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Taxhow 1040x Publication 515 - Main Content Table of Contents Withholding of TaxWithholding Agent Withholding and Reporting Obligations Persons Subject to NRA WithholdingIdentifying the Payee Foreign Persons DocumentationBeneficial Owners Foreign Intermediaries and Foreign Flow-Through Entities Standards of Knowledge Presumption Rules Income Subject to NRA WithholdingSource of Income Fixed or Determinable Annual or Periodical Income (FDAP) Withholding on Specific IncomeEffectively Connected Income Income Not Effectively Connected Pay for Personal Services Performed Artists and Athletes (Income Codes 42 and 43) Other Income Foreign Governments and Certain Other Foreign Organizations U. Taxhow 1040x S. Taxhow 1040x Taxpayer Identification NumbersUnexpected payment. Taxhow 1040x Depositing Withheld TaxesWhen Deposits Are Required Adjustment for Overwithholding Returns RequiredJoint owners. Taxhow 1040x Electronic reporting. Taxhow 1040x Partnership Withholding on Effectively Connected IncomeWho Must Withhold Foreign Partner Publicly Traded Partnerships U. Taxhow 1040x S. Taxhow 1040x Real Property InterestForeign corporations. Taxhow 1040x Domestic corporations. Taxhow 1040x U. Taxhow 1040x S. Taxhow 1040x real property holding corporations. Taxhow 1040x Partnerships. Taxhow 1040x Trusts and estates. Taxhow 1040x Domestically controlled QIE. Taxhow 1040x Late filing of certifications or notices. Taxhow 1040x Certifications. Taxhow 1040x Liability of agent or qualified substitute. Taxhow 1040x Reporting and Paying the Tax Withholding Certificates Tax Treaty TablesTable 1 Table 2 Table 3 How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). Taxhow 1040x Withholding of Tax In most cases, a foreign person is subject to U. Taxhow 1040x S. Taxhow 1040x tax on its U. Taxhow 1040x S. Taxhow 1040x source income. Taxhow 1040x Most types of U. Taxhow 1040x S. Taxhow 1040x source income received by a foreign person are subject to U. Taxhow 1040x S. Taxhow 1040x tax of 30%. Taxhow 1040x A reduced rate, including exemption, may apply if there is a tax treaty between the foreign person's country of residence and the United States. Taxhow 1040x The tax is generally withheld (NRA withholding) from the payment made to the foreign person. Taxhow 1040x The term “NRA withholding” is used in this publication descriptively to refer to withholding required under sections 1441, 1442, and 1443 of the Internal Revenue Code. Taxhow 1040x In most cases, NRA withholding describes the withholding regime that requires withholding on a payment of U. Taxhow 1040x S. Taxhow 1040x source income. Taxhow 1040x Payments to foreign persons, including nonresident alien individuals, foreign entities, and governments, may be subject to NRA withholding. Taxhow 1040x NRA withholding does not include withholding under section 1445 of the Code (see U. Taxhow 1040x S. Taxhow 1040x Real Property Interest, later) or under section 1446 of the Code (see Partnership Withholding on Effectively Connected Income , later). Taxhow 1040x A withholding agent (defined next) is the person responsible for withholding on payments made to a foreign person. Taxhow 1040x However, a withholding agent that can reliably associate the payment with documentation (discussed later) from a U. Taxhow 1040x S. Taxhow 1040x person is not required to withhold. Taxhow 1040x In addition, a withholding agent may apply a reduced rate of withholding (including an exemption from withholding) if it can reliably associate the payment with documentation from a beneficial owner that is a foreign person entitled to a reduced rate of withholding. Taxhow 1040x Withholding Agent You are a withholding agent if you are a U. Taxhow 1040x S. Taxhow 1040x or foreign person that has control, receipt, custody, disposal, or payment of any item of income of a foreign person that is subject to withholding. Taxhow 1040x A withholding agent may be an individual, corporation, partnership, trust, association, nominee (under section 1446 of the Code), or any other entity, including any foreign intermediary, foreign partnership, or U. Taxhow 1040x S. Taxhow 1040x branch of certain foreign banks and insurance companies. Taxhow 1040x You may be a withholding agent even if there is no requirement to withhold from a payment or even if another person has withheld the required amount from the payment. Taxhow 1040x Although several persons may be withholding agents for a single payment, the full tax is required to be withheld only once. Taxhow 1040x In most cases, the U. Taxhow 1040x S. Taxhow 1040x person who pays an amount subject to NRA withholding is the person responsible for withholding. Taxhow 1040x However, other persons may be required to withhold. Taxhow 1040x For example, a payment made by a flow-through entity or nonqualified intermediary that knows, or has reason to know, that the full amount of NRA withholding was not done by the person from which it receives a payment is required to do the appropriate withholding since it also falls within the definition of a withholding agent. Taxhow 1040x In addition, withholding must be done by any qualified intermediary, withholding foreign partnership, or withholding foreign trust in accordance with the terms of its withholding agreement, discussed later. Taxhow 1040x Liability for tax. Taxhow 1040x   As a withholding agent, you are personally liable for any tax required to be withheld. Taxhow 1040x This liability is independent of the tax liability of the foreign person to whom the payment is made. Taxhow 1040x If you fail to withhold and the foreign payee fails to satisfy its U. Taxhow 1040x S. Taxhow 1040x tax liability, then both you and the foreign person are liable for tax, as well as interest and any applicable penalties. Taxhow 1040x   The applicable tax will be collected only once. Taxhow 1040x If the foreign person satisfies its U. Taxhow 1040x S. Taxhow 1040x tax liability, you are not liable for the tax but remain liable for any interest and penalties for failure to withhold. Taxhow 1040x Determination of amount to withhold. Taxhow 1040x   You must withhold on the gross amount subject to NRA withholding. Taxhow 1040x You cannot reduce the gross amount by any deductions. Taxhow 1040x However, see Scholarships and Fellowship Grants and Pay for Personal Services Performed , later, for when a deduction for a personal exemption may be allowed. Taxhow 1040x   If the determination of the source of the income or the amount subject to tax depends on facts that are not known at the time of payment, you must withhold an amount sufficient to ensure that at least 30% of the amount subsequently determined to be subject to withholding is withheld. Taxhow 1040x In no case, however, should you withhold more than 30% of the total amount paid. Taxhow 1040x Or, you may make a reasonable estimate of the amount from U. Taxhow 1040x S. Taxhow 1040x sources and put a corresponding part of the amount due in escrow until the amount from U. Taxhow 1040x S. Taxhow 1040x sources can be determined, at which time withholding becomes due. Taxhow 1040x When to withhold. Taxhow 1040x   Withholding is required at the time you make a payment of an amount subject to withholding. Taxhow 1040x A payment is made to a person if that person realizes income, whether or not there is an actual transfer of cash or other property. Taxhow 1040x A payment is considered made to a person if it is paid for that person's benefit. Taxhow 1040x For example, a payment made to a creditor of a person in satisfaction of that person's debt to the creditor is considered made to the person. Taxhow 1040x A payment also is considered made to a person if it is made to that person's agent. Taxhow 1040x   A U. Taxhow 1040x S. Taxhow 1040x partnership should withhold when any distributions that include amounts subject to withholding are made. Taxhow 1040x However, if a foreign partner's distributive share of income subject to withholding is not actually distributed, the U. Taxhow 1040x S. Taxhow 1040x partnership must withhold on the foreign partner's distributive share of the income on the earlier of the date that a Schedule K-1 (Form 1065) is provided or mailed to the partner or the due date for furnishing that schedule. Taxhow 1040x If the distributable amount consists of effectively connected income, see Partnership Withholding on Effectively Connected Income , later. Taxhow 1040x A U. Taxhow 1040x S. Taxhow 1040x trust is required to withhold on the amount includible in the gross income of a foreign beneficiary to the extent the trust's distributable net income consists of an amount subject to withholding. Taxhow 1040x To the extent a U. Taxhow 1040x S. Taxhow 1040x trust is required to distribute an amount subject to withholding but does not actually distribute the amount, it must withhold on the foreign beneficiary's allocable share at the time the income is required to be reported on Form 1042-S. Taxhow 1040x Withholding and Reporting Obligations You are required to report payments subject to NRA withholding on Form 1042-S and to file a tax return on Form 1042. Taxhow 1040x (See Returns Required , later. Taxhow 1040x ) An exception from reporting may apply to individuals who are not required to withhold from a payment and who do not make the payment in the course of their trade or business. Taxhow 1040x Form 1099 reporting and backup withholding. Taxhow 1040x    You also may be responsible as a payer for reporting on Form 1099 payments made to a U. Taxhow 1040x S. Taxhow 1040x person. Taxhow 1040x You must withhold 28% (backup withholding rate) from a reportable payment made to a U. Taxhow 1040x S. Taxhow 1040x person that is subject to Form 1099 reporting if any of the following apply. Taxhow 1040x The U. Taxhow 1040x S. Taxhow 1040x person has not provided its taxpayer identification number (TIN) in the manner required. Taxhow 1040x The IRS notifies you that the TIN furnished by the payee is incorrect. Taxhow 1040x There has been a notified payee underreporting. Taxhow 1040x There has been a payee certification failure. Taxhow 1040x In most cases, a TIN must be provided by a U. Taxhow 1040x S. Taxhow 1040x non-exempt recipient on Form W-9, Request for Taxpayer Identification Number and Certification. Taxhow 1040x A payer files a tax return on Form 945, Annual Return of Withheld Federal Income Tax, for backup withholding. Taxhow 1040x You may be required to file Form 1099 and, if appropriate, backup withhold, even if you do not make the payments directly to that U. Taxhow 1040x S. Taxhow 1040x person. Taxhow 1040x For example, you are required to report income paid to a foreign intermediary or flow-through