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Turbotax Online 2012

Turbotax online 2012 1. Turbotax online 2012   Tax Withholding for 2014 Table of Contents Introduction Useful Items - You may want to see: Salaries and WagesDetermining Amount of Tax Withheld Using Form W-4 Completing Form W-4 and Worksheets Getting the Right Amount of Tax Withheld Rules Your Employer Must Follow Exemption From Withholding Supplemental Wages Penalties Tips Taxable Fringe BenefitsSpecial rule. Turbotax online 2012 Exceptions. Turbotax online 2012 Sick Pay Pensions and AnnuitiesPeriodic Payments Nonperiodic Payments Eligible Rollover Distributions Choosing Not To Have Income Tax Withheld Gambling WinningsException. Turbotax online 2012 Identical wagers. Turbotax online 2012 Unemployment Compensation Federal Payments Backup WithholdingTaxpayer identification number. Turbotax online 2012 Underreported interest or dividends. Turbotax online 2012 Introduction This chapter discusses income tax withholding on: Salaries and wages, Tips, Taxable fringe benefits, Sick pay, Pensions and annuities, Gambling winnings, Unemployment compensation, and Certain federal payments. Turbotax online 2012 This chapter explains in detail the rules for withholding tax from each of these types of income. Turbotax online 2012 The discussion of salaries and wages includes an explanation of how to complete Form W-4. Turbotax online 2012 This chapter also covers backup withholding on interest, dividends, and other payments. Turbotax online 2012 Useful Items - You may want to see: Form (and Instructions) W-4 Employee's Withholding Allowance Certificate W-4P Withholding Certificate for Pension or Annuity Payments W-4S Request for Federal Income Tax Withholding From Sick Pay W-4V Voluntary Withholding Request See chapter 5 of this publication for information about getting these publications and forms. Turbotax online 2012 Salaries and Wages Income tax is withheld from the pay of most employees. Turbotax online 2012 Your pay includes your regular pay, bonuses, commissions, and vacation allowances. Turbotax online 2012 It also includes reimbursements and other expense allowances paid under a nonaccountable plan. Turbotax online 2012 See Supplemental Wages , later, for definitions of accountable and nonaccountable plans. Turbotax online 2012 If your income is low enough that you will not have to pay income tax for the year, you may be exempt from withholding. Turbotax online 2012 This is explained under Exemption From Withholding , later. Turbotax online 2012 You can ask your employer to withhold income tax from noncash wages and other wages not subject to withholding. Turbotax online 2012 If your employer does not agree to withhold tax, or if not enough is withheld, you may have to pay estimated tax, as discussed in chapter 2. Turbotax online 2012 Military retirees. Turbotax online 2012   Military retirement pay is treated in the same manner as regular pay for income tax withholding purposes, even though it is treated as a pension or annuity for other tax purposes. Turbotax online 2012 Household workers. Turbotax online 2012   If you are a household worker, you can ask your employer to withhold income tax from your pay. Turbotax online 2012 A household worker is an employee who performs household work in a private home, local college club, or local fraternity or sorority chapter. Turbotax online 2012   Tax is withheld only if you want it withheld and your employer agrees to withhold it. Turbotax online 2012 If you do not have enough income tax withheld, you may have to pay estimated tax, as discussed in chapter 2. Turbotax online 2012 Farmworkers. Turbotax online 2012   Generally, income tax is withheld from your cash wages for work on a farm unless your employer both: Pays you cash wages of less than $150 during the year, and Has expenditures for agricultural labor totaling less than $2,500 during the year. Turbotax online 2012 Differential wage payments. Turbotax online 2012   When employees are on leave from employment for military duty, some employers make up the difference between the military pay and civilian pay. Turbotax online 2012 Payments to an employee who is on active duty for a period of more than 30 days will be subject to income tax withholding, but not subject to social security or Medicare taxes. Turbotax online 2012 The wages and withholding will be reported on Form W-2, Wage and Tax Statement. Turbotax online 2012 Determining Amount of Tax Withheld Using Form W-4 The amount of income tax your employer withholds from your regular pay depends on two things. Turbotax online 2012 The amount you earn in each payroll period. Turbotax online 2012 The information you give your employer on Form W-4. Turbotax online 2012 Form W-4 includes four types of information that your employer will use to figure your withholding. Turbotax online 2012 Whether to withhold at the single rate or at the lower married rate. Turbotax online 2012 How many withholding allowances you claim (each allowance reduces the amount withheld). Turbotax online 2012 Whether you want an additional amount withheld. Turbotax online 2012 Whether you are claiming an exemption from withholding in 2014. Turbotax online 2012 See Exemption From Withholding , later. Turbotax online 2012 Note. Turbotax online 2012 You must specify a filing status and a number of withholding allowances on Form W-4. Turbotax online 2012 You cannot specify only a dollar amount of withholding. Turbotax online 2012 New Job When you start a new job, you must fill out a Form W-4 and give it to your employer. Turbotax online 2012 Your employer should have copies of the form. Turbotax online 2012 If you need to change the information later, you must fill out a new form. Turbotax online 2012 If you work only part of the year (for example, you start working after the beginning of the year), too much tax may be withheld. Turbotax online 2012 You may be able to avoid overwithholding if your employer agrees to use the part-year method. Turbotax online 2012 See Part-Year Method , later, for more information. Turbotax online 2012 Employee also receiving pension income. Turbotax online 2012   If you receive pension or annuity income and begin a new job, you will need to file Form W-4 with your new employer. Turbotax online 2012 However, you can choose to split your withholding allowances between your pension and job in any manner. Turbotax online 2012 Changing Your Withholding During the year changes may occur to your marital status, exemptions, adjustments, deductions, or credits you expect to claim on your tax return. Turbotax online 2012 When this happens, you may need to give your employer a new Form W-4 to change your withholding status or number of allowances. Turbotax online 2012 If the changes reduce the number of allowances you are allowed to claim or changes your marital status from married to single, you must give your employer a new Form W-4 within 10 days. Turbotax online 2012 See Marital Status (Line 3 of Form W-4) and Withholding Allowances (Line 5 of Form W-4) , later. Turbotax online 2012 Generally, you can submit a new Form W-4 whenever you wish to change your withholding allowances for any other reason. Turbotax online 2012 See Table 1-1 for examples of personal and financial changes you should consider. Turbotax online 2012 Table 1-1. Turbotax online 2012 Personal and Financial Changes Factor Examples Lifestyle change Marriage Divorce Birth or adoption of child Loss of an exemption Purchase of a new home Retirement Filing chapter 11 bankruptcy Wage income You or your spouse start or stop working, or start or stop a second job Change in the amount of taxable income not subject to withholding Interest income Dividends Capital gains Self-employment income IRA (including certain Roth  IRA) distributions Change in the amount of adjustments to income IRA deduction Student loan interest deduction Alimony expense Change in the amount of itemized deductions or tax credits Medical expenses Taxes Interest expense Gifts to charity Job expenses Dependent care expenses Education credit Child tax credit Earned income credit If you change the number of your withholding allowances, you can request that your employer withhold using the Cumulative Wage Method , explained later. Turbotax online 2012 Checking Your Withholding After you have given your employer a Form W-4, you can check to see whether the amount of tax withheld from your pay is too much or too little. Turbotax online 2012 If too much or too little tax is being withheld, you should give your employer a new Form W-4 to change your withholding. Turbotax online 2012 You can get a blank Form W-4 from your employer or print the form from IRS. Turbotax online 2012 gov. Turbotax online 2012 You should try to have your withholding match your actual tax liability. Turbotax online 2012 If not enough tax is withheld, you will owe tax at the end of the year and may have to pay interest and a penalty. Turbotax online 2012 If too much tax is withheld, you will lose the use of that money until you get your refund. Turbotax online 2012 Always check your withholding if there are personal or financial changes in your life or changes in the law that might change your tax liability. Turbotax online 2012 See Table 1-1 for examples. Turbotax online 2012 Note. Turbotax online 2012 You cannot give your employer a payment to cover federal income tax withholding on salaries and wages for past pay periods or a payment for estimated tax. Turbotax online 2012 When Should You Check Your Withholding? The earlier in the year you check your withholding, the easier it is to get the right amount of tax withheld. Turbotax online 2012 You should check your withholding when any of the following situations occur. Turbotax online 2012 You receive a paycheck stub (statement) covering a full pay period in 2014, showing tax withheld based on 2014 tax rates. Turbotax online 2012 You prepare your 2013 tax return and get a: Big refund, or Balance due that is: More than you can comfortably pay, or Subject to a penalty. Turbotax online 2012 There are changes in your life or financial situation that affect your tax liability. Turbotax online 2012 See Table 1-1. Turbotax online 2012 There are changes in the tax law that affect your tax liability. Turbotax online 2012 How Do You Check Your Withholding? You can use the worksheets and tables in this publication to see if you are having the right amount of tax withheld. Turbotax online 2012 You can also use the IRS Withholding calculator at www. Turbotax online 2012 irs. Turbotax online 2012 gov/individuals. Turbotax online 2012 If you use the worksheets and tables in this publication, follow these steps. Turbotax online 2012 Fill out Worksheet 1-5 to project your total federal income tax liability for 2014. Turbotax online 2012 Fill out Worksheet 1-7 to project your total federal withholding for 2014 and compare that with your projected tax liability from Worksheet 1-5. Turbotax online 2012 If you are not having enough tax withheld, line 6 of Worksheet 1-7 will show you how much more to have withheld each payday. Turbotax online 2012 For ways to increase the amount of tax withheld, see How Do You Increase Your Withholding? If line 5 of Worksheet 1-7 shows that you are having more tax withheld than necessary, see How Do You Decrease Your Withholding, for ways to decrease the amount of tax you have withheld each payday. Turbotax online 2012 How Do You Increase Your Withholding? There are two ways to increase your withholding. Turbotax online 2012 You