For those financial institutions (FIs) who submit their FATCA reporting directly to the U.S. Internal Revenue Service (IRS), the March 31, 2021 deadline is approaching. Have you downloaded the IRS’ new public key and checked to see if your digital certificate is current?
What Is IDES?
Certain FIs transmit data directly to the IRS through the International Data Exchange Service (IDES). Depending on the amount of data to be submitted and an FI’s in-house staffing, the FI will either submit the data itself to the IRS or engage a third-party service provider who is specialized in electronic FATCA reporting.
Which Entities Use IDES?
The following types of entities may be required to undertake FATCA reporting through IDES:
Participating Foreign Financial Institution (PFFI)
U.S. branch of an FFI not treated as a U.S. person
Registered Deemed Compliant FFI (RDCFFI)
Related entity or branch described in an applicable Model 2 IGA
Reporting Model 2 FFI
Qualified Intermediary (QI), Withholding Foreign Partnership (WP), or Withholding Foreign Trust (WT)
Direct Reporting Non-Financial Foreign Entity (NFFE)
The IRS public key is a certificate that can be downloaded from the IDES enrollment site and must be included when you transmit FATCA data to the IRS through IDES. Both the IRS public key and your company’s digital certificate have expiration dates. The IRS replaced its public key for FATCA filing on December 14, 2020. You will not be able to submit Y2020 data to the IRS until you download the new IRS Public Key from IDES.
Prior to submitting the IRS Form 8966 data in a standard XML schema format, it is necessary to obtain a Digital Certificate from one of the following IRS Approved Certificate Authorities:
Links to each of these companies can be found on the IRS site. The purpose of the certificate is for the certificate authority to confirm the identity of the person sending data to the IRS.
IDES Enrollment Process
Once you have obtained a valid digital certificate, you can start the IDES enrollment process. Through this process, you will:
Create a user profile and account.
Validate your entity’s GIIN.
Enter your digital certificate.
Receive an email with enrollment approval and instructions or a secure file transfer protocol (SFTP) link.
Third Party Service Providers
Depending on your in-house capabilities and amount of FATCA/CRS reporting, it may be more cost effective to engage a third party to assist you with your reporting through IDES and/or through local country portals. It is important to assess your in house FATCA/CRS knowledge prior to choosing a reporting service provider. There are a number of excellent companies, but pricing may be related to how much guidance they are able to provide you through the process.
I have a diverse group of clients with varying levels of FATCA/CRS expertise. Some clients rely on their own in-house knowledge and/or my assistance during the preparation stages and only need a reporting service provider to check for problems and run the submission. Other clients expect the reporting service provider to have a robust advisory team to be available with substantive and technical knowledge. Doing a self-assessment of your firm’s needs is imperative before signing on the dotted line with a reporting company.