entity that collects for a U. Taxhow 1040x S. Taxhow 1040x person subject to Form 1099 reporting. Taxhow 1040x See Identifying the Payee , later, for more information. Taxhow 1040x Also see Section S. Taxhow 1040x Special Rules for Reporting Payments Made Through Foreign Intermediaries and Foreign Flow-Through Entities on Form 1099 in the General Instructions for Certain Information Returns. Taxhow 1040x Foreign persons who provide Form W-8BEN, Form W-8ECI, or Form W-8EXP (or applicable documentary evidence) are exempt from backup withholding and Form 1099 reporting. Taxhow 1040x Wages paid to employees. Taxhow 1040x   If you are the employer of a nonresident alien, you generally must withhold taxes at graduated rates. Taxhow 1040x See Pay for Personal Services Performed , later. Taxhow 1040x Effectively connected income by partnerships. Taxhow 1040x   A withholding agent that is a partnership (whether U. Taxhow 1040x S. Taxhow 1040x or foreign) is also responsible for withholding on its income effectively connected with a U. Taxhow 1040x S. Taxhow 1040x trade or business that is allocable to foreign partners. Taxhow 1040x See Partnership Withholding on Effectively Connected Income , later, for more information. Taxhow 1040x U. Taxhow 1040x S. Taxhow 1040x real property interest. Taxhow 1040x   A withholding agent also may be responsible for withholding if a foreign person transfers a U. Taxhow 1040x S. Taxhow 1040x real property interest to the agent, or if it is a corporation, partnership, trust, or estate that distributes a U. Taxhow 1040x S. Taxhow 1040x real property interest to a shareholder, partner, or beneficiary that is a foreign person. Taxhow 1040x See U. Taxhow 1040x S. Taxhow 1040x Real Property Interest , later. Taxhow 1040x Persons Subject to NRA Withholding NRA withholding applies only to payments made to a payee that is a foreign person. Taxhow 1040x It does not apply to payments made to U. Taxhow 1040x S. Taxhow 1040x persons. Taxhow 1040x Usually, you determine the payee's status as a U. Taxhow 1040x S. Taxhow 1040x or foreign person based on the documentation that person provides. Taxhow 1040x See Documentation , later. Taxhow 1040x However, if you have received no documentation or you cannot reliably associate all or a part of a payment with documentation, then you must apply certain presumption rules, discussed later. Taxhow 1040x Identifying the Payee In most cases, the payee is the person to whom you make the payment, regardless of whether that person is the beneficial owner of the income. Taxhow 1040x However, there are situations in which the payee is a person other than the one to whom you actually make a payment. Taxhow 1040x U. Taxhow 1040x S. Taxhow 1040x agent of foreign person. Taxhow 1040x   If you make a payment to a U. Taxhow 1040x S. Taxhow 1040x person and you have actual knowledge that the U. Taxhow 1040x S. Taxhow 1040x person is receiving the payment as an agent of a foreign person, you must treat the payment as made to the foreign person. Taxhow 1040x However, if the U. Taxhow 1040x S. Taxhow 1040x person is a financial institution, you may treat the institution as the payee provided you have no reason to believe that the institution will not comply with its own obligation to withhold. Taxhow 1040x   If the payment is not subject to NRA withholding (for example, gross proceeds from the sales of securities), you must treat the payment as made to a U. Taxhow 1040x S. Taxhow 1040x person and not as a payment to a foreign person. Taxhow 1040x You may be required to report the payment on Form 1099 and, if applicable, backup withhold. Taxhow 1040x Disregarded entities. Taxhow 1040x   A business entity that is not a corporation and that has a single owner may be disregarded as an entity separate from its owner (a disregarded entity) for federal tax purposes. Taxhow 1040x The payee of a payment made to a disregarded entity is the owner of the entity. Taxhow 1040x   If the owner of the entity is a foreign person, you must apply NRA withholding unless you can treat the foreign owner as a beneficial owner entitled to a reduced rate of withholding. Taxhow 1040x   If the owner is a U. Taxhow 1040x S. Taxhow 1040x person, you do not apply NRA withholding. Taxhow 1040x However, you may be required to report the payment on Form 1099 and, if applicable, backup withhold. Taxhow 1040x You may assume that a foreign entity is not a disregarded entity unless you can reliably associate the payment with documentation provided by the owner or you have actual knowledge or reason to know that the foreign entity is a disregarded entity. Taxhow 1040x Flow-Through Entities The payees of payments (other than income effectively connected with a U. Taxhow 1040x S. Taxhow 1040x trade or business) made to a foreign flow-through entity are the owners or beneficiaries of the flow-through entity. Taxhow 1040x This rule applies for purposes of NRA withholding and for Form 1099 reporting and backup withholding. Taxhow 1040x Income that is, or is deemed to be, effectively connected with the conduct of a U. Taxhow 1040x S. Taxhow 1040x trade or business of a flow-through entity is treated as paid to the entity. Taxhow 1040x All of the following are flow-through entities. Taxhow 1040x A foreign partnership (other than a withholding foreign partnership). Taxhow 1040x A foreign simple or foreign grantor trust (other than a withholding foreign trust). Taxhow 1040x A fiscally transparent entity receiving income for which treaty benefits are claimed. Taxhow 1040x See Fiscally transparent entity , later. Taxhow 1040x In most cases, you treat a payee as a flow-through entity if it provides you with a Form W-8IMY (see Documentation , later) on which it claims such status. Taxhow 1040x You also may be required to treat the entity as a flow-through entity under the presumption rules, discussed later. Taxhow 1040x You must determine whether the owners or beneficiaries of a flow-through entity are U. Taxhow 1040x S. Taxhow 1040x or foreign persons, how much of the payment relates to each owner or beneficiary, and, if the owner or beneficiary is foreign, whether a reduced rate of NRA withholding applies. Taxhow 1040x You make these determinations based on the documentation and other information (contained in a withholding statement) that is associated with the flow-through entity's Form W-8IMY. Taxhow 1040x If you do not have all of the information that is required to reliably associate a payment with a specific payee, you must apply the presumption rules. Taxhow 1040x See Documentation and Presumption Rules , later. Taxhow 1040x Withholding foreign partnerships and withholding foreign trusts are not flow-through entities. Taxhow 1040x Foreign partnerships. Taxhow 1040x    A foreign partnership is any partnership that is not organized under the laws of any state of the United States or the District of Columbia or any partnership that is treated as foreign under the income tax regulations. Taxhow 1040x If a foreign partnership is not a withholding foreign partnership, the payees of income are the partners of the partnership, provided the partners are not themselves a flow-through entity or a foreign intermediary. Taxhow 1040x However, the payee is the partnership itself if the partnership is claiming treaty benefits on the basis that it is not fiscally transparent and that it meets all the other requirements for claiming treaty benefits. Taxhow 1040x If a partner is a foreign flow-through entity or a foreign intermediary, you apply the payee determination rules to that partner to determine the payees. Taxhow 1040x Example 1. Taxhow 1040x A nonwithholding foreign partnership has three partners: a nonresident alien individual; a foreign corporation; and a U. Taxhow 1040x S. Taxhow 1040x citizen. Taxhow 1040x You make a payment of U. Taxhow 1040x S. Taxhow 1040x source interest to the partnership. Taxhow 1040x It gives you a Form W-8IMY with which it associates Form W-8BEN from the nonresident alien; Form W-8BEN from the foreign corporation; and Form W-9 from the U. Taxhow 1040x S. Taxhow 1040x citizen. Taxhow 1040x The partnership also gives you a complete withholding statement that enables you to associate a part of the interest payment to each partner. Taxhow 1040x You must treat all three partners as the payees of the interest payment as if the payment were made directly to them. Taxhow 1040x Report the payment to the nonresident alien and the foreign corporation on Forms 1042-S. Taxhow 1040x Report the payment to the U. Taxhow 1040x S. Taxhow 1040x citizen on Form 1099-INT. Taxhow 1040x Example 2. Taxhow 1040x A nonwithholding foreign partnership has two partners: a foreign corporation and a nonwithholding foreign partnership. Taxhow 1040x The second partnership has two partners, both nonresident alien individuals. Taxhow 1040x You make a payment of U. Taxhow 1040x S. Taxhow 1040x source interest to the first partnership. Taxhow 1040x It gives you a valid Form W-8IMY with which it associates a Form W-8BEN from the foreign corporation and a Form W-8IMY from the second partnership. Taxhow 1040x In addition, Forms W-8BEN from the partners are associated with the Form W-8IMY from the second partnership. Taxhow 1040x The Forms W-8IMY from the partnerships have complete withholding statements associated with them. Taxhow 1040x Because you can reliably associate a part of the interest payment with the Form W-8BEN provided by the foreign corporation and the Forms W-8BEN provided by the nonresident alien individual partners as a result of the withholding statements, you must treat them as the payees of the interest. Taxhow 1040x Example 3. Taxhow 1040x You make a payment of U. Taxhow 1040x S. Taxhow 1040x source dividends to a withholding foreign partnership. Taxhow 1040x The partnership has two partners, both foreign corporations. Taxhow 1040x You can reliably associate the payment with a valid Form W-8IMY from the partnership on which it represents that it is a withholding foreign partnership. Taxhow 1040x You must treat the partnership as the payee of the dividends. Taxhow 1040x Foreign simple and grantor trust. Taxhow 1040x   A trust is foreign unless it meets both of the following tests. Taxhow 1040x A court within the United States is able to exercise primary supervision over the administration of the trust. Taxhow 1040x One or more U. Taxhow 1040x S. Taxhow 1040x persons have the authority to control all substantial decisions of the trust. Taxhow 1040x   In most cases, a foreign simple trust is a foreign trust that is required to distribute all of its income annually. Taxhow 1040x A foreign grantor trust is a foreign trust that is treated as a grantor trust under