can: Decrease the number of allowances you claim on Form W-4, or Enter an additional amount that you want withheld from each paycheck on Form W-4. Turbotax online 2012 Requesting an additional amount withheld. Turbotax online 2012   You can request that an additional amount be withheld from each paycheck by following these steps. Turbotax online 2012 Complete Worksheets 1-5 and 1-7. Turbotax online 2012 Complete a new Form W-4 if the amount on Worksheet 1-7, line 5: Is more than you want to pay with your tax return or in estimated tax payments throughout the year, or Would cause you to pay a penalty when you file your tax return for 2014. Turbotax online 2012 Enter on your new Form W-4, the same number of withholding allowances your employer now uses for your withholding. Turbotax online 2012 This is the number of allowances you entered on the last Form W-4 you gave your employer. Turbotax online 2012 Enter on your new Form W-4, the amount from Worksheet 1-7, line 6. Turbotax online 2012 Give your newly completed Form W-4 to your employer. Turbotax online 2012   If you have this additional amount withheld from your pay each payday, you should avoid owing a large amount at the end of the year. Turbotax online 2012 Example. Turbotax online 2012 Early in 2014, Steve Miller used Worksheets 1-5, 1-6, and 1-7 to project his 2014 tax liability ($4,316) and his withholding for the year ($3,516). Turbotax online 2012 Steve's tax will be underwithheld by $800 ($4,316 − $3,516). Turbotax online 2012 His choices are to pay this amount when he files his 2014 tax return, make estimated tax payments, or increase his withholding now. Turbotax online 2012 Steve gets a new Form W-4 from his employer, who tells him that there are 50 paydays remaining in 2014. Turbotax online 2012 Steve completes the new Form W-4 as before, entering the same number of withholding allowances as before, but, in addition, entering $16 ($800 ÷ 50) on the form as the additional amount to be withheld from his pay each payday. Turbotax online 2012 He gives the completed form to his employer. Turbotax online 2012 What if I have more than one job or my spouse also has a job?   You are more likely to need to increase your withholding if you have more than one job or if you are married filing jointly and your spouse also works. Turbotax online 2012 If this is the case, you can increase your withholding for one or more of the jobs. Turbotax online 2012   You can apply the amount on Worksheet 1-7, line 5, to only one job or divide it between the jobs any way you wish. Turbotax online 2012 For each job, determine the extra amount that you want to apply to that job and divide that amount by the number of paydays remaining in 2014 for that job. Turbotax online 2012 This will give you the additional amount to enter on the Form W-4 you will file for that job. Turbotax online 2012 You need to give your employer a new Form W-4 for each job for which you are changing your withholding. Turbotax online 2012 Example. Turbotax online 2012 Meg Green works in a store and earns $46,000 a year. Turbotax online 2012 Her husband, John, works full-time in manufacturing and earns $68,000 a year. Turbotax online 2012 In 2014, they will also have $184 in taxable interest and $1,000 of other taxable income. Turbotax online 2012 They expect to file a joint income tax return. Turbotax online 2012 Meg and John complete Worksheets 1-5, 1-6, and 1-7. Turbotax online 2012 Line 5 of Worksheet 1-7 shows that they will owe an additional $4,459 after subtracting their withholding for the year. Turbotax online 2012 They can divide the $4,459 any way they want. Turbotax online 2012 They can enter an additional amount on either of their Forms W-4, or divide it between them. Turbotax online 2012 They decide to have the additional amount withheld from John's wages, so they enter $91 ($4,459 ÷ 49 remaining paydays) on his Form W-4. Turbotax online 2012 Both claim the same number of allowances as before. Turbotax online 2012 How Do You Decrease Your Withholding? If your completed Worksheets 1-5 and 1-7 show that you may have more tax withheld than your projected tax liability for 2014, you may be able to decrease your withholding. Turbotax online 2012 There are two ways to do this. Turbotax online 2012 You can: Decrease any additional amount you are having withheld, or Increase the number of allowances you claim on Form W-4. Turbotax online 2012 You can claim only the number of allowances to which you are entitled. Turbotax online 2012 To see if you can decrease your withholding by increasing your allowances, see the Form W-4 instructions and the rest of this publication. Turbotax online 2012 Increasing the number of allowances. Turbotax online 2012   Figure and increase the number of withholding allowances you can claim as follows. Turbotax online 2012 On a new Form W-4, complete the Personal Allowances Worksheet. Turbotax online 2012 If you plan to itemize deductions, claim adjustments to income, or claim tax credits, complete a new Deductions and Adjustments Worksheet. Turbotax online 2012 If you plan to claim tax credits, see Converting Credits to Withholding Allowances, later. Turbotax online 2012 If you meet the criteria on line H of the Form W-4 Personal Allowances Worksheet, complete a new Two-Earners/Multiple Jobs Worksheet. Turbotax online 2012 If the number of allowances you can claim on Form W-4, is different from the number you already are claiming, give the newly completed Form W-4 to your employer. Turbotax online 2012 Converting Credits to Withholding Allowances Table 1-2 , later, shows many of the tax credits you may be able to use to decrease your withholding. Turbotax online 2012 The Form W-4 Personal Allowances Worksheet provides only rough adjustments for the child and dependent care credit and the child tax credit. Turbotax online 2012 Complete Worksheet 1-8 to figure these credits more accurately and also take other credits into account. Turbotax online 2012 Include the amount from line 12 of Worksheet 1-8 in the total on line 5 of the Deductions and Adjustments Worksheet. Turbotax online 2012 Then complete the Deductions and Adjustments Worksheet and the rest of Form W-4. Turbotax online 2012 If you take the child and dependent care credit into account on Worksheet 1-8, enter -0- on line F of the Personal Allowances Worksheet. Turbotax online 2012 If you take the child tax credit into account on Worksheet 1-8, enter -0- on line G of the Personal Allowances Worksheet. Turbotax online 2012 Example. Turbotax online 2012 Brett and Alyssa Davis are married and expect to file a joint return for 2014. Turbotax online 2012 Their expected taxable income from all sources is $68,000. Turbotax online 2012 They expect to have $15,900 of itemized deductions. Turbotax online 2012 Their projected tax credits include a child and dependent care credit of $960 and an adoption credit of $1,500. Turbotax online 2012 The Davis' complete Worksheet 1-8, as follows, to see whether they can convert their tax credits into additional withholding allowances. Turbotax online 2012 Line 1, expected child and dependent care credit—$960. Turbotax online 2012 Line 9, expected adoption credit—$1,500. Turbotax online 2012 Line 10, total estimated tax credits—$2,460. Turbotax online 2012 Line 11. Turbotax online 2012 Their combined total income from all sources, $68,000, falls between $42,001 and $98,000 on the table for married filing jointly or qualifying widow(er). Turbotax online 2012 The number to the right of this range is 6. Turbotax online 2012 7. Turbotax online 2012 Line 12, multiply line 10 by line 11—$16,482. Turbotax online 2012 Then the Davis' complete the Form W-4 worksheets. Turbotax online 2012 Because they choose to account for their child and dependent care credit on the Deductions and Adjustments Worksheet, they enter -0- on line F of the Personal Allowances Worksheet and figure a new total for line H. Turbotax online 2012 They take the result on line 12 of Worksheet 1-8, add it to their other adjustments on line 5 of the Form W-4 Deductions and Adjustments Worksheet, and complete the Form W-4 worksheets. Turbotax online 2012 When Will Your New Form W-4 Go Into Effect? If the change is for the current year, your employer must put your new Form W-4 into effect no later than the start of the first payroll period ending on or after the 30th day after the day on which you give your employer your revised Form W-4. Turbotax online 2012 If the change is for next year, your new Form W-4 will not take effect until next year. Turbotax online 2012 Retirees Returning to the Workforce When you first began receiving your pension, you told the payer how much tax to withhold, if any, by completing Form W-4P, Withholding Certificate for Pension or Annuity Payments (or similar form). Turbotax online 2012 However, if your retirement pay is from the military or certain deferred compensation plans, you completed Form W-4 instead of Form W-4P. Turbotax online 2012 You completed either form based on your projected income at that time. Turbotax online 2012 Now that you are returning to the workforce, your new Form W-4 (given to your employer) and your Form W-4 or W-4P (on file with your pension plan) must work together to determine the correct amount of withholding for your new amount of income. Turbotax online 2012 The worksheets that come with Forms W-4 and W-4P are basically the same, so you can use either set of worksheets to figure out how many withholding allowances you are entitled to claim. Turbotax online 2012 Start off with the Personal Allowances Worksheet. Turbotax online 2012 Then, if you will be itemizing your deductions, claiming adjustments to income, or claiming tax credits when you file your tax return, complete the Deductions and Adjustments Worksheet. Turbotax online 2012 The third worksheet is the most important for this situation. Turbotax online 2012 Form W-4 calls it the Two-Earners/Multiple Jobs Worksheet, Form W-4P calls it the Multiple Pensions/More-Than-One-Income Worksheet—both are the same. Turbotax online 2012 If you have more than one source of income, in order to have enough withholding to cover the tax on your higher income, you may need to claim fewer withholding allowances or request your employer to withhold an additional amount from each paycheck. Turbotax online 2012 Once you have figured out how many allowances you are entitled to claim, look at the income from both your pension and your new job, and how often you receive payments. Turbotax online 2012 It is your decision how to divide up your withholding allowances between these sources of income. Turbotax online 2012 For example, you may want to “take home” most of your weekly paycheck to use as spending money and use your monthly pension to “pay the bills. Turbotax online 2012 ” In that case, change your Form W-4P to zero allowances and claim all that you are entitled to on your Form W-4. Turbotax online 2012 There are a couple of ways you can get a better idea of how much tax will be withheld when claiming a certain number of allowances. Turbotax online 2012 Use the withholding tables in Publication 15 (Circular E), Employer's Tax Guide. Turbotax online 2012 Contact your pension provider and your employer's payroll department. Turbotax online 2012 And remember, this is not a final decision. Turbotax online 2012 If you do not get the correct amount of withholding with the first Forms W-4 and W-4P you submit, you should refigure your allowances (or divide them differently) using the information and worksheets in