to submit a Form W-7 to apply for an individual taxpayer identification number (ITIN). Foreign entities are required to have an employer identification number (EIN) to submit a Form 1120F tax return or to claim exemption from withholding under an income tax treaty. They must submit a Form SS-4 to obtain an EIN. These applications may be submitted either directly to the IRS or with the assistance of an acceptance agent.
Acceptance agents are individuals or entities that enter into a written agreement with the IRS authorizing them to assist foreign nationals and foreign entities in completing the forms and submitting Forms W-7 (with required documentary evidence) and SS-4 (with supplemental schedules) to the IRS on behalf of the applicant.
Certified acceptance agents are authorized to submit a Form W-7 to the IRS on behalf of an ITIN applicant without furnishing supporting documentary evidence. When the certifying acceptance agent submits the Form W-7, they must certify that:
Certifying acceptance agents must describe the documentation on which they are relying. In appropriate cases, the IRS may request to see the documentation before issuing an ITIN.
The new acceptance agent application is a three-step process:
1. Form 13551 Application
Applicants may be either U.S. or foreign citizens or entities. Applicants eligible to become acceptance agents under this new procedure include:
Application to become an acceptance agent should be made on Form 13551, Application to Participate in the IRS Acceptance Agent Program. Form 13551 requires complete contact information for the applicant and the applicant’s EIN (which all must have), an SSN or ITIN if the applicant is an individual, and an Electronic Filing Identification Number (EFIN), if available. (Applicants lacking an EIN may apply for one using Form SS-4.) In addition, Form 13551 requires a description of:
Applicants for certifying acceptance agent status must so indicate in the application.
The IRS may request additional information upon review of the application.
Prior to submitting a formal application, a party interested in becoming an acceptance agent may request a telephone or in-person conference with the IRS to explore informally the benefits and burdens associated with the role of an acceptance agent. For example, the conference allows an opportunity for applicants for certifying acceptance agent status to discuss the scope of the agreement, corresponding obligations for the applicant that arise under the agreement, and the nature of documentation, record maintenance, and verification procedures that arise under the agreement. Requests for a pre-application conference can be made to the IRS, Wage and Investment Division at 404-338-8963.
Applicants assisting with tax return preparation may request to be included on a public list of acceptance agents published periodically by the IRS.
2. Suitability Check
Generally, the IRS will determine whether the applicant qualifies to become an acceptance agent or certifying acceptance agent based on the following suitability background checks:
Exceptions to these suitability checks include financial institutions, and colleges and universities as described above as well as casinos. However, the IRS may consider the tax filing history of an entity submitting an application in determining suitability. There are also exceptions for federal agencies and applicants who have passed the suitability check for Electronic Return Origination (ERO) status and who remain in good standing with the IRS.
3. Negotiation of the Agreement
If an applicant is approved as an acceptance agent, the IRS will provide written instructions to the applicant regarding the procedures for entering into the acceptance agent agreement with the IRS.
Terms and Conditions
The terms and conditions of the acceptance agent agreement will vary depending upon the applicant’s professional status, organizational status, and place of residence or organization. Generally agreements will contain terms and conditions requiring the procedures to insure the proper administration of the TIN application process including assistance in completion of TIN application forms, IRS communication with the acceptance agent, submission of TIN applications, collection and review of required documentation, assisting taxpayers with a notification of change of status affecting SSN eligibility, and verification of compliance with the agreement.
Either party, within its own discretion, may terminate the agreement after delivery of a notice of termination to the other party. However, the IRS generally will not terminate an agreement unless the acceptance agent knowingly fails to comply with procedures required by the agreement or to perform any duty or obligation required by the agreement (including failure to exercise due diligence) and such failure constitutes material noncompliance, or the acceptance agent made a material misrepresentation on its Form 13551 application or on a TIN application. An acceptance agent may request that the IRS reinstate their acceptance agent agreement by submitting, within 30 days of termination a written explanation to the ITIN Program Office stating how the violation will be corrected and avoided in the future. The IRS must accept or reject the request, or make a counter-proposal, within 30 days of receipt of the request. The decision is not subject to appeal.
Additional Procedures for Certifying Acceptance Agents
The terms of a certifying acceptance agent agreement may vary from case to case depending upon such factors as local laws and practices, know-your-customer procedures, supervisory controls, and the types of internal controls and recordkeeping procedures in effect in the normal course of the business of the certifying agent.
Agreements with certifying acceptance agents will also include terms and conditions requiring the following procedures to insure the proper administration of their additional responsibilities including collection and review of required documentation, maintenance of records of required documentation, and IRS compliance checks of certifications.
Term of the Agreement
An acceptance agent agreement becomes effective on the date the agreement is signed by an authorized IRS representative and expires on December 31 of the fourth full calendar year after the year in which the agreement became effective. For example, acceptance agreements entered into in 2006 will expire on December 31, 2010. Acceptance agents must reapply at least six months prior to the expiration of their agreements in order to avoid a lapse in their acceptance agent status. Therefore, acceptance agents subject to current agreements who wish to maintain acceptance agent status should apply under this procedure by June 30, 2006.
Paula Singer, Esq., CEO of Windstar Technologies, Inc. and partner in the tax law firm, Vacovec, Mayotte & Singer, Newton, MA has over 25 years of experience providing advice and compliance services to employers on cross-border employment matters. For more information, visit www.windstar.com. For additional information, call 1-800-259-6398 or email: firstname.lastname@example.org
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