sections 671 through 679 of the Code. Taxhow 1040x   The payees of a payment made to a foreign simple trust are the beneficiaries of the trust. Taxhow 1040x The payees of a payment made to a foreign grantor trust are the owners of the trust. Taxhow 1040x However, the payee is the foreign simple or grantor trust itself if the trust is claiming treaty benefits on the basis that it is not fiscally transparent and that it meets all the other requirements for claiming treaty benefits. Taxhow 1040x If the beneficiaries or owners are themselves flow-through entities or foreign intermediaries, you apply the payee determination rules to that beneficiary or owner to determine the payees. Taxhow 1040x Example. Taxhow 1040x A foreign simple trust has three beneficiaries: two nonresident alien individuals and a U. Taxhow 1040x S. Taxhow 1040x citizen. Taxhow 1040x You make a payment of interest to the foreign trust. Taxhow 1040x It gives you a Form W-8IMY with which it associates Forms W-8BEN from the nonresident aliens and a Form W-9 from the U. Taxhow 1040x S. Taxhow 1040x citizen. Taxhow 1040x The trust also gives you a complete withholding statement that enables you to associate a part of the interest payment with the forms provided by each beneficiary. Taxhow 1040x You must treat all three beneficiaries as the payees of the interest payment as if the payment were made directly to them. Taxhow 1040x Report the payment to the nonresident aliens on Forms 1042-S. Taxhow 1040x Report the payment to the U. Taxhow 1040x S. Taxhow 1040x citizen on Form 1099-INT. Taxhow 1040x Fiscally transparent entity. Taxhow 1040x   If a reduced rate of withholding under an income tax treaty is claimed, a flow-through entity includes any entity in which the interest holder must treat the entity as fiscally transparent. Taxhow 1040x The determination of whether an entity is fiscally transparent is made on an item of income basis (that is, the determination is made separately for interest, dividends, royalties, etc. Taxhow 1040x ). Taxhow 1040x The interest holder in an entity makes the determination by applying the laws of the jurisdiction where the interest holder is organized, incorporated, or otherwise considered a resident. Taxhow 1040x An entity is considered to be fiscally transparent for the income to the extent the laws of that jurisdiction require the interest holder to separately take into account on a current basis the interest holder's share of the income, whether or not distributed to the interest holder, and the character and source of the income to the interest holder are determined as if the income was realized directly from the source that paid it to the entity. Taxhow 1040x Subject to the standards of knowledge rules discussed later, you generally make the determination that an entity is fiscally transparent based on a Form W-8IMY provided by the entity. Taxhow 1040x   The payees of a payment made to a fiscally transparent entity are the interest holders of the entity. Taxhow 1040x Example. Taxhow 1040x Entity A is a business organization organized under the laws of country X that has an income tax treaty in force with the United States. Taxhow 1040x A has two interest holders, B and C. Taxhow 1040x B is a corporation organized under the laws of country Y. Taxhow 1040x C is a corporation organized under the laws of country Z. Taxhow 1040x Both countries Y and Z have an income tax treaty in force with the United States. Taxhow 1040x A receives royalty income from U. Taxhow 1040x S. Taxhow 1040x sources that is not effectively connected with the conduct of a trade or business in the United States. Taxhow 1040x For U. Taxhow 1040x S. Taxhow 1040x income tax purposes, A is treated as a partnership. Taxhow 1040x Country X treats A as a partnership and requires the interest holders in A to separately take into account on a current basis their respective shares of the income paid to A even if the income is not distributed. Taxhow 1040x The laws of country X provide that the character and source of the income to A's interest holders are determined as if the income was realized directly from the source that paid it to A. Taxhow 1040x Accordingly, A is fiscally transparent in its jurisdiction, country X. Taxhow 1040x B and C are not fiscally transparent under the laws of their respective countries of incorporation. Taxhow 1040x Country Y requires B to separately take into account on a current basis B's share of the income paid to A, and the character and source of the income to B is determined as if the income was realized directly from the source that paid it to A. Taxhow 1040x Accordingly, A is fiscally transparent for that income under the laws of country Y, and B is treated as deriving its share of the U. Taxhow 1040x S. Taxhow 1040x source royalty income for purposes of the U. Taxhow 1040x S. Taxhow 1040x -Y income tax treaty. Taxhow 1040x Country Z, on the other hand, treats A as a corporation and does not require C to take into account its share of A's income on a current basis whether or not distributed. Taxhow 1040x Therefore, A is not treated as fiscally transparent under the laws of country Z. Taxhow 1040x Accordingly, C is not treated as deriving its share of the U. Taxhow 1040x S. Taxhow 1040x source royalty income for purposes of the U. Taxhow 1040x S. Taxhow 1040x -Z income tax treaty. Taxhow 1040x Foreign Intermediaries In most cases, if you make payments to a foreign intermediary, the payees are the persons for whom the foreign intermediary collects the payment, such as account holders or customers, not the intermediary itself. Taxhow 1040x This rule applies for purposes of NRA withholding and for Form 1099 reporting and backup withholding. Taxhow 1040x You may, however, treat a qualified intermediary that has assumed primary withholding responsibility for a payment as the payee, and you are not required to withhold. Taxhow 1040x An intermediary is a custodian, broker, nominee, or any other person that acts as an agent for another person. Taxhow 1040x A foreign intermediary is either a qualified intermediary or a nonqualified intermediary. Taxhow 1040x In most cases, you determine whether an entity is a qualified intermediary or a nonqualified intermediary based on the representations the intermediary makes on Form W-8IMY. Taxhow 1040x You must determine whether the customers or account holders of a foreign intermediary are U. Taxhow 1040x S. Taxhow 1040x or foreign persons and, if the account holder or customer is foreign, whether a reduced rate of NRA withholding applies. Taxhow 1040x You make these determinations based on the foreign intermediary's Form W-8IMY and associated information and documentation. Taxhow 1040x If you do not have all of the information or documentation that is required to reliably associate a payment with a payee, you must apply the presumption rules. Taxhow 1040x See Documentation and Presumption Rules , later. Taxhow 1040x Nonqualified intermediary. Taxhow 1040x   A nonqualified intermediary (NQI) is any intermediary that is a foreign person and that is not a qualified intermediary. Taxhow 1040x The payees of a payment made to an NQI are the customers or account holders on whose behalf the NQI is acting. Taxhow 1040x Example. Taxhow 1040x You make a payment of interest to a foreign bank that is a nonqualified intermediary. Taxhow 1040x The bank gives you a Form W-8IMY and the Forms W-8BEN of two foreign persons, and a Form W-9 from a U. Taxhow 1040x S. Taxhow 1040x person for whom the bank is collecting the payments. Taxhow 1040x The bank also associates with its Form W-8IMY a withholding statement on which it allocates the interest payment to each account holder and provides all other information required to be on the withholding statement. Taxhow 1040x The account holders are the payees of the interest payment. Taxhow 1040x You should report the part of the interest paid to the two foreign persons on Forms 1042-S and the part paid to the U. Taxhow 1040x S. Taxhow 1040x person on Form 1099-INT. Taxhow 1040x Qualified intermediary. Taxhow 1040x   A qualified intermediary (QI) is any foreign intermediary (or foreign branch of a U. Taxhow 1040x S. Taxhow 1040x intermediary) that has entered into a qualified intermediary withholding agreement (discussed later) with the IRS. Taxhow 1040x You may treat a QI as a payee to the extent the QI assumes primary withholding responsibility or primary Form 1099 reporting and backup withholding responsibility for a payment. Taxhow 1040x In this situation, the QI is required to withhold the tax. Taxhow 1040x You can determine whether a QI has assumed responsibility from the Form W-8IMY provided by the QI. Taxhow 1040x   A payment to a QI to the extent it does not assume primary NRA withholding responsibility is considered made to the person on whose behalf the QI acts. Taxhow 1040x If a QI does not assume Form 1099 reporting and backup withholding responsibility, you must report on Form 1099 and, if applicable, backup withhold as if you were making the payment directly to the U. Taxhow 1040x S. Taxhow 1040x person. Taxhow 1040x Branches of financial institutions. Taxhow 1040x   Branches of financial institutions are not permitted to operate as QIs if they are located outside of countries having approved “know-your-customer” (KYC) rules. Taxhow 1040x The countries with approved KYC rules are listed on IRS. Taxhow 1040x gov. Taxhow 1040x QI withholding agreement. Taxhow 1040x   Foreign financial institutions and foreign branches of U. Taxhow 1040x S. Taxhow 1040x financial institutions can enter into an agreement with the IRS to be a qualified intermediary. Taxhow 1040x   A QI is entitled to certain simplified withholding and reporting rules. Taxhow 1040x In general, there are three major areas whereby intermediaries with QI status are afforded such simplified treatment. Taxhow 1040x   To apply for QI status, complete Form 14345, Qualified Intermediary Application, and Form SS-4, Application for Employer Identification Number. Taxhow 1040x These forms, and the procedures required to obtain a QI withholding agreement are available at www. Taxhow 1040x irs. Taxhow 1040x gov/Businesses/Corporations/Qualified-Intermediaries-(QI). Taxhow 1040x Documentation. Taxhow 1040x   A QI is not required to forward documentation obtained from foreign account holders to the U. Taxhow 1040x S. Taxhow 1040x withholding agent from whom the QI receives a payment of U. Taxhow 1040x S. Taxhow 1040x source income. Taxhow 1040x The QI maintains such documentation at its location and provides the U. Taxhow 1040x S. Taxhow 1040x withholding agent with withholding rate pools. Taxhow 1040x A withholding rate pool is a payment of