this publication, or the resources mentioned above. Turbotax online 2012 You should go through this same process each time your life situation changes, whether it be for personal or financial reasons. Turbotax online 2012 You may need more tax withheld, or you may need less. Turbotax online 2012 Table 1-2. Turbotax online 2012 Tax Credits for 2014 For more information about the . Turbotax online 2012 . Turbotax online 2012 . Turbotax online 2012 See . Turbotax online 2012 . Turbotax online 2012 . Turbotax online 2012 Adoption credit Form 8839 instructions Child and dependent care expenses, credit for Publication 503, Child and Dependent Care Expenses Child tax credit (including the additional child tax credit) Instructions for Form 1040 or Form 1040A Earned income credit Publication 596, Earned Income Credit Education credits Publication 970, Tax Benefits for Education Elderly or the disabled, credit for the Publication 524, Credit for the Elderly or the Disabled Foreign tax credit (except any credit that applies to wages not subject to U. Turbotax online 2012 S. Turbotax online 2012 income tax withholding because they are subject to income tax withholding by a foreign country) Publication 514, Foreign Tax Credit for Individuals General business credit Form 3800, General Business Credit Mortgage interest credit Publication 530, Tax Information for First-Time Homeowners Qualified electric vehicle passive activity credit Form 8834 Prior year minimum tax, credit for (if you paid alternative minimum tax in an earlier year) Form 8801 instructions Retirement savings contributions credit (saver's credit) Publication 590, Individual Retirement Arrangements (IRAs) Tax credit bonds, credit to holders of Form 8912 instructions Completing Form W-4 and Worksheets When reading the following discussion, you may find it helpful to refer to Form W-4. Turbotax online 2012 Marital Status There is a lower withholding rate for people who qualify to check the “Married” box on line 3 of Form W-4. Turbotax online 2012 Everyone else must have tax withheld at the higher single rate. Turbotax online 2012 Single. Turbotax online 2012   You must check the “Single” box if any of the following applies. Turbotax online 2012 You are single. Turbotax online 2012 If you are divorced, or separated from your spouse under a court decree of separate maintenance, you are considered single. Turbotax online 2012 You are married, but neither you nor your spouse is a citizen or resident of the United States. Turbotax online 2012 You are married, either you or your spouse is a nonresident alien, and you have not chosen to have that person treated as a resident alien for tax purposes. Turbotax online 2012 For more information, see Nonresident Spouse Treated as a Resident in chapter 1 of Publication 519. Turbotax online 2012 Married. Turbotax online 2012   You qualify to check the “Married” box if any of the following applies. Turbotax online 2012 You are married and neither you nor your spouse is a nonresident alien. Turbotax online 2012 You are considered married for the whole year even if your spouse died during the year. Turbotax online 2012 You are married and either you or your spouse is a nonresident alien who has chosen to be treated as a resident alien for tax purposes. Turbotax online 2012 For more information, see Nonresident Spouse Treated as a Resident in chapter 1 of Publication 519. Turbotax online 2012 You expect to be able to file your return as a qualifying widow or widower. Turbotax online 2012 You usually can use this filing status if your spouse died within the previous 2 years and you provide more than half the cost of keeping up a home for the entire year that was the main home for you and your child whom you can claim as a dependent. Turbotax online 2012 However, you must file a new Form W-4 showing your filing status as single by December 1 of the last year you are eligible to file as a qualifying widow or widower. Turbotax online 2012 For more information on this filing status, see Qualifying Widow(er) With Dependent Child under Filing Status in Publication 501, Exemptions, Standard Deduction, and Filing Information. Turbotax online 2012 Married, but withhold at higher single rate. Turbotax online 2012   Some married people find that they do not have enough tax withheld at the married rate. Turbotax online 2012 This can happen, for example, when both spouses work. Turbotax online 2012 To avoid this, you can check the “Married, but withhold at higher Single rate” box (even if you qualify for the married rate). Turbotax online 2012 Also, you may find that more tax is withheld if you fill out the Two-Earners/Multiple Jobs Worksheet, explained later. Turbotax online 2012 Withholding Allowances The more allowances you claim on Form W-4, the less income tax your employer will withhold. Turbotax online 2012 You will have the most tax withheld if you claim “0” allowances. Turbotax online 2012 The number of allowances you can claim depends on the following factors. Turbotax online 2012 How many exemptions you can take on your tax return. Turbotax online 2012 Whether you have income from more than one job. Turbotax online 2012 What deductions, adjustments to income, and credits you expect to have for the year. Turbotax online 2012 Whether you will file as head of household. Turbotax online 2012 If you are married (filing jointly), it also depends on whether your spouse also works and claims any allowances on his or her own Form W-4. Turbotax online 2012 Or, if married filing separately, whether or not your spouse also works. Turbotax online 2012 Form W-4 worksheets. Turbotax online 2012    Form W-4 has worksheets to help you figure how many withholding allowances you can claim. Turbotax online 2012 The worksheets are for your own records. Turbotax online 2012 Do not give them to your employer. Turbotax online 2012   Complete only one set of Form W-4 worksheets, no matter how many jobs you have. Turbotax online 2012 If you are married and will file a joint return, complete only one set of worksheets for you and your spouse, even if you both earn wages and each must give Form W-4 to your employers. Turbotax online 2012 Complete separate sets of worksheets only if you and your spouse will file separate returns. Turbotax online 2012   If you are not exempt from withholding (see Exemption From Withholding , later), complete the Personal Allowances Worksheet on page 1 of the form. Turbotax online 2012 Also, use the worksheets on page 2 of the form to adjust the number of your withholding allowances for itemized deductions and adjustments to income, and for two-earner or multiple-job situations. Turbotax online 2012 If you want to adjust the number of your withholding allowances for certain tax credits, use the Deductions and Adjustments Worksheet on page 2 of Form W-4, even if you do not have any deductions or adjustments. Turbotax online 2012   Complete all worksheets that apply to your situation. Turbotax online 2012 The worksheets will help you figure the maximum number of withholding allowances you are entitled to claim so that the amount of income tax withheld from your wages will match, as closely as possible, the amount of income tax you will owe at the end of the year. Turbotax online 2012 Multiple jobs. Turbotax online 2012   If you have income from more than one job at the same time, complete only one set of Form W-4 worksheets. Turbotax online 2012 Then split your allowances between the Forms W-4 for each job. Turbotax online 2012 You cannot claim the same allowances with more than one employer at the same time. Turbotax online 2012 You can claim all your allowances with one employer and none with the other(s), or divide them any other way. Turbotax online 2012 Married individuals. Turbotax online 2012   If both you and your spouse are employed and expect to file a joint return, figure your withholding allowances using your combined income, adjustments, deductions, exemptions, and credits. Turbotax online 2012 Use only one set of worksheets. Turbotax online 2012 You can divide your total allowances any way, but you cannot claim an allowance that your spouse also claims. Turbotax online 2012   If you and your spouse expect to file separate returns, figure your allowances using separate worksheets based on your own individual income, adjustments, deductions, exemptions, and credits. Turbotax online 2012 Alternative method of figuring withholding allowances. Turbotax online 2012   You do not have to use the Form W-4 worksheets if you use a more accurate method of figuring the number of withholding allowances. Turbotax online 2012   The method you use must be based on withholding schedules, the tax rate schedules, and the 2014 Estimated Tax Worksheet in chapter 2. Turbotax online 2012 It must take into account only the items of income, adjustments to income, deductions, and tax credits that are taken into account on Form W-4. Turbotax online 2012   You can use the number of withholding allowances determined under an alternative method rather than the number determined using the Form W-4 worksheets. Turbotax online 2012 You still must give your employer a Form W-4 claiming your withholding allowances. Turbotax online 2012 Employees who are not citizens or residents. Turbotax online 2012   If you are neither a citizen nor a resident of the United States, you usually can claim only one withholding allowance. Turbotax online 2012 However, this rule does not apply if you are a resident of Canada or Mexico, or if you are a U. Turbotax online 2012 S. Turbotax online 2012 national. Turbotax online 2012 It also does not apply if your spouse is a U. Turbotax online 2012 S. Turbotax online 2012 citizen or resident and you have chosen to be treated as a resident of the United States for tax purposes. Turbotax online 2012 Special rules apply to residents of South Korea and India. Turbotax online 2012 For more information, see Withholding From Compensation in chapter 8 of Publication 519. Turbotax online 2012 Personal Allowances Worksheet Use the Personal Allowances Worksheet on page 1 of Form W-4 to figure your withholding allowances based on all of the following that apply. Turbotax online 2012 Exemptions. Turbotax online 2012 Only one job. Turbotax online 2012 Head of household filing status. Turbotax online 2012 Child and dependent care credit. Turbotax online 2012 Child tax credit. Turbotax online 2012 Exemptions (worksheet lines A, C, and D). Turbotax online 2012   You can claim one withholding allowance for each exemption you expect to claim on your tax return. Turbotax online 2012 Self. Turbotax online 2012   You can claim an allowance for your exemption on line A unless another person can claim an exemption for you on his or her tax return. Turbotax online 2012 If another person is entitled to claim an exemption for you, you cannot claim an allowance for your exemption even if the other person will not claim your exemption. Turbotax online 2012 Spouse. Turbotax online 2012   You can claim an allowance for your spouse's exemption on line C unless your spouse is claiming his or her own exemption or another person can claim an exemption for your spouse. Turbotax online 2012 Do not claim this allowance if you and your spouse expect to file separate returns. Turbotax online 2012 Dependents. Turbotax online 2012   You can claim one allowance on line D for each exemption you will claim for a dependent on your tax return. Turbotax online 2012 Only one job (worksheet line B). Turbotax online 2012    You can claim an additional withholding allowance if any of the following apply for 2014. Turbotax online 2012 You are single and you have only one job at a time. Turbotax online 2012 You are married, you have only one job at a time, and your spouse does not work. Turbotax online 2012 Your wages from a second job or your spouse's wages (or the total of both) are $1,500 or less. Turbotax online 2012 If you qualify for this allowance, enter “1” on line B of the worksheet. Turbotax online 2012 Head of household filing status (worksheet line E). Turbotax online 2012   Generally, you can file as head of household if you are unmarried and pay more than half the cost of keeping up a home that: Was the main home for all of 2014 of your parent whom you can claim as a dependent, or You lived in for more than half the year with your qualifying child or any other person you can claim as a dependent. Turbotax online 2012 For more information, see Publication 501. Turbotax online 2012   If you expect to file as head of household on your 2014 tax return, enter “1” on line E of the worksheet. Turbotax online 2012 Reduction of personal allowances. Turbotax online 2012   For 2014, your deduction for personal exemptions on your tax return is reduced if your adjusted gross income (AGI) is more than the AGI shown next for your filing status. Turbotax online 2012 Personal Allowance Phaseout Threshold Single $254,200 Married filing jointly or qualifying widow(er) $305,050 Married filing separately $152,525 Head of household $279,650   If you expect your AGI to be more than the amount listed, use Worksheet 1-1 to figure your reduced number of personal allowances on lines A, C, and D of the Personal Allowances Worksheet. Turbotax online 2012 Worksheet 1-1. Turbotax online 2012 Personal Allowances Worksheet (Form W-4) Reduction of Personal Allowances if AGI Above Phaseout Threshold 1. Turbotax online 2012 Enter the total amount of allowances on lines A, C, and D of the Personal Allowance Worksheet without regard to the phaseout rule 1. Turbotax online 2012   2. Turbotax online 2012 Enter your expected AGI 2. Turbotax online 2012       3. Turbotax online 2012 Enter $254,200 if single $305,050 if married filing jointly or qualifying widow(er) $152,525 if married filing separately $279,650 if head of household 3. Turbotax online 2012       4. Turbotax online 2012 Subtract line 3 from line 2 4. Turbotax online 2012       5. Turbotax online 2012 Divide line 4 by $125,000 ($62,500 if married filing separately). Turbotax online 2012 Enter the result as a decimal 5. Turbotax online 2012   6. Turbotax online 2012 Multiply line 1 by line 5. Turbotax online 2012 If the result is not a whole number, increase it to the next higher whole number 6. Turbotax online 2012   7. Turbotax online 2012 Subtract line 6 from line 1. Turbotax online 2012 The total of the numbers you enter on A, C, and D of the Personal Allowances Worksheet can not be more than this amount 7. Turbotax online 2012     Child and dependent care credit (worksheet line F). Turbotax online 2012   Enter “1” on line F if you expect to claim a credit for at least $2,000 of qualifying child or dependent care expenses on your 2014 return. Turbotax online 2012 Generally, qualifying expenses are those you pay for the care of your dependent who is your qualifying child under age 13 or for your spouse or dependent who is not able to care for himself or herself so that you can work or look for work. Turbotax online 2012 For more information, see Publication 503, Child and Dependent Care Expenses. Turbotax online 2012   Instead of using line F, you can choose to take the credit into account on line 5 of the Deductions and Adjustments Worksheet, as explained under Tax credits , later. Turbotax online 2012 Child tax credit (worksheet line G). Turbotax online 2012   If your total income will be less than $65,000 ($95,000 if married), enter “2” on line G for each eligible child. Turbotax online 2012 Subtract “1” from that amount if you have three to six eligible children. Turbotax online 2012 Subtract “2” from that amount if you have seven or more eligible children. Turbotax online 2012   If your total income will be between $65,000 and $84,000 ($95,000 and $119,000 if married), enter “1” on line G for each eligible child. Turbotax online 2012   An eligible child is any child: Who is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew), Who will be under age 17 at the end of 2014, Who is younger than you (or your spouse if filing jointly) or permanently and totally disabled, Who will not provide over half of his or her own support for 2014, Who will not file a joint return, unless the return is filed only as a claim for refund, Who will live with you for more than half of 2014, Who is a U. Turbotax online 2012 S. Turbotax online 2012 citizen, U. Turbotax online 2012 S. Turbotax online 2012 national, or U. Turbotax online 2012 S. Turbotax online 2012 resident alien, and Who will be claimed as a dependent on your return. Turbotax online 2012 If you are a U. Turbotax online 2012 S. Turbotax online 2012 citizen or U. Turbotax online 2012 S. Turbotax online 2012 national and your adopted child lived with you all year as a member of your household, that child meets the citizenship test. Turbotax online 2012   Also, if any other person can claim the child as an eligible child, see Qualifying child of more than one person in the 2013 instructions for Form 1040 or 1040A, line 6c. Turbotax online 2012   For more information about the child tax credit, see the instructions for Form 1040 or Form 1040A. Turbotax online 2012   Instead of using line G, you can choose to take the credit into account on line 5 of the Deductions and Adjustments Worksheet, as explained under Tax credits , later. Turbotax online 2012 Total personal allowances (worksheet line H). Turbotax online 2012    Add lines A through G and enter the total on line H. Turbotax online 2012 If you do not use either of the worksheets on the back of Form W-4, enter the number from line H on line 5 of Form W-4. Turbotax online 2012 Deductions and Adjustments Worksheet Use the Deductions and Adjustments Worksheet on page 2 of Form W-4 if you plan to itemize your deductions, claim certain credits, or claim adjustments to the income on your 2014 tax return and you want to reduce your withholding. Turbotax online 2012 Also, complete this worksheet when you have changes to those items to see if you need to change your withholding. Turbotax online 2012 Use the amount of each item you reasonably can expect to show on your return. Turbotax online 2012 However, do not use more than: The amount shown for that item on your 2013 return (or your 2012 return if you have not yet filed your 2013 return), plus Any additional amount related to a transaction or occurrence (such as payments already made, the signing of an agreement, or the sale of property) that you can prove has happened or will happen during 2013 or 2014. Turbotax online 2012 Do not include any amount shown on your last tax return that has been disallowed by the IRS. Turbotax online 2012 Example. Turbotax online 2012 On June 30, 2013, you bought your first home. Turbotax online 2012 On your 2013 tax return, you claimed itemized deductions of $6,600, the total mortgage interest and real estate tax you paid during the 6 months you owned your home. Turbotax online 2012 Based on your mortgage payment schedule and your real estate tax assessment, you reasonably can expect to claim deductions of $13,200 for those items on your 2014 return. Turbotax online 2012 You can use $13,200 to figure the number of your withholding allowances for itemized deductions. Turbotax online 2012 Not itemizing deductions. Turbotax online 2012   If you expect to claim the standard deduction on your tax return, skip lines 1 and 2, and enter “0” on line 3 of the worksheet. Turbotax online 2012 Itemized deductions (worksheet line 1). Turbotax online 2012   Enter your estimated total itemized deductions on line 1 of the worksheet. Turbotax online 2012   Listed below are some of the deductions you can take into account when figuring additional withholding allowances for 2014. Turbotax online 2012 You normally claim these deductions on Schedule A of Form 1040. Turbotax online 2012 Medical and dental expenses that are more than 10% (7. Turbotax online 2012 5% if either you or your spouse was born before January 2, 1950) of your 2014 AGI (defined under AGI , later). Turbotax online 2012 State and local income or property taxes. Turbotax online 2012 Deductible home mortgage interest. Turbotax online 2012 Investment interest up to net investment income. Turbotax online 2012 Charitable contributions. Turbotax online 2012 Casualty and theft losses that are more than $100 and 10% of your AGI. Turbotax online 2012 Fully deductible miscellaneous itemized deductions, including: Impairment-related work expenses of persons with disabilities, Federal estate tax on income in respect of a decedent, Repayment of more than $3,000 of income held under a claim of right that you included in income in an earlier year because at the time you thought you had an unrestricted right to it, Unrecovered investments in an annuity contract under which payments have ceased because of the annuitant's death, Gambling losses up to the amount of gambling winnings reported on your return, and Casualty and theft losses from  income-producing property. Turbotax online 2012 Other miscellaneous itemized deductions that are more than 2% of your AGI, including: Unreimbursed employee business expenses, such as education expenses, work clothes and uniforms, union dues and fees, and the cost of work-related small tools and supplies, Safe deposit box rental, Tax counsel and assistance, and Certain fees paid to an IRA trustee or custodian. Turbotax online 2012 AGI. Turbotax online 2012   For the purpose of estimating your itemized deductions, your AGI is your estimated total income for 2014 minus any estimated adjustments to income (discussed later) that you include on line 4 of the Deductions and Adjustments Worksheet. Turbotax online 2012 Phaseout of itemized deductions. Turbotax online 2012   For 2014, your total itemized deductions may be phased out (reduced) if your AGI is more than the following thresholds. Turbotax online 2012    Itemized Deduction Phaseout Threshold Single $254,200 Married filing jointly or qualifying widow(er) $305,050 Married filing separately $152,525 Head of household $279,650   If you expect your AGI to be more than the amount listed, use Worksheet 1–2 to figure your reduction in itemized deductions. Turbotax online 2012 Worksheet 1-2. Turbotax online 2012 Deductions and Adjustments Worksheet (Form W-4)—Line 1 Phaseout of Itemized Deductions 1. Turbotax online 2012 Enter the estimated total of your itemized deductions 1. Turbotax online 2012   2. Turbotax online 2012 Enter the amount included in line 1 for medical and dental expenses, investment interest, casualty or theft losses, and gambling losses 2. Turbotax online 2012   3. Turbotax online 2012 Is the amount on line 2 less than the amount on line 1? ❑ No. Turbotax online 2012 Stop here. Turbotax online 2012 Your deduction is not limited. Turbotax online 2012 Enter the amount from line 1 above on line 1 of the Deductions and Adjustments Worksheet. Turbotax online 2012  ❑ Yes. Turbotax online 2012 Subtract line 2 from line 1. Turbotax online 2012 3. Turbotax online 2012       4. Turbotax online 2012 Multiply line 3 by 80% (. Turbotax online 2012 80) 4. Turbotax online 2012       5. Turbotax online 2012 Enter your expected AGI 