a single type of income that is subject to a single rate of withholding. Taxhow 1040x   A QI is required to provide the U. Taxhow 1040x S. Taxhow 1040x withholding agent with information regarding U. Taxhow 1040x S. Taxhow 1040x persons subject to Form 1099 information reporting unless the QI assumes the primary obligation to do Form 1099 reporting and backup withholding. Taxhow 1040x   If a QI obtains documentary evidence under the “know-your-customer” rules that apply to the QI under local law, and the documentary evidence is of a type specified in an attachment to the QI agreement, the documentary evidence remains valid until there is a change in circumstances or the QI knows the information is incorrect. Taxhow 1040x This indefinite validity period rule does not apply to Forms W-8 or to documentary evidence that is not of the type specified in the attachment to the agreement. Taxhow 1040x Form 1042-S reporting. Taxhow 1040x   A QI is permitted to report payments made to its direct foreign account holders on a pooled basis rather than reporting payments to each direct account holder specifically. Taxhow 1040x Pooled basis reporting is not available for payments to certain account holders, such as a nonqualified intermediary or a flow-through entity (discussed earlier). Taxhow 1040x Collective refund procedures. Taxhow 1040x   A QI may seek a refund on behalf of its direct account holders. Taxhow 1040x The direct account holders, therefore, are not required to file returns with the IRS to obtain refunds, but rather may obtain them from the QI. Taxhow 1040x U. Taxhow 1040x S. Taxhow 1040x branches of foreign banks and foreign insurance companies. Taxhow 1040x   Special rules apply to a U. Taxhow 1040x S. Taxhow 1040x branch of a foreign bank subject to Federal Reserve Board supervision or a foreign insurance company subject to state regulatory supervision. Taxhow 1040x If you agree to treat the branch as a U. Taxhow 1040x S. Taxhow 1040x person, you may treat the branch as a U. Taxhow 1040x S. Taxhow 1040x payee for a payment subject to NRA withholding provided you receive a Form W-8IMY from the U. Taxhow 1040x S. Taxhow 1040x branch on which the agreement is evidenced. Taxhow 1040x If you treat the branch as a U. Taxhow 1040x S. Taxhow 1040x payee, you are not required to withhold. Taxhow 1040x Even though you agree to treat the branch as a U. Taxhow 1040x S. Taxhow 1040x person, you must report the payment on Form 1042-S. Taxhow 1040x   A financial institution organized in a U. Taxhow 1040x S. Taxhow 1040x possession is treated as a U. Taxhow 1040x S. Taxhow 1040x branch. Taxhow 1040x The special rules discussed in this section apply to a possessions financial institution. Taxhow 1040x   If you are paying a U. Taxhow 1040x S. Taxhow 1040x branch an amount that is not subject to NRA withholding, treat the payment as made to a foreign person, irrespective of any agreement to treat the branch as a U. Taxhow 1040x S. Taxhow 1040x person for amounts subject to NRA withholding. Taxhow 1040x Consequently, amounts not subject to NRA withholding that are paid to a U. Taxhow 1040x S. Taxhow 1040x branch are not subject to Form 1099 reporting or backup withholding. Taxhow 1040x   Alternatively, a U. Taxhow 1040x S. Taxhow 1040x branch may provide you with a Form W-8IMY with which it associates the documentation of the persons on whose behalf it acts. Taxhow 1040x In this situation, the payees are the persons on whose behalf the branch acts provided you can reliably associate the payment with valid documentation from those persons. Taxhow 1040x See Nonqualified Intermediaries under  Documentation, later. Taxhow 1040x   If the U. Taxhow 1040x S. Taxhow 1040x branch does not provide you with a Form W-8IMY, then you should treat a payment subject to NRA withholding as made to the foreign person of which the branch is a part and the income as effectively connected with the conduct of a trade or business in the United States. Taxhow 1040x Withholding foreign partnership and foreign trust. Taxhow 1040x   A withholding foreign partnership (WP) is any foreign partnership that has entered into a WP withholding agreement with the IRS and is acting in that capacity. Taxhow 1040x A withholding foreign trust (WT) is a foreign simple or grantor trust that has entered into a WT withholding agreement with the IRS and is acting in that capacity. Taxhow 1040x   A WP or WT may act in that capacity only for payments of amounts subject to NRA withholding that are distributed to, or included in the distributive share of, its direct partners, beneficiaries, or owners. Taxhow 1040x A WP or WT acting in that capacity must assume NRA withholding responsibility for these amounts. Taxhow 1040x You may treat a WP or WT as a payee if it has provided you with documentation (discussed later) that represents that it is acting as a WP or WT for such amounts. Taxhow 1040x WP and WT withholding agreements. Taxhow 1040x   The WP and WT withholding agreements and the application procedures for the agreements are in Revenue Procedure 2003-64. Taxhow 1040x Also see the following items. Taxhow 1040x Revenue Procedure 2004-21. Taxhow 1040x Revenue Procedure 2005-77. Taxhow 1040x Employer identification number (EIN). Taxhow 1040x   A completed Form SS-4 must be submitted with the application for being a WP or WT. Taxhow 1040x The WP or WT will be assigned a WP-EIN or WT-EIN to be used only when acting in that capacity. Taxhow 1040x Documentation. Taxhow 1040x   A WP or WT must provide you with a Form W-8IMY that certifies that the WP or WT is acting in that capacity and a written statement identifying the amounts for which it is so acting. Taxhow 1040x The statement is not required to contain withholding rate pool information or any information relating to the identity of a direct partner, beneficiary, or owner. Taxhow 1040x The Form W-8IMY must contain the WP-EIN or WT-EIN. Taxhow 1040x Foreign Persons A payee is subject to NRA withholding only if it is a foreign person. Taxhow 1040x A foreign person includes a nonresident alien individual, foreign corporation, foreign partnership, foreign trust, foreign estate, and any other person that is not a U. Taxhow 1040x S. Taxhow 1040x person. Taxhow 1040x It also includes a foreign branch of a U. Taxhow 1040x S. Taxhow 1040x financial institution if the foreign branch is a qualified intermediary. Taxhow 1040x In most cases, the U. Taxhow 1040x S. Taxhow 1040x branch of a foreign corporation or partnership is treated as a foreign person. Taxhow 1040x Nonresident alien. Taxhow 1040x   A nonresident alien is an individual who is not a U. Taxhow 1040x S. Taxhow 1040x citizen or a resident alien. Taxhow 1040x A resident of a foreign country under the residence article of an income tax treaty is a nonresident alien individual for purposes of withholding. Taxhow 1040x Married to U. Taxhow 1040x S. Taxhow 1040x citizen or resident alien. Taxhow 1040x   Nonresident alien individuals married to U. Taxhow 1040x S. Taxhow 1040x citizens or resident aliens may choose to be treated as resident aliens for certain income tax purposes. Taxhow 1040x However, these individuals are still subject to the NRA withholding rules that apply to nonresident aliens for all income except wages. Taxhow 1040x Wages paid to these individuals are subject to graduated withholding. Taxhow 1040x See Wages Paid to Employees—Graduated Withholding . Taxhow 1040x Resident alien. Taxhow 1040x   A resident alien is an individual who is not a citizen or national of the United States and who meets either the green card test or the substantial presence test for the calendar year. Taxhow 1040x Green card test. Taxhow 1040x An alien is a resident alien if the individual was a lawful permanent resident of the United States at any time during the calendar year. Taxhow 1040x This is known as the green card test because these aliens hold immigrant visas (also known as green cards). Taxhow 1040x Substantial presence test. Taxhow 1040x An alien is considered a resident alien if the individual meets the substantial presence test for the calendar year. Taxhow 1040x Under this test, the individual must be physically present in the United States on at least: 31 days during the current calendar year, and 183 days during the current year and the 2 preceding years, counting all the days of physical presence in the current year, but only 1/3 the number of days of presence in the first preceding year, and only 1/6 the number of days in the second preceding year. Taxhow 1040x   In most cases, the days the alien is in the United States as a teacher, student, or trainee on an “F,” “J,” “M,” or “Q” visa are not counted. Taxhow 1040x This exception is for a limited period of time. Taxhow 1040x   For more information on resident and nonresident status, the tests for residence, and the exceptions to them, see Publication 519. Taxhow 1040x Note. Taxhow 1040x   If your employee is late in notifying you that his or her status changed from nonresident alien to resident alien, you may have to make an adjustment to Form 941 if that employee was exempt from withholding of social security and Medicare taxes as a nonresident alien. Taxhow 1040x For more information on making adjustments, see chapter 13 of Publication 15 (Circular E). Taxhow 1040x Resident of a U. Taxhow 1040x S. Taxhow 1040x possession. Taxhow 1040x   A bona fide resident of Puerto Rico, the U. Taxhow 1040x S. Taxhow 1040x Virgin Islands, Guam, the Commonwealth of the Northern Mariana Islands (CNMI), or American Samoa who is not a U. Taxhow 1040x S. Taxhow 1040x citizen or a U. Taxhow 1040x S. Taxhow 1040x national is treated as a nonresident alien for the withholding rules explained here. Taxhow 1040x A bona fide resident of a possession is someone who: Meets the presence test, Does not have a tax home outside the possession, and Does not have a closer connection to the United States or to a foreign country than to the possession. Taxhow 1040x   For more information, see Publication 570, Tax Guide for Individuals With Income From U. Taxhow 1040x S. Taxhow 1040x Possessions. Taxhow 1040x Foreign corporations. Taxhow 1040x   A foreign corporation is one that does not fit the definition of a domestic corporation. Taxhow 1040x A domestic corporation is one that was created or organized in the United States or under the laws of the United States, any of its states, or the District of Columbia. Taxhow 1040x Guam or Northern Mariana Islands corporations. Taxhow 1040x   A corporation created or organized in, or under the laws of, Guam or the CNMI is not considered a foreign corporation for the purpose of withholding tax for the tax year if: At all times during the tax year less