5. Turbotax online 2012       6. Turbotax online 2012 Enter $305,050 If married filing jointly or qualifying widow(er), $279,650 if head of household, $254,200 if single, or $152,525 if married filing separately 6. Turbotax online 2012   7. Turbotax online 2012 Is the amount on line 6 less than the amount on line 5? ❑ No. Turbotax online 2012 Stop here. Turbotax online 2012 Your deduction is not limited. Turbotax online 2012 Enter the amount from line 1 above on line 1 of the Deductions and Adjustments Worksheet. Turbotax online 2012  ❑ Yes. Turbotax online 2012 Subtract line 6 from line 5. Turbotax online 2012 7. Turbotax online 2012       8. Turbotax online 2012 Multiply line 7 by 3% (. Turbotax online 2012 03) 8. Turbotax online 2012       9. Turbotax online 2012 Enter the smaller of line 4 or line 8 9. Turbotax online 2012     10. Turbotax online 2012 Subtract line 9 from line 1. Turbotax online 2012 Enter the result here and on line 1 of the Deductions and Adjustments Worksheet 10. Turbotax online 2012     Adjustments to income (worksheet line 4). Turbotax online 2012   Enter your estimated total adjustments to income on line 4 of the Deductions and Adjustments Worksheet. Turbotax online 2012   You can take the following adjustments to income into account when figuring additional withholding allowances for 2014. Turbotax online 2012 These adjustments appear on page 1 of your Form 1040 or 1040A. Turbotax online 2012 Net losses from Schedules C, D, E, and F of Form 1040 and from Part II of Form 4797, line 18b. Turbotax online 2012 Net operating loss carryovers. Turbotax online 2012 Certain business expenses of reservists, performing artists, and fee-based government officials. Turbotax online 2012 Health savings account or medical savings account deduction. Turbotax online 2012 Certain moving expenses. Turbotax online 2012 Deduction for self-employment tax. Turbotax online 2012 Deduction for contributions to self-employed SEP, and qualified SIMPLE plans. Turbotax online 2012 Self-employed health insurance deduction. Turbotax online 2012 Penalty on early withdrawal of savings. Turbotax online 2012 Alimony paid. Turbotax online 2012 IRA deduction. Turbotax online 2012 Student loan interest deduction. Turbotax online 2012 Jury duty pay given to your employer. Turbotax online 2012 Reforestation amortization and expenses. Turbotax online 2012 Deductible expenses related to income reported on line 21 from the rental of personal property engaged in for profit. Turbotax online 2012 Repayment of certain supplemental unemployment benefits. Turbotax online 2012 Contributions to IRC 501(c)(18)(D) pension plans. Turbotax online 2012 Contributions by certain chaplains to IRC 403(b) plans. Turbotax online 2012 Attorney fees and court costs for certain unlawful discrimination claims. Turbotax online 2012 Attorney fees and court costs for certain whistleblower awards. Turbotax online 2012 Estimated amount of decrease in tax attributable to income averaging using Schedule J (Form 1040). Turbotax online 2012 Tax credits (worksheet line 5). Turbotax online 2012   Although you can take most tax credits into account when figuring withholding allowances, the Personal Allowances Worksheet uses only the child and dependent care credit (line F) and the child tax credit (line G). Turbotax online 2012 But you can take these credits and others into account by adding an extra amount on line 5 of the Deductions and Adjustments Worksheet. Turbotax online 2012   If you take the child and dependent care credit into account on line 5, do not use line F. Turbotax online 2012 If you take the child tax credit into account on line 5, do not use line G. Turbotax online 2012   In addition to the child and dependent care credit and the child tax credit, you can generally take into account the following credits. Turbotax online 2012 See the individual tax form instructions for more details. Turbotax online 2012 Foreign tax credit, except any credit that applies to wages not subject to U. Turbotax online 2012 S. Turbotax online 2012 income tax withholding because they are subject to income tax withholding by a foreign country. Turbotax online 2012 See Publication 514, Foreign Tax Credit for Individuals. Turbotax online 2012 Credit for the elderly or the disabled. Turbotax online 2012 See Publication 524, Credit for the Elderly or the Disabled. Turbotax online 2012 Education credits. Turbotax online 2012 See Publication 970, Tax Benefits for Education. Turbotax online 2012 Retirement savings contributions credit (saver's credit). Turbotax online 2012 See Publication 590. Turbotax online 2012 Mortgage interest credit. Turbotax online 2012 See Publication 530, Tax Information for Homeowners. Turbotax online 2012 Adoption credit. Turbotax online 2012 See the Instructions for Form 8839. Turbotax online 2012 Credit for nonrefundable portion of prior year minimum tax if you paid alternative minimum tax in an earlier year. Turbotax online 2012 See the Instructions for Form 8801. Turbotax online 2012 General business credit. Turbotax online 2012 See the Instructions for Form 3800. Turbotax online 2012 Earned income credit. Turbotax online 2012 See Publication 596. Turbotax online 2012 Figuring line 5 entry. Turbotax online 2012   To figure the amount to add on line 5 for tax credits, multiply your estimated total credits by the appropriate number from Table 1-3 . Turbotax online 2012 Example. Turbotax online 2012 You are married and expect to file a joint return for 2014. Turbotax online 2012 Your combined estimated wages are $68,000. Turbotax online 2012 Your estimated tax credits include a child and dependent care credit of $960 and a mortgage interest credit of $1,700 (total credits = $2,660). Turbotax online 2012 In Table 1-3, the number corresponding to your combined estimated wages ($42,001 – $98,000) is 6. Turbotax online 2012 7. Turbotax online 2012 Multiply your total estimated tax credits of $2,660 by 6. Turbotax online 2012 7. Turbotax online 2012 Add the result, $17,822, to the amount you otherwise would show on line 5 of the Deductions and Adjustments Worksheet and enter the total on line 5. Turbotax online 2012 Because you choose to account for your child and dependent care credit this way, do not make an entry on line F of the Personal Allowances Worksheet. Turbotax online 2012 Nonwage income (worksheet line 6). Turbotax online 2012   Enter on line 6 your estimated total nonwage income (other than tax-exempt income). Turbotax online 2012 Nonwage income includes interest, dividends, net rental income, unemployment compensation, alimony, gambling winnings, prizes and awards, hobby income, capital gains, royalties, and partnership income. Turbotax online 2012   If line 6 is more than line 5, you may not have enough income tax withheld from your wages. Turbotax online 2012 See Getting the Right Amount of Tax Withheld , later. Turbotax online 2012 Net deductions and adjustments (worksheet line 8). Turbotax online 2012    If line 7 is less than $3,950, enter “0” on line 8. Turbotax online 2012 If line 7 is $3,950 or more, divide it by $3,950, drop any fraction, and enter the result on line 8. Turbotax online 2012 Example. Turbotax online 2012 If line 7 is $5,200, $5,200 ÷ $3,950 = 1. Turbotax online 2012 32. Turbotax online 2012 Drop the fraction (. Turbotax online 2012 32) and enter “1” on line 8. Turbotax online 2012 Two-Earners/Multiple Jobs Worksheet Complete the Two-Earners/Multiple Jobs Worksheet on page 2 of Form W-4 if you have more than one job or are married and you and your spouse both work and the combined earnings from all jobs are more than $50,000 ($20,000 if married). Turbotax online 2012 Reducing your allowances (worksheet lines 1-3). Turbotax online 2012   On line 1 of the worksheet, enter the number from line H of the Personal Allowances Worksheet (or line 10 of the Deductions and Adjustments Worksheet, if used). Turbotax online 2012 Using Table 1 in the Two-Earners/Multiple Jobs Worksheet, find the number listed beside the amount of your estimated wages for the year from your lowest paying job (or if lower and you are filing jointly, your spouse's job). Turbotax online 2012 Enter that number on line 2. Turbotax online 2012 However, if you are married filing jointly and estimated wages from the highest paying job are $65,000 or less, do not enter more than “3. Turbotax online 2012 ”    Table 1-3. Turbotax online 2012 Deductions and Adjustments Worksheet (Form W-4)—Line 5 a. Turbotax online 2012  Married Filing Jointly or Qualifying Widow(er) If combined income from all sources is:   Multiply credits by: $0 – 42,000 10. Turbotax online 2012 0 $42,001 – 98,000 6. Turbotax online 2012 7 $98,001 – 180,000 4. Turbotax online 2012 0 $180,001 – 270,000 3. Turbotax online 2012 6 $270,001 – 440,000 3. Turbotax online 2012 0 $440,001 – 490,000. Turbotax online 2012 . Turbotax online 2012 . Turbotax online 2012 . Turbotax online 2012 2. Turbotax online 2012 9 $490,001 and over 2. Turbotax online 2012 5 b. Turbotax online 2012  Single If combined income from all sources is:   Multiply credits by: $0 – 19,000 10. Turbotax online 2012 0 $19,001 – 47,000 6. Turbotax online 2012 7 $47,001 – 104,000 4. Turbotax online 2012 0 $104,001 – 205,000 3. Turbotax online 2012 6 $205,001 – 430,000 3. Turbotax online 2012 0 $430,001 and over 2. Turbotax online 2012 5 c. Turbotax online 2012  Head of Household If combined income from all sources is:   Multiply credits by: $0 – 30,000 10. Turbotax online 2012 0 $30,001 – 66,000 6. Turbotax online 2012 7 $66,001 – 150,000 4. Turbotax online 2012 0 $150,001 – 235,000 3. Turbotax online 2012 6 $235,001 – 430,000 3. Turbotax online 2012 0 $430,001 – 460,000 2. Turbotax online 2012 9 $460,001 and over 2. Turbotax online 2012 5 d. Turbotax online 2012  Married Filing Separately   If combined income from all sources is:   Multiply credits by: $0 – 21,000 10. Turbotax online 2012 0 $21,001 – 49,000 6. Turbotax online 2012 7 $49,001 – 90,000 4. Turbotax online 2012 0 $90,001 – 135,000 3. Turbotax online 2012 6 $135,001 – 220,000 3. Turbotax online 2012 0 $220,001 – 245,000 2. Turbotax online 2012 9 $245,001 and over 2. Turbotax online 2012 5   Subtract line 2 from line 1 and enter the result (but not less than zero) on line 3 and on Form W-4, line 5. Turbotax online 2012 If line 1 is more than or equal to line 2, do not use the rest of the worksheet. Turbotax online 2012   If line 1 is less than line 2, enter “0” on Form W-4, line 5. Turbotax online 2012 Then complete lines 4 through 9 of the worksheet to figure the additional withholding needed to avoid underwithholding. Turbotax online 2012 Other amounts owed. Turbotax online 2012   If you expect to owe amounts other than income tax, such as self-employment tax, include them on line 8. Turbotax online 2012 The total is the additional withholding needed for the year. Turbotax online 2012 Getting the Right Amount of Tax Withheld In most situations, the tax withheld from your pay will be close to the tax you figure on your return if you follow these two rules. Turbotax online 2012 You accurately complete all the Form W-4 worksheets that apply to you. Turbotax online 2012 You give your employer a new Form W-4 when changes occur. Turbotax online 2012 But because the worksheets and withholding methods do not account for all possible situations, you may not be getting the right amount withheld. Turbotax online 2012 This is most likely to happen in the following situations. Turbotax online 2012 You are married and both you and your spouse work. Turbotax online 2012 You have more than one job at a time. Turbotax online 2012 You have nonwage income, such as interest, dividends, alimony, unemployment compensation, or self-employment income. Turbotax online 2012 You will owe additional amounts with your return, such as self-employment tax. Turbotax online 2012 Your withholding is based on obsolete Form W-4 information for a substantial part of the year. Turbotax online 2012 Your earnings are more than $130,000 if you are single or $180,000 if you are married. Turbotax online 2012 You work only part of the year. Turbotax online 2012 You change the number of your withholding allowances during the year. Turbotax online 2012 You are subject to Additional Medicare Tax or Net Investment Income Tax. Turbotax online 2012 If you anticipate liability for Additional Medicare Tax or Net Investment Income Tax, you may request that your employer withhold an additional amount of income tax withholding on Form W-4. Turbotax online 2012 Part-Year Method If you work only part of the year and your employer agrees to use the part-year withholding method, less tax will be withheld from each wage payment than would be withheld if you worked all year. Turbotax online 2012 To be eligible for the part-year method, you must meet both of the following requirements. Turbotax online 2012 You must use the calendar year (the 12 months from January 1 through December 31) as your tax year. Turbotax online 2012 You cannot use a fiscal year. Turbotax online 2012 You must not expect to be employed for more than 245 days during the year. Turbotax online 2012 To figure this limit, count all calendar days that you are employed (including weekends, vacations, and sick days) beginning with the first day you are on the job for pay and ending with your last day of work. Turbotax online 2012 If you are temporarily laid off for 30 days or less, count those days too. Turbotax online 2012 If you are laid off for more than 30 days, do not count those days. Turbotax online 2012 You will not meet this requirement if you begin working before May 1 and expect to work for the rest of the year. Turbotax online 2012 How to apply for the part-year method. Turbotax online 2012   You must ask your employer in writing to use this method. Turbotax online 2012 The request must state all three of the following. Turbotax online 2012 The date of your last day of work for any prior employer during the current calendar year. Turbotax online 2012 That you do not expect to be employed more than 245 days during the current calendar year. Turbotax online 2012 That you use the calendar year as your tax year. Turbotax online 2012 Cumulative Wage Method If you change the number of your withholding allowances during the year, too much or too little tax may have been withheld for the period before you made the change. Turbotax online 2012 You may be able to compensate for this if your employer agrees to use the cumulative wage withholding method for the rest of the year. Turbotax online 2012 You must ask your employer in writing to use this method. Turbotax online 2012 To be eligible, you must have been paid for the same kind of payroll period (weekly, biweekly, etc. Turbotax online 2012 ) since the beginning of the year. Turbotax online 2012 Aids for Figuring Your Withholding IRS Withholding Calculator. Turbotax online 2012   If you had too much or too little income tax withheld from your pay, the IRS provides a withholding calculator on its website. Turbotax online 2012 Go to www. Turbotax online 2012 irs. Turbotax online 2012 gov/Individuals/IRS-Withholding-Calculator. Turbotax online 2012 It can help you determine the correct amount to be withheld any time during the year. Turbotax online 2012 Rules Your Employer Must Follow It may be helpful for you to know some of the withholding rules your employer must follow. Turbotax online 2012 These rules can affect how to fill out your Form W-4 and how to handle problems that may arise. Turbotax online 2012 New Form W-4. Turbotax online 2012   When you start a new job, your employer should give you a Form W-4 to fill out. Turbotax online 2012 Beginning with your first payday, your employer will use the information you give on the form to figure your withholding. Turbotax online 2012   If you later fill out a new Form W-4, your employer can put it into effect as soon as possible. Turbotax online 2012 The deadline for putting it into effect is the start of the first payroll period ending 30 or more days after you turn it in. Turbotax online 2012 No Form W-4. Turbotax online 2012   If you do not give your employer a completed Form W-4, your employer must withhold at the highest rate, as if you were single and claimed no withholding allowances. Turbotax online 2012 Repaying withheld tax. Turbotax online 2012   If you find you are having too much tax withheld because you did not claim all the withholding allowances you are entitled to, you should give your employer a new Form W-4. Turbotax online 2012 Your employer cannot repay any of the tax previously withheld. Turbotax online 2012 Instead, claim the full amount withheld when you file your tax return. Turbotax online 2012   However, if your employer has withheld more than the correct amount of tax for the Form W-4 you have in effect, you do not have to fill out a new Form W-4 to have your withholding lowered to the correct amount. Turbotax online 2012 Your employer can repay the amount that was withheld incorrectly. Turbotax online 2012 If you are not repaid, your Form W-2 will reflect the full amount actually withheld, which you would claim when you file your tax return. Turbotax online 2012 IRS review of your withholding. Turbotax online 2012   Whether you are entitled to claim a certain number of allowances or a complete exemption from withholding is subject to review by the IRS. Turbotax online 2012 Your employer may be required to send a copy of the Form W-4 to the IRS. Turbotax online 2012 There is a penalty for supplying false information on Form W-4. Turbotax online 2012 See Penalties , later. Turbotax online 2012   If the IRS determines that you cannot claim more than a specified number of withholding allowances or claim a complete exemption from withholding, the IRS will issue a notice of the maximum number of withholding allowances permitted (commonly referred to as a “lock-in letter”) to both you and your employer. Turbotax online 2012   The IRS will provide a period of time during which you can dispute the determination before your employer adjusts your withholding. Turbotax online 2012 If you believe that you are entitled to claim complete exemption from withholding or claim more withholding allowances than the maximum number specified by the IRS in the lock-in letter, you must submit a new Form W-4 and a written statement to support your claims to the IRS. Turbotax online 2012 Contact information (a toll-free number and an IRS office address) will be provided in the lock-in letter. Turbotax online 2012 At the end of this period, if you have not responded or if your response is not adequate, your employer will be required to withhold based on the original lock-in letter. Turbotax online 2012   After the lock-in letter takes effect, your employer must withhold tax on the basis of the withholding rate (marital status) and maximum number of withholding allowances specified in that letter. Turbotax online 2012   If you later believe that you are entitled to claim exemption from withholding or more allowances than the IRS determined, you can complete a new Form W-4 and a written statement to support the claims made on the Form W-4 and send them directly to the IRS address shown on the lock-in letter. Turbotax online 2012 Your employer must continue to figure your withholding on the basis of the number of allowances previously determined by the IRS until the IRS advises your employer otherwise. Turbotax online 2012   At any time, either before or after the lock-in letter becomes effective, you may give your employer a new Form W-4 that does not claim complete exemption from withholding and results in more income tax withheld than specified in the lock-in letter. Turbotax online 2012 Your employer must then withhold tax based on this new Form W-4. Turbotax online 2012   Additional information is available at IRS. Turbotax online 2012 gov. Turbotax online 2012 Enter “withholding compliance questions” in the search box. Turbotax online 2012 Exemption From Withholding If you claim exemption from withholding, your employer will not withhold federal income tax from your wages. Turbotax online 2012 The exemption applies only to income tax, not to social security or Medicare tax. Turbotax online 2012 You can claim exemption from withholding for 2014 only if both of the following situations apply. Turbotax online 2012 For 2013 you had a right to a refund of all federal income tax withheld because you had no tax liability. Turbotax online 2012 For 2014 you expect a refund of all federal income tax withheld because you expect to have no tax liability. Turbotax online 2012 Use Figure 1-A to help you decide whether you can claim exemption from withholding. Turbotax online 2012 Do not use Figure 1-A if you: Are 65 or older, Are blind, Will itemize deductions on your 2014 return, Will claim an exemption for a dependent on your 2014 return, or Will claim any tax credits on your 2014 return. Turbotax online 2012 These situations are discussed later. Turbotax online 2012 Students. Turbotax online 2012   If you are a student, you are not automatically exempt. Turbotax online 2012 If you work only part time or during the summer, you may qualify for exemption from withholding. Turbotax online 2012 Example 1. Turbotax online 2012 You are a high school student and expect to earn $2,500 from a summer job. Turbotax online 2012 You do not expect to have any other income during the year, and your parents will be able to claim an exemption for you on their tax return. Turbotax online 2012 You worked last summer and had $375 federal income tax withheld from your pay. Turbotax online 2012 The entire $375 was refunded when you filed your 2013 return. Turbotax online 2012 Using Figure 1-A, you find that you can claim exemption from withholding. Turbotax online 2012 Please click here for the text description of the image. Turbotax online 2012 Figure 1-A: Exemption From Withholding on Form W-4 Example 2. Turbotax online 2012 The facts are the same as in Example 1, except that you also have a savings account and expect to have $400 interest income during the year. Turbotax online 2012 Using Figure 1-A, you find that you cannot claim exemption from withholding because your unearned income will be more than $350 and your total income will be more than $1,000. Turbotax online 2012    You may have to file a tax return, even if you are exempt from withholding. Turbotax online 2012 See Publication 501 to see whether you must file a return. Turbotax online 2012    Age 65 or older or blind. Turbotax online 2012 If you are 65 or older or blind, use Worksheet 1-3 or Worksheet 1-4, to help you decide whether you can claim exemption from withholding. Turbotax online 2012 Do not use either worksheet if you will itemize deductions, claim exemptions for dependents, or claim tax credits on your 2014 return. Turbotax online 2012 Instead, see Itemizing deductions or claiming exemptions or credits, next. Turbotax online 2012 Itemizing deductions or claiming exemptions or credits. Turbotax online 2012   If you had no tax liability for 2013, and you will: Itemize deductions, Claim an exemption