than 25% in value of the corporation's stock is owned, directly or indirectly, by foreign persons; and At least 20% of the corporation's gross income is derived from sources within Guam or the CNMI for the 3-year period ending with the close of the preceding tax year of the corporation (or the period the corporation has been in existence, if less). Taxhow 1040x Note. Taxhow 1040x   The provisions discussed below under U. Taxhow 1040x S. Taxhow 1040x Virgin Islands and American Samoa corporations will apply to Guam or CNMI corporations when an implementing agreement is in effect between the United States and that possession. Taxhow 1040x U. Taxhow 1040x S. Taxhow 1040x Virgin Islands and American Samoa corporations. Taxhow 1040x   A corporation created or organized in, or under the laws of, the U. Taxhow 1040x S. Taxhow 1040x Virgin Islands or American Samoa is not considered a foreign corporation for the purposes of withholding tax for the tax year if: At all times during the tax year less than 25% in value of the corporation's stock is owned, directly or indirectly, by foreign persons, At least 65% of the corporation's gross income is effectively connected with the conduct of a trade or business in the U. Taxhow 1040x S. Taxhow 1040x Virgin Islands, American Samoa, Guam, the CNMI, or the United States for the 3-year period ending with the close of the tax year of the corporation (or the period the corporation or any predecessor has been in existence, if less), and No substantial part of the income of the corporation is used, directly or indirectly, to satisfy obligations to a person who is not a bona fide resident of the U. Taxhow 1040x S. Taxhow 1040x Virgin Islands, American Samoa, Guam, the CNMI, or the United States. Taxhow 1040x Foreign private foundations. Taxhow 1040x   A private foundation that was created or organized under the laws of a foreign country is a foreign private foundation. Taxhow 1040x Gross investment income from sources within the United States paid to a qualified foreign private foundation is subject to NRA withholding at a 4% rate (unless exempted by a treaty) rather than the ordinary statutory 30% rate. Taxhow 1040x Other foreign organizations, associations, and charitable institutions. Taxhow 1040x   An organization may be exempt from income tax under section 501(a) of the Internal Revenue Code even if it was formed under foreign law. Taxhow 1040x In most cases, you do not have to withhold tax on payments of income to these foreign tax-exempt organizations unless the IRS has determined that they are foreign private foundations. Taxhow 1040x   Payments to these organizations, however, must be reported on Form 1042-S, even though no tax is withheld. Taxhow 1040x   You must withhold tax on the unrelated business income (as described in Publication 598, Tax on Unrelated Business Income of Exempt Organizations) of foreign tax-exempt organizations in the same way that you would withhold tax on similar income of nonexempt organizations. Taxhow 1040x U. Taxhow 1040x S. Taxhow 1040x branches of foreign persons. Taxhow 1040x   In most cases, a payment to a U. Taxhow 1040x S. Taxhow 1040x branch of a foreign person is a payment made to the foreign person. Taxhow 1040x However, you may treat payments to U. Taxhow 1040x S. Taxhow 1040x branches of foreign banks and foreign insurance companies (discussed earlier) that are subject to U. Taxhow 1040x S. Taxhow 1040x regulatory supervision as payments made to a U. Taxhow 1040x S. Taxhow 1040x person, if you and the U. Taxhow 1040x S. Taxhow 1040x branch have agreed to do so, and if their agreement is evidenced by a withholding certificate, Form W-8IMY. Taxhow 1040x For this purpose, a financial institution organized under the laws of a U. Taxhow 1040x S. Taxhow 1040x possession is treated as a U. Taxhow 1040x S. Taxhow 1040x branch. Taxhow 1040x Documentation In most cases, you must withhold 30% from the gross amount paid to a foreign payee unless you can reliably associate the payment with valid documentation that establishes either of the following. Taxhow 1040x The payee is a U. Taxhow 1040x S. Taxhow 1040x person. Taxhow 1040x The payee is a foreign person that is the beneficial owner of the income and is entitled to a reduced rate of withholding. Taxhow 1040x In most cases, you must get the documentation before you make the payment. Taxhow 1040x The documentation is not valid if you know, or have reason to know, that it is unreliable or incorrect. Taxhow 1040x See Standards of Knowledge , later. Taxhow 1040x If you cannot reliably associate a payment with valid documentation, you must use the presumption rules discussed later. Taxhow 1040x For example, if you do not have documentation or you cannot determine the part of a payment that is allocable to specific documentation, you must use the presumption rules. Taxhow 1040x The specific types of documentation are discussed in this section. Taxhow 1040x However, see Withholding on Specific Income , later, as well as the instructions to the particular forms. Taxhow 1040x As the withholding agent, you also may want to see the Instructions for the Requester of Forms W-8BEN, W-8ECI, W-8EXP, and W-8IMY. Taxhow 1040x Section 1446 withholding. Taxhow 1040x   Under section 1446 of the Code, a partnership must withhold tax on its effectively connected income allocable to a foreign partner. Taxhow 1040x In most cases, a partnership determines if a partner is a foreign partner and the partner's tax classification based on the withholding certificate provided by the partner. Taxhow 1040x This is the same documentation that is filed for NRA withholding, but may require additional information as discussed under each of the forms in this section. Taxhow 1040x Joint owners. Taxhow 1040x    If you make a payment to joint owners, you need to get documentation from each owner. Taxhow 1040x Form W-9. Taxhow 1040x   In most cases, you can treat the payee as a U. Taxhow 1040x S. Taxhow 1040x person if the payee gives you a Form W-9. Taxhow 1040x The Form W-9 can be used only by a U. Taxhow 1040x S. Taxhow 1040x person and must contain the payee's taxpayer identification number (TIN). Taxhow 1040x If there is more than one owner, you may treat the total amount as paid to a U. Taxhow 1040x S. Taxhow 1040x person if any one of the owners gives you a Form W-9. Taxhow 1040x See U. Taxhow 1040x S. Taxhow 1040x Taxpayer Identification Numbers , later. Taxhow 1040x U. Taxhow 1040x S. Taxhow 1040x persons are not subject to NRA withholding, but may be subject to Form 1099 reporting and backup withholding. Taxhow 1040x Form W-8. Taxhow 1040x   In most cases, a foreign payee of the income should give you a form in the Form W-8 series. Taxhow 1040x Until further notice, you can rely upon Forms W-8 that contain a P. Taxhow 1040x O. Taxhow 1040x box as a permanent residence address provided you do not know, or have reason to know, that the person providing the form is a U. Taxhow 1040x S. Taxhow 1040x person and that a street address is available. Taxhow 1040x You may rely on Forms W-8 for which there is a U. Taxhow 1040x S. Taxhow 1040x mailing address provided you received the form prior to December 31, 2001. Taxhow 1040x   If certain requirements are met, the foreign person can give you documentary evidence, rather than a Form W-8. Taxhow 1040x You can rely on documentary evidence in lieu of a Form W-8 for a payment made in a U. Taxhow 1040x S. Taxhow 1040x possession. Taxhow 1040x Other documentation. Taxhow 1040x   Other documentation may be required to claim an exemption from, or a reduced rate of, withholding on pay for personal services. Taxhow 1040x The nonresident alien individual may have to give you a Form W-4 or a Form 8233, Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual. Taxhow 1040x These forms are discussed in Pay for Personal Services Performed under Withholding on Specific Income. Taxhow 1040x Beneficial Owners If all the appropriate requirements have been established on a Form W-8BEN, W-8ECI, W-8EXP or, if applicable, on documentary evidence, you may treat the payee as a foreign beneficial owner. Taxhow 1040x Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding. Taxhow 1040x   This form is used by a foreign person to: Establish foreign status; Claim that such person is the beneficial owner of the income for which the form is being furnished or a partner in a partnership subject to section 1446 withholding; and If applicable, claim a reduced rate of, or exemption from, withholding under an income tax treaty. Taxhow 1040x   Form W-8BEN also may be used to claim that the foreign person is exempt from Form 1099 reporting and backup withholding for income that is not subject to NRA withholding. Taxhow 1040x For example, a foreign person may provide a Form W-8BEN to a broker to establish that the gross proceeds from the sale of securities are not subject to Form 1099 reporting or backup withholding. Taxhow 1040x Claiming treaty benefits. Taxhow 1040x   You may apply a reduced rate of withholding to a foreign person that provides a Form W-8BEN claiming a reduced rate of withholding under an income tax treaty only if the person provides a U. Taxhow 1040x S. Taxhow 1040x TIN and certifies that: It is a resident of a treaty country; It is the beneficial owner of the income; If it is an entity, it derives the income within the meaning of section 894 of the Internal Revenue Code (it is not fiscally transparent); and It meets any limitation on benefits provision contained in the treaty, if applicable. Taxhow 1040x   If the foreign beneficial owner claiming a treaty benefit is related to you, the foreign beneficial owner also must certify on Form W-8BEN that it will file Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b), if the amount subject to NRA withholding received during a calendar year exceeds, in the aggregate, $500,000. Taxhow 1040x   An entity derives income for which it is claiming treaty benefits only if the entity is not treated as fiscally transparent for that income. Taxhow 1040x See Fiscally transparent entity discussed earlier under Flow-Through Entities. Taxhow 1040x   Limitations on benefits provisions generally prohibit third country residents from obtaining treaty benefits. Taxhow 1040x For example, a foreign corporation may not be entitled to a reduced rate of withholding unless a minimum percentage of its owners are citizens or residents of the United States or the treaty country. Taxhow 1040x   The exemptions from, or reduced rates of, U. Taxhow 1040x S. Taxhow 1040x tax vary under each treaty. Taxhow 1040x You must check the provisions of the tax treaty that apply. Taxhow 1040x Tables at the end of this publication show the countries with which the United States has income tax treaties and the rates of withholding that apply in cases where all conditions of the particular treaty articles are satisfied. Taxhow 1040x   If you know, or have reason to know, that an owner of income is not eligible for treaty benefits claimed, you must not apply the treaty rate. Taxhow 1040x You are not, however, responsible for misstatements on a Form W-8, documentary evidence, or statements accompanying documentary evidence for which you did not have actual knowledge, or reason to know, that the statements were incorrect. Taxhow 1040x Exceptions to TIN requirement. Taxhow 1040x   A foreign person does not have to provide a TIN to claim a reduced rate of withholding under a treaty if the requirements for the following exceptions are met. Taxhow 1040x Income from marketable securities (discussed next). Taxhow 1040x Unexpected payments to an individual (discussed under U. Taxhow 1040x S. Taxhow 1040x Taxpayer Identification Numbers ). Taxhow 1040x Marketable securities. Taxhow 1040x   A Form W-8BEN provided to claim treaty benefits does not need a U. Taxhow 1040x S. Taxhow 1040x TIN if the foreign beneficial owner is claiming the benefits on income from marketable securities. Taxhow 1040x For this purpose, income from a marketable security consists of the following items. Taxhow 1040x Dividends and interest from stocks and debt obligations that are actively traded. Taxhow 1040x Dividends from any redeemable security issued by an investment company registered under the Investment Company Act of 1940 (mutual fund). Taxhow 1040x Dividends, interest, or royalties from units of beneficial interest in a unit investment trust that are (or were upon issuance) publicly offered and are registered with the SEC under the Securities Act of 1933. Taxhow 1040x Income related to loans of any of the above securities. Taxhow 1040x Offshore accounts. Taxhow 1040x   If a payment is made outside the United States to an offshore account, a payee may give you documentary evidence, rather than Form W-8BEN. Taxhow 1040x   In most cases, a payment is made outside the United States if you complete the acts necessary to effect the payment outside the United States. Taxhow 1040x However, an amount paid by a bank or other financial institution on a deposit or account usually will be treated as paid at the branch or office where the amount is credited. Taxhow 1040x An offshore account is an account maintained at an office or branch of a U. Taxhow 1040x S. Taxhow 1040x or foreign bank or other financial institution at any location outside the United States. Taxhow 1040x   You may rely on documentary evidence given to you by a nonqualified intermediary or a flow-through entity with its Form W-8IMY. Taxhow 1040x This rule applies even though you make the payment to a nonqualified intermediary or flow-through entity in the United States. Taxhow 1040x In most cases, the nonqualified intermediary or flow-through entity that gives you documentary evidence also will have to give you a withholding statement, discussed later. Taxhow 1040x Documentary evidence. Taxhow 1040x   You may apply a reduced rate of withholding to income from marketable securities (discussed earlier) paid outside the United States to an offshore account if the beneficial owner gives you documentary evidence in place of a Form W-8BEN. Taxhow 1040x To claim treaty benefits, the documentary evidence must be one of the following: A certificate of residence that: Is issued by a tax official of the treaty country of which the foreign beneficial owner claims to be a resident, States that the person has filed its most recent income tax return as a resident of that country, and Is issued within 3 years prior to being presented to you. Taxhow 1040x Documentation for an individual that: Includes the individual's name, address, and photograph, Is an official document issued by an authorized governmental body, and Is issued no more than 3 years prior to being presented to you. Taxhow 1040x Documentation for an entity that: Includes the name of the entity, Includes the address of its principal office in the treaty country, and Is an official document issued by an authorized governmental body. Taxhow 1040x In addition to the documentary evidence, a foreign beneficial owner that is an entity must provide a statement that it derives the income for which it claims treaty benefits and that it meets one or more of the conditions set forth in a limitation on benefits article, if any, (or similar provision) contained in the applicable treaty. Taxhow 1040x Form W-8ECI, Certificate of Foreign Person's Claim That Income Is Effectively Connected With the Conduct of a Trade or Business in the United States. Taxhow 1040x   This form is used by a foreign person to: Establish foreign status, Claim that such person is the beneficial owner of the income for which the form is being furnished, and Claim that the income is effectively connected with the conduct of a trade or business in the United States. Taxhow 1040x (See Effectively Connected Income , later. Taxhow 1040x )   Effectively connected income for which a valid Form W-8ECI has been provided is generally not subject to NRA withholding. Taxhow 1040x   If a partner submits this form to a partnership, the income claimed to be effectively connected with the conduct of a U. Taxhow 1040x S. Taxhow 1040x trade or business is subject to withholding under section 1446. Taxhow 1040x If the partner has made, or will make, an election under section 871(d) or 882(d), the partner must submit Form W-8ECI, and attach a copy of the election, or a statement of intent to elect, to the form. Taxhow 1040x    If the partner's only effectively connected income is the income allocated from the partnership and the partner is not making the election under section 871(d) or 882(d), the partner should provide Form W-8BEN to the partnership. Taxhow 1040x Form W-8EXP, Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding. Taxhow 1040x   This form is used by a foreign government, international organization, foreign central bank of issue, foreign tax-exempt organization, foreign private foundation, or government of a U. Taxhow 1040x S. Taxhow 1040x possession to: Establish foreign status, Claim that such person is the beneficial owner of the income for which the form is being furnished, and Claim a reduced rate of, or an exemption from, withholding as such an entity. Taxhow 1040x   If the government or organization is a partner in a partnership carrying on a trade or business in the United States, the effectively connected income allocable to the partner is subject to withholding under section 1446. Taxhow 1040x   See Foreign Governments and Certain Other Foreign Organizations , later. Taxhow 1040x Foreign Intermediaries and Foreign Flow-Through Entities Payments made to a foreign intermediary or foreign flow-through entity are treated as made to the payees on whose behalf the intermediary or entity acts. Taxhow 1040x The Form W-8IMY provided by a foreign intermediary or flow-through entity must be accompanied by additional information for you to be able to reliably associate the payment with a payee. Taxhow 1040x The additional information required depends on the type of intermediary or flow-through entity and the extent of the withholding responsibilities it assumes. Taxhow 1040x Form W-8IMY, Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U. Taxhow 1040x S. Taxhow 1040x Branches for United States Tax Withholding. Taxhow 1040x   This form is used by foreign intermediaries and foreign flow-through entities, as well as certain U. Taxhow 1040x S. Taxhow 1040x branches, to: Represent that a foreign person is a qualified intermediary or nonqualified intermediary, Represent, if applicable, that the qualified intermediary is assuming primary NRA withholding responsibility and/or primary Form 1099 reporting and backup withholding responsibility, Represent that a foreign partnership or a foreign simple or grantor trust is a withholding foreign partnership or a withholding foreign trust, Represent that a foreign flow-through entity is a nonwithholding foreign partnership, or a nonwithholding foreign trust and that the income is not effectively connected with the conduct of a trade or business in the United States, Represent that the provider is a U. Taxhow 1040x S. Taxhow 1040x branch of a foreign bank or insurance company and either is agreeing to be treated as a U. Taxhow 1040x S. Taxhow 1040x person or is transmitting documentation of the persons on whose behalf it is acting, or Represent that, for purposes of section 1446, it is an upper-tier foreign partnership or a foreign grantor trust and that the form is being used to transmit the required documentation. Taxhow 1040x For information on qualifying as an upper-tier foreign partnership, see Regulations section 1. Taxhow 1040x 1446-5. Taxhow 1040x Qualified Intermediaries In most cases, a QI is any foreign intermediary that has entered into a QI withholding agreement (discussed earlier) with the IRS. Taxhow 1040x A foreign intermediary that has received a QI employer identification number (QI-EIN) may represent on Form W-8IMY that it is a QI before it receives a fully executed agreement. Taxhow 1040x The intermediary can claim that it is a QI until the IRS revokes its QI-EIN. Taxhow 1040x The IRS will revoke a QI-EIN if the QI agreement is not executed and returned to the IRS within a reasonable period of time after the agreement was sent to the intermediary for signature. Taxhow 1040x Responsibilities. Taxhow 1040x   Payments made to a QI that does not assume NRA withholding responsibility are treated as paid to its account holders and customers. Taxhow 1040x However, a QI is not required to provide you with documentation it obtains from its foreign account holders and customers. Taxhow 1040x Instead, it provides you with a withholding statement that contains withholding rate pool information. Taxhow 1040x A withholding rate pool is a payment of a single type of income, determined in accordance with the categories of income reported on Form 1042-S that is subject to a single rate of withholding. Taxhow 1040x A qualified intermediary is required to provide you with information regarding U. Taxhow 1040x S. Taxhow 1040x persons subject to Form 1099 reporting and to provide you withholding rate pool information separately for each such U. Taxhow 1040x S. Taxhow 1040x person unless it has assumed Form 1099 reporting and backup withholding responsibility. Taxhow 1040x For the alternative procedure for providing rate pool information for U. Taxhow 1040x S. Taxhow 1040x non-exempt persons, see the Form W-8IMY instructions. Taxhow 