for a dependent, or Claim a tax credit, use the 2014 Estimated Tax Worksheet (also see chapter 2), to figure your 2014 expected tax liability. Turbotax online 2012 You can claim exemption from withholding only if your total expected tax liability (line 13c of the worksheet) is zero. Turbotax online 2012 Claiming exemption from withholding. Turbotax online 2012   To claim exemption, you must give your employer a Form W-4. Turbotax online 2012 Do not complete lines 5 and 6. Turbotax online 2012 Enter “Exempt” on line 7. Turbotax online 2012   If you claim exemption, but later your situation changes so that you will have to pay income tax after all, you must file a new Form W-4 within 10 days after the change. Turbotax online 2012 If you claim exemption in 2014 but you expect to owe income tax for 2015, you must file a new Form W-4 by December 1, 2014. Turbotax online 2012   Your claim of exempt status may be reviewed by the IRS. Turbotax online 2012 See IRS review of your withholding , earlier. Turbotax online 2012 An exemption is good for only 1 year. Turbotax online 2012   You must give your employer a new Form W-4 by February 15 each year to continue your exemption. Turbotax online 2012 Supplemental Wages Supplemental wages include bonuses, commissions, overtime pay, vacation allowances, certain sick pay, and expense allowances under certain plans. Turbotax online 2012 The payer can figure withholding on supplemental wages using the same method used for your regular wages. Turbotax online 2012 However, if these payments are identified separately from regular wages, your employer or other payer of supplemental wages can withhold income tax from these wages at a flat rate. Turbotax online 2012 Expense allowances. Turbotax online 2012   Reimbursements or other expense allowances paid by your employer under a nonaccountable plan are treated as supplemental wages. Turbotax online 2012 A nonaccountable plan is a reimbursement arrangement that does not require you to account for, or prove, your business expenses to your employer or does not require you to return your employer's payments that are more than your proven expenses. Turbotax online 2012   Reimbursements or other expense allowances paid under an accountable plan that are more than your proven expenses are treated as paid under a nonaccountable plan if you do not return the excess payments within a reasonable period of time. Turbotax online 2012 Accountable plan. Turbotax online 2012   To be an accountable plan, your employer's reimbursement or allowance arrangement must include all three of the following rules. Turbotax online 2012 Your expenses must have a business connection. Turbotax online 2012 That is, you must have paid or incurred deductible expenses while performing services as an employee of your employer. Turbotax online 2012 You must adequately account to your employer for these expenses within a reasonable period of time. Turbotax online 2012 You must return any excess reimbursement or allowance within a reasonable period of time. Turbotax online 2012    An excess reimbursement or allowance is any amount you are paid that is more than the business-related expenses that you adequately accounted for to your employer. Turbotax online 2012   The definition of reasonable period of time depends on the facts and circumstances of your situation. Turbotax online 2012 However, regardless of those facts and circumstances, actions that take place within the times specified in the following list will be treated as taking place within a reasonable period of time. Turbotax online 2012 You receive an advance within 30 days of the time you have an expense. Turbotax online 2012 You adequately account for your expenses within 60 days after they were paid or incurred. Turbotax online 2012 You return any excess reimbursement within 120 days after the expense was paid or incurred. Turbotax online 2012 You are given a periodic statement (at least quarterly) that asks you to either return or adequately account for outstanding advances and you comply within 120 days of the statement. Turbotax online 2012 Nonaccountable plan. Turbotax online 2012   Any plan that does not meet the definition of an accountable plan is considered a nonaccountable plan. Turbotax online 2012 For more information about accountable and nonaccountable plans, see chapter 6 of Publication 463, Travel, Entertainment, Gift, and Car Expenses. Turbotax online 2012 Penalties You may have to pay a penalty of $500 if both of the following apply. Turbotax online 2012 You make statements or claim withholding allowances on your Form W-4 that reduce the amount of tax withheld. Turbotax online 2012 You have no reasonable basis for those statements or allowances at the time you prepare your Form W-4. Turbotax online 2012 There is also a criminal penalty for willfully supplying false or fraudulent information on your Form W-4 or for willfully failing to supply information that would increase the amount withheld. Turbotax online 2012 The penalty upon conviction can be either a fine of up to $1,000 or imprisonment for up to 1 year, or both. Turbotax online 2012 These penalties will apply if you deliberately and knowingly falsify your Form W-4 in an attempt to reduce or eliminate the proper withholding of taxes. Turbotax online 2012 A simple error or an honest mistake will not result in one of these penalties. Turbotax online 2012 For example, a person who has tried to figure the number of withholding allowances correctly, but claims seven when the proper number is six, will not be charged a Form W-4 penalty. Turbotax online 2012 However, see chapter 4 for information on the penalty for underpaying your tax. Turbotax online 2012 Tips The tips you receive while working on your job are considered part of your pay. Turbotax online 2012 You must include your tips on your tax return on the same line as your regular pay. Turbotax online 2012 However, tax is not withheld directly from tip income, as it is from your regular pay. Turbotax online 2012 Nevertheless, your employer will take into account the tips you report when figuring how much to withhold from your regular pay. Turbotax online 2012 Reporting tips to your employer. Turbotax online 2012   If you receive tips of $20 or more in a month while working for any one employer, you must report to your employer the total amount of tips you receive on the job during the month. Turbotax online 2012 The report is due by the 10th day of the following month. Turbotax online 2012   If you have more than one job, make a separate report to each employer. Turbotax online 2012 Report only the tips you received while working for that employer, and only if they total $20 or more for the month. Turbotax online 2012 How employer figures amount to withhold. Turbotax online 2012   The tips you report to your employer are counted as part of your income for the month you report them. Turbotax online 2012 Your employer can figure your withholding in either of two ways. Turbotax online 2012 By withholding at the regular rate on the sum of your pay plus your reported tips. Turbotax online 2012 By withholding at the regular rate on your pay plus a percentage of your reported tips. Turbotax online 2012 Not enough pay to cover taxes. Turbotax online 2012   If your regular pay is not enough for your employer to withhold all the tax (including income tax and social security and Medicare taxes (or the equivalent railroad retirement tax)) due on your pay plus your tips, you can give your employer money to cover the shortage. Turbotax online 2012   If you do not give your employer money to cover the shortage, your employer first withholds as much Medicare tax and social security or railroad retirement tax as possible, up to the proper amount, and then withholds income tax up to the full amount of your pay. Turbotax online 2012 If not enough tax is withheld, you may have to pay estimated tax. Turbotax online 2012 When you file your return, you also may have to pay any Medicare and social security tax or railroad retirement tax your employer could not withhold. Turbotax online 2012 Tips not reported to your employer. Turbotax online 2012   On your tax return, you must report all the tips you receive during the year, even tips you do not report to your employer (this includes the value of any noncash tips you received, such as tickets, passes, or other items of value). Turbotax online 2012 Make sure you are having enough tax withheld, or are paying enough estimated tax (see chapter 2), to cover all your tip income. Turbotax online 2012 Allocated tips. Turbotax online 2012   If you work in a large food or beverage establishment, your employer may have to report an allocated amount of tips on your Form W-2. Turbotax online 2012   Your employer should not withhold income tax, Medicare tax, and social security or railroad retirement tax on the allocated amount. Turbotax online 2012 Withholding is based only on your pay plus your reported tips. Turbotax online 2012 Your employer should refund to you any incorrectly withheld tax. Turbotax online 2012 More information. Turbotax online 2012   For more information on the reporting and withholding rules for tip income and on tip allocation, see Publi
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The Turbotax Online 2012

Turbotax online 2012 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. Turbotax online 2012 S. Turbotax online 2012 Taxpayer Identification NumbersUnexpected payment. Turbotax online 2012 Depositing Withheld TaxesWhen Deposits Are Required Adjustment for Overwithholding Returns RequiredJoint owners. Turbotax online 2012 Electronic reporting. Turbotax online 2012 Partnership Withholding on Effectively Connected IncomeWho Must Withhold Foreign Partner Publicly Traded Partnerships U. Turbotax online 2012 S. Turbotax online 2012 Real Property InterestForeign corporations. Turbotax online 2012 Domestic corporations. Turbotax online 2012 U. Turbotax online 2012 S. Turbotax online 2012 real property holding corporations. Turbotax online 2012 Partnerships. Turbotax online 2012 Trusts and estates. Turbotax online 2012 Domestically controlled QIE. Turbotax online 2012 Late filing of certifications or notices. Turbotax online 2012 Certifications. Turbotax online 2012 Liability of agent or qualified substitute. Turbotax online 2012 Reporting and Paying the Tax Withholding Certificates Tax Treaty TablesTable 1 Table 2 Table 3 How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). Turbotax online 2012 Withholding of Tax In most cases, a foreign person is subject to U. Turbotax online 2012 S. Turbotax online 2012 tax on its U. Turbotax online 2012 S. Turbotax online 2012 source income. Turbotax online 2012 Most types of U. Turbotax online 2012 S. Turbotax online 2012 source income received by a foreign person are subject to U. Turbotax online 2012 S. Turbotax online 2012 tax of 30%. Turbotax online 2012 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. Turbotax online 2012 The tax is generally withheld (NRA withholding) from the payment made to the foreign person. Turbotax online 2012 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. Turbotax online 2012 In most cases, NRA withholding describes the withholding regime that requires withholding on a payment of U. Turbotax online 2012 S. Turbotax online 2012 source income. Turbotax online 2012 Payments to foreign persons, including nonresident alien individuals, foreign entities, and governments, may be subject to NRA withholding. Turbotax online 2012 NRA withholding