1040x   The withholding statement must: Designate those accounts for which it acts as a qualified intermediary, Designate those accounts for which it assumes primary NRA withholding responsibility and/or primary Form 1099 and backup withholding responsibility, and Provide sufficient information for you to allocate the payment to a withholding rate pool. Taxhow 1040x   The extent to which you must have withholding rate pool information depends on the withholding and reporting obligations assumed by the QI. Taxhow 1040x Primary responsibility not assumed. Taxhow 1040x   If a QI does not assume primary NRA withholding responsibility or primary Form 1099 reporting and backup withholding responsibility for the payment, you can reliably associate the payment with valid documentation only to the extent you can reliably determine the part of the payment that relates to each withholding rate pool for foreign payees. Taxhow 1040x Unless the alternative procedure applies, the qualified intermediary must provide you with a separate withholding rate pool for each U. Taxhow 1040x S. Taxhow 1040x person subject to Form 1099 reporting and/or backup withholding. Taxhow 1040x The QI must provide a Form W-9 or, in the absence of the form, the name, address, and TIN, if available, for such person. Taxhow 1040x Primary NRA withholding responsibility assumed. Taxhow 1040x   If you make a payment to a QI that assumes primary NRA withholding responsibility (but not primary Form 1099 reporting and backup withholding responsibility), you can reliably associate the payment with valid documentation only to the extent you can reliably determine the part of the payment that relates to the withholding rate pool for which the QI assumes primary NRA withholding responsibility and the part of the payment attributable to withholding rate pools for each U. Taxhow 1040x S. Taxhow 1040x person, unless the alternative procedure applies, subject to Form 1099 reporting and/or backup withholding. Taxhow 1040x The QI must provide a Form W-9 or, in the absence of the form, the name, address, and TIN, if available, for such person. Taxhow 1040x Primary NRA and Form 1099 responsibility assumed. Taxhow 1040x   If you make a payment to a QI that assumes both primary NRA withholding responsibility and primary Form 1099 reporting and backup withholding responsibility, you can reliably associate a payment with valid documentation provided that you receive a valid Form W-8IMY. Taxhow 1040x It is not necessary to associate the payment with withholding rate pools. Taxhow 1040x Example. Taxhow 1040x You make a payment of dividends to a QI. Taxhow 1040x It has five customers: two are foreign persons who have provided documentation entitling them to a 15% rate of withholding on dividends; two are foreign persons subject to a 30% rate of withholding on dividends; and one is a U. Taxhow 1040x S. Taxhow 1040x individual who provides it with a Form W-9. Taxhow 1040x Each customer is entitled to 20% of the dividend payment. Taxhow 1040x The QI does not assume any primary withholding responsibility. Taxhow 1040x The QI gives you a Form W-8IMY with which it associates the Form W-9 and a withholding statement that allocates 40% of the dividend to a 15% withholding rate pool, 40% to a 30% withholding rate pool, and 20% to the U. Taxhow 1040x S. Taxhow 1040x individual. Taxhow 1040x You should report on Forms 1042-S 40% of the payment as made to a 15% rate dividend pool and 40% of the payment as made to a 30% rate dividend pool. Taxhow 1040x The part of the payment allocable to the U. Taxhow 1040x S. Taxhow 1040x individual (20%) is reportable on Form 1099-DIV. Taxhow 1040x Smaller partnerships and trusts. Taxhow 1040x   A QI may apply special rules to a smaller partnership or trust (Joint Account Provision) only if the partnership or trust meets the following conditions. Taxhow 1040x It is a foreign partnership or foreign simple or grantor trust. Taxhow 1040x It is a direct account holder of the QI. Taxhow 1040x It does not have any partner, beneficiary, or owner that is a U. Taxhow 1040x S. Taxhow 1040x person or a pass- through partner, beneficiary, or owner. Taxhow 1040x   For information on these rules, see section 4A. Taxhow 1040x 01 of the QI agreement. Taxhow 1040x This is found in Appendix 3 of Revenue Procedure 2003-64. Taxhow 1040x Also see Revenue Procedure 2004-21. Taxhow 1040x Related partnerships and trusts. Taxhow 1040x    A QI may apply special rules to a related partnership or trust only if the partnership or trust meets the following conditions. Taxhow 1040x It is a foreign partnership or foreign simple or grantor trust. Taxhow 1040x It is either: A direct account holder of the QI, or An indirect account holder of the QI that is a direct partner, beneficiary, or owner of a partnership or trust to which the QI has applied this rule. Taxhow 1040x For information on these rules, see section 4A. Taxhow 1040x 02 of the QI agreement. Taxhow 1040x This is found in Appendix 3 of Revenue Procedure 2003-64. Taxhow 1040x Also see Revenue Procedure 2005-77. Taxhow 1040x Nonqualified Intermediaries If you are making a payment to an NQI, foreign flow-through entity, or U. Taxhow 1040x S. Taxhow 1040x branch that is using Form W-8IMY to transmit information about the branch's account holders or customers, you can treat the payment (or a part of the payment) as reliably associated with valid documentation from a specific payee only if, prior to making the payment: You can allocate the payment to a valid Form W-8IMY, You can reliably determine how much of the payment relates to valid documentation provided by a payee (a person that is not itself a foreign intermediary, flow- through entity, or U. Taxhow 1040x S. Taxhow 1040x branch), and You have sufficient information to report the payment on Form 1042-S or Form 1099, if reporting is required. Taxhow 1040x The NQI, flow-through entity, or U. Taxhow 1040x S. Taxhow 1040x branch must give you certain information on a withholding statement that is associated with the Form W-8IMY. Taxhow 1040x A withholding statement must be updated to keep the information accurate prior to each payment. Taxhow 1040x Withholding statement. Taxhow 1040x   In most cases, a withholding statement must contain the following information. Taxhow 1040x The name, address, and TIN (if any, or if required) of each person for whom documentation is provided. Taxhow 1040x The type of documentation (documentary evidence, Form W-8, or Form W-9) for every person for whom documentation has been provided. Taxhow 1040x The status of the person for whom the documentation has been provided, such as whether the person is a U. Taxhow 1040x S. Taxhow 1040x exempt recipient (U. Taxhow 1040x S. Taxhow 1040x person exempt from Form 1099 reporting), U. Taxhow 1040x S. Taxhow 1040x non-exempt recipient (U. Taxhow 1040x S. Taxhow 1040x person subject to Form 1099 reporting), or a foreign person. Taxhow 1040x For a foreign person, the statement must indicate whether the person is a beneficial owner or a foreign intermediary, flow-through entity, or a U. Taxhow 1040x S. Taxhow 1040x branch. Taxhow 1040x The type of recipient the person is, based on the recipient codes used on Form 1042-S. Taxhow 1040x Information allocating each payment, by income type, to each payee (including U. Taxhow 1040x S. Taxhow 1040x exempt and U. Taxhow 1040x S. Taxhow 1040x non-exempt recipients) for whom documentation has been provided. Taxhow 1040x The rate of withholding that applies to each foreign person to whom a payment is allocated. Taxhow 1040x A foreign payee's country of residence. Taxhow 1040x If a reduced rate of withholding is claimed, the basis for a reduced rate of withholding (for example, portfolio interest, treaty benefit, etc. Taxhow 1040x ). Taxhow 1040x In the case of treaty benefits claimed by entities, whether the applicable limitation on benefits statement and the statement that the foreign person derives the income for which treaty benefits are claimed, have been made. Taxhow 1040x The name, address, and TIN (if any) of any other NQI, flow-through entity, or U. Taxhow 1040x S. Taxhow 1040x branch from which the payee will directly receive a payment. Taxhow 1040x Any other information a withholding agent requests to fulfill its reporting and withholding obligations. Taxhow 1040x Alternative procedure. Taxhow 1040x   Under this alternative procedure the NQI can give you the information that allocates each payment to each foreign and U. Taxhow 1040x S. Taxhow 1040x exempt recipient by January 31 following the calendar year of payment, rather than prior to the payment being made as otherwise required. Taxhow 1040x To take advantage of this procedure, the NQI must: (a) inform you, on its withholding statement, that it is using the alternative procedure; and (b) obtain your consent. Taxhow 1040x You must receive the withholding statement with all the required information (other than item 5) prior to making the payment. Taxhow 1040x    This alternative procedure cannot be used for payments to U. Taxhow 1040x S. Taxhow 1040x non-exempt recipients. Taxhow 1040x Therefore, an NQI must always provide you with allocation information for all U. Taxhow 1040x S. Taxhow 1040x non-exempt recipients prior to a payment being made. Taxhow 1040x Pooled withholding information. Taxhow 1040x   If an NQI uses the alternative procedure, it must provide you with withholding rate pool information, as opposed to individual allocation information, prior to the payment of a reportable amount. Taxhow 1040x A withholding rate pool is a payment of a single type of income (as determined by the income categories on Form 1042-S) that is subject to a single rate of withholding. Taxhow 1040x For example, an NQI that has foreign account holders receiving royalties and dividends, both subject to the 15% rate, will provide you with information for two withholding rate pools (one for royalties and one for dividends). Taxhow 1040x The NQI must provide you with the payee specific allocation information (information allocating each payment to each payee) by January 31 following the calendar year of payment. Taxhow 1040x Failure to provide allocation information. Taxhow 1040x   If an NQI fails to provide you with the payee specific allocation information for a withholding rate pool by January 31, you must not apply the alternative procedure to any of the NQI's withholding rate pools from that date forward. Taxhow 1040x You must treat the payees as undocumented and apply the presumption rules, discussed later in Presumption Rules . Taxhow 1040x An NQI is deemed to have f
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Consumer Protection Offices

City, county, regional, and state consumer offices offer a variety of important services. They might mediate complaints, conduct investigations, prosecute offenders of consumer laws, license and regulate professional service providers, provide educational materials and advocate for consumer rights. To save time, call before sending a written complaint. Ask if the office handles the type of complaint you have and if complaint forms are provided.

State Consumer Protection Offices

Wisconsin Department of Agriculture, Trade and Consumer Protection

Website: Wisconsin Department of Agriculture, Trade and Consumer Protection

Address: Wisconsin Department of Agriculture, Trade and Consumer Protection
Bureau of Consumer Protection
PO Box 8911
2811 Agriculture Dr.
Madison, WI 53708-8911

Phone Number: 608-224-4953

Toll-free: 1-800-422-7128 (WI)

TTY: 608-224-5058

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Banking Authorities

The officials listed in this section regulate and supervise state-chartered banks. Many of them handle or refer problems and complaints about other types of financial institutions as well. Some also answer general questions about banking and consumer credit. If you are dealing with a federally chartered bank, check Federal Agencies.

Department of Financial Institutions

Website: Department of Financial Institutions

Address: Department of Financial Institutions
Bureau of Consumer Affairs
PO Box 8041
Madison, WI 53708-8041

Phone Number: 608-264-7969

TTY: 608-266-8818

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Insurance Regulators

Each state has its own laws and regulations for each type of insurance. The officials listed in this section enforce these laws. Many of these offices can also provide you with information to help you make informed insurance buying decisions.

Office of the Commissioner of Insurance

Website: Office of the Commissioner of Insurance

Address: Office of the Commissioner of Insurance
125 S. Webster St.
Madison, WI 53703-3474

Phone Number: 608-266-3585

Toll-free: 1-800-236-8517 (WI)

TTY: 711 and ask for 608-266-3586

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Securities Administrators

Each state has its own laws and regulations for securities brokers and securities - including stocks, mutual funds, commodities, real estate, etc. The officials and agencies listed in this section enforce these laws and regulations. Many of these offices can also provide information to help you make informed investment decisions.

Department of Financial Institutions

Website: Department of Financial Institutions

Address: Department of Financial Institutions
Division of Securities
PO Box 1768
Madison, WI 53701-1768

Phone Number: 608-266-1064

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Utility Commissions

State Utility Commissions regulate services and rates for gas, electricity and telephones within your state. In some states, the utility commissions regulate other services such as water, transportation, and the moving of household goods. Many utility commissions handle consumer complaints. Sometimes, if a number of complaints are received about the same utility matter, they will conduct investigations.

Public Service Commission

Website: Public Service Commission

Address: Public Service Commission
Consumer Affairs Unit
PO Box 7854
Madison, WI 53707-7854

Phone Number: 608-266-2001

Toll-free: 1-800-225-7729

TTY: 608-267-1479

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The Taxhow 1040x

Taxhow 1040x 11. Taxhow 1040x   Patient-Centered Outcomes Research Fee Table of Contents The patient-centered outcomes research fee is imposed on issuers of specified health insurance policies (section 4375) and plan sponsors of applicable self-insured health plans (section 4376) for policy and plan years ending on or after October 1, 2012. Taxhow 1040x Generally, references to taxes on Form 720 include this fee. Taxhow 1040x Specified health insurance policies. Taxhow 1040x   For issuers of specified health insurance policies, the fee for a policy year ending before October 1, 2013, is $1. Taxhow 1040x 00, multiplied by the average number of lives covered under the policy for that policy year. Taxhow 1040x Generally, issuers of specified health insurance polices must use one of the following four alternative methods to determine the average number of lives covered under a policy for the policy year. Taxhow 1040x The actual count method. Taxhow 1040x For policy years that end on or after October 1, 2012, issuers using the actual count method may begin counting lives covered under a policy as of May 14, 2012, rather than the first day of the policy year, and divide by the appropriate number of days remaining in the policy year. Taxhow 1040x The snapshot method. Taxhow 1040x For policy years that end on or after October 1, 2012, but that began before May 14, 2012, issuers using the snapshot method may use counts from quarters beginning on or after May 14, 2012, to determine the average number of lives covered under the policy. Taxhow 1040x The member months method. Taxhow 1040x And, 4. Taxhow 1040x The state form method. Taxhow 1040x The member months data and the data reported on state forms are based on the calendar year. Taxhow 1040x To adjust for 2012, issuers will use a pro rata approach for calculating the average number of lives covered using the member months method or the state form method for 2012. Taxhow 1040x For example, issuers using the member months number for 2012 will divide the member months number by 12 and multiply the resulting number by one quarter to arrive at the average number of lives covered for October through December 2012. Taxhow 1040x Applicable self-insured health plans. Taxhow 1040x   For plan sponsors of applicable self-insured health plans, the fee for a plan year ending on or after October 1, 2012, and ending before October 1, 2013 is $1. Taxhow 1040x 00, multiplied by the average number of lives covered under the plan for that plan year. Taxhow 1040x Generally, plan sponsors of applicable self-insured health plans must use one of the following three alternative methods to determine the average number of lives covered under a plan for the plan year. Taxhow 1040x Actual count method. Taxhow 1040x Snapshot method. Taxhow 1040x Form 5500 method. Taxhow 1040x However, for plan years beginning before July 11, 2012, and ending on or after October 1, 2012, plan sponsors may determine the average number of lives covered under the plan for the plan year using any reasonable method. Taxhow 1040x Reporting and paying the fee. Taxhow 1040x   File Form 720 annually to report and pay the fee on the second quarter Form 720, no later than July 31 of the calendar year immediately following the last day of the policy year or plan year to which the fee applies. Taxhow 1040x If you file Form 720 only to report the fee, do not file Form 720 for the 1st, 3rd, or 4th quarters of the year. Taxhow 1040x If you file Form 720 to report quarterly excise tax liability for the 1st, 3rd, or 4th quarter of the year (for example, filers reporting the foreign insurance tax (IRS No. Taxhow 1040x 30)), do not make an entry on the line for IRS No. Taxhow 1040x 133 on those filings. Taxhow 1040x   Deposits are not required for this fee, so issuers and plan sponsors are not required to pay the fee using Electronic Federal Tax Payment System (EFTPS). Taxhow 1040x   However, if the fee is paid using EFTPS, the payment should be applied to the second quarter. Taxhow 1040x See Electronic deposit requirement under How To Make Deposits in chapter 13, later. Taxhow 1040x More information. Taxhow 1040x   For more information, including methods for calculating the average number of lives covered, see sections 4375, 4376, and 4377; also see T. Taxhow 1040x D. Taxhow 1040x 9602, which is on page 746 of I. Taxhow 1040x R. Taxhow 1040x B. Taxhow 1040x 2012-52 at www. Taxhow 1040x irs. Taxhow 1040x gov/pub/irs-irbs/irb12-52. Taxhow 1040x pdf. Taxhow 1040x Prev  Up  Next   Home   More Online Publications