does not include withholding under section 1445 of the Code (see U. Turbotax online 2012 S. Turbotax online 2012 Real Property Interest, later) or under section 1446 of the Code (see Partnership Withholding on Effectively Connected Income , later). Turbotax online 2012 A withholding agent (defined next) is the person responsible for withholding on payments made to a foreign person. Turbotax online 2012 However, a withholding agent that can reliably associate the payment with documentation (discussed later) from a U. Turbotax online 2012 S. Turbotax online 2012 person is not required to withhold. Turbotax online 2012 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. Turbotax online 2012 Withholding Agent You are a withholding agent if you are a U. Turbotax online 2012 S. Turbotax online 2012 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. Turbotax online 2012 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. Turbotax online 2012 S. Turbotax online 2012 branch of certain foreign banks and insurance companies. Turbotax online 2012 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. Turbotax online 2012 Although several persons may be withholding agents for a single payment, the full tax is required to be withheld only once. Turbotax online 2012 In most cases, the U. Turbotax online 2012 S. Turbotax online 2012 person who pays an amount subject to NRA withholding is the person responsible for withholding. Turbotax online 2012 However, other persons may be required to withhold. Turbotax online 2012 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. Turbotax online 2012 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. Turbotax online 2012 Liability for tax. Turbotax online 2012   As a withholding agent, you are personally liable for any tax required to be withheld. Turbotax online 2012 This liability is independent of the tax liability of the foreign person to whom the payment is made. Turbotax online 2012 If you fail to withhold and the foreign payee fails to satisfy its U. Turbotax online 2012 S. Turbotax online 2012 tax liability, then both you and the foreign person are liable for tax, as well as interest and any applicable penalties. Turbotax online 2012   The applicable tax will be collected only once. Turbotax online 2012 If the foreign person satisfies its U. Turbotax online 2012 S. Turbotax online 2012 tax liability, you are not liable for the tax but remain liable for any interest and penalties for failure to withhold. Turbotax online 2012 Determination of amount to withhold. Turbotax online 2012   You must withhold on the gross amount subject to NRA withholding. Turbotax online 2012 You cannot reduce the gross amount by any deductions. Turbotax online 2012 However, see Scholarships and Fellowship Grants and Pay for Personal Services Performed , later, for when a deduction for a personal exemption may be allowed. Turbotax online 2012   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. Turbotax online 2012 In no case, however, should you withhold more than 30% of the total amount paid. Turbotax online 2012 Or, you may make a reasonable estimate of the amount from U. Turbotax online 2012 S. Turbotax online 2012 sources and put a corresponding part of the amount due in escrow until the amount from U. Turbotax online 2012 S. Turbotax online 2012 sources can be determined, at which time withholding becomes due. Turbotax online 2012 When to withhold. Turbotax online 2012   Withholding is required at the time you make a payment of an amount subject to withholding. Turbotax online 2012 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. Turbotax online 2012 A payment is considered made to a person if it is paid for that person's benefit. Turbotax online 2012 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. Turbotax online 2012 A payment also is considered made to a person if it is made to that person's agent. Turbotax online 2012   A U. Turbotax online 2012 S. Turbotax online 2012 partnership should withhold when any distributions that include amounts subject to withholding are made. Turbotax online 2012 However, if a foreign partner's distributive share of income subject to withholding is not actually distributed, the U. Turbotax online 2012 S. Turbotax online 2012 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. Turbotax online 2012 If the distributable amount consists of effectively connected income, see Partnership Withholding on Effectively Connected Income , later. Turbotax online 2012 A U. Turbotax online 2012 S. Turbotax online 2012 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. Turbotax online 2012 To the extent a U. Turbotax online 2012 S. Turbotax online 2012 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. Turbotax online 2012 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. Turbotax online 2012 (See Returns Required , later. Turbotax online 2012 ) 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. Turbotax online 2012 Form 1099 reporting and backup withholding. Turbotax online 2012    You also may be responsible as a payer for reporting on Form 1099 payments made to a U. Turbotax online 2012 S. Turbotax online 2012 person. Turbotax online 2012 You must withhold 28% (backup withholding rate) from a reportable payment made to a U. Turbotax online 2012 S. Turbotax online 2012 person that is subject to Form 1099 reporting if any of the following apply. Turbotax online 2012 The U. Turbotax online 2012 S. Turbotax online 2012 person has not provided its taxpayer identification number (TIN) in the manner required. Turbotax online 2012 The IRS notifies you that the TIN furnished by the payee is incorrect. Turbotax online 2012 There has been a notified payee underreporting. Turbotax online 2012 There has been a payee certification failure. Turbotax online 2012 In most cases, a TIN must be provided by a U. Turbotax online 2012 S. Turbotax online 2012 non-exempt recipient on Form W-9, Request for Taxpayer Identification Number and Certification. Turbotax online 2012 A payer files a tax return on Form 945, Annual Return of Withheld Federal Income Tax, for backup withholding. Turbotax online 2012 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. Turbotax online 2012 S. Turbotax online 2012 person. Turbotax online 2012 For example, you are required to report income paid to a foreign intermediary or flow-through entity that collects for a U. Turbotax online 2012 S. Turbotax online 2012 person subject to Form 1099 reporting. Turbotax online 2012 See Identifying the Payee , later, for more information. Turbotax online 2012 Also see Section S. Turbotax online 2012 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. Turbotax online 2012 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. Turbotax online 2012 Wages paid to employees. Turbotax online 2012   If you are the employer of a nonresident alien, you generally must withhold taxes at graduated rates. Turbotax online 2012 See Pay for Personal Services Performed , later. Turbotax online 2012 Effectively connected income by partnerships. Turbotax online 2012   A withholding agent that is a partnership (whether U. Turbotax online 2012 S. Turbotax online 2012 or foreign) is also responsible for withholding on its income effectively connected with a U. Turbotax online 2012 S. Turbotax online 2012 trade or business that is allocable to foreign partners. Turbotax online 2012 See Partnership Withholding on Effectively Connected Income , later, for more information. Turbotax online 2012 U. Turbotax online 2012 S. Turbotax online 2012 real property interest. Turbotax online 2012   A withholding agent also may be responsible for withholding if a foreign person transfers a U. Turbotax online 2012 S. Turbotax online 2012 real property interest to the agent, or if it is a corporation, partnership, trust, or estate that distributes a U. Turbotax online 2012 S. Turbotax online 2012 real property interest to a shareholder, partner, or beneficiary that is a foreign person. Turbotax online 2012 See U. Turbotax online 2012 S. Turbotax online 2012 Real Property Interest , later. Turbotax online 2012 Persons Subject to NRA Withholding NRA withholding applies only to payments made to a payee that is a foreign person. Turbotax online 2012 It does not apply to payments made to U. Turbotax online 2012 S. Turbotax online 2012 persons. Turbotax online 2012 Usually, you determine the payee's status as a U. Turbotax online 2012 S. Turbotax online 2012 or foreign person based on the documentation that person provides. Turbotax online 2012 See Documentation , later. Turbotax online 2012 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. Turbotax online 2012 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. Turbotax online 2012 However, there are situations in which the payee is a person other than the one to whom you actually make a payment. Turbotax online 2012 U. Turbotax online 2012 S. Turbotax online 2012 agent of foreign person. Turbotax online 2012   If you make a payment to a U. Turbotax online 2012 S. Turbotax online 2012 person and you have actual knowledge that the U. Turbotax online 2012 S. Turbotax online 2012 person is receiving the payment as an agent of a foreign person, you must treat the payment as made to the foreign person. Turbotax online 2012 However, if the U. Turbotax online 2012 S. Turbotax online 2012 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. Turbotax online 2012   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. Turbotax online 2012 S. Turbotax online 2012 person and not as a payment to a foreign person. Turbotax online 2012 You may be required to report the payment on Form 1099 and, if applicable, backup withhold. Turbotax online 2012 Disregarded entities. Turbotax online 2012   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. Turbotax online 2012 The payee of a payment made to a disregarded entity is the owner of the entity. Turbotax online 2012   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. Turbotax online 2012   If the owner is a U. Turbotax online 2012 S. Turbotax online 2012 person, you do not apply NRA withholding. Turbotax online 2012 However, you may be required to report the payment on Form 1099 and, if applicable, backup withhold. Turbotax online 2012 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. Turbotax online 2012 Flow-Through Entities The payees of payments (other than income effectively connected with a U. Turbotax online 2012 S. Turbotax online 2012 trade or business) made to a foreign flow-through entity are the owners or beneficiaries of the flow-through entity. Turbotax online 2012 This rule applies for purposes of NRA withholding and for Form 1099 reporting and backup withholding. Turbotax online 2012 Income that is, or is deemed to be, effectively connected with the conduct of a U. Turbotax online 2012 S. Turbotax online 2012 trade or business of a flow-through entity is treated as paid to the entity. Turbotax online 2012 All of the following are flow-through entities. Turbotax online 2012 A foreign partnership (other than a withholding foreign partnership). Turbotax online 2012 A foreign simple or foreign grantor trust (other than a withholding foreign trust). Turbotax online 2012 A fiscally transparent entity receiving income for which treaty benefits are claimed. Turbotax online 2012 See Fiscally transparent entity , later. Turbotax online 2012 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. Turbotax online 2012 You also may be required to treat the entity as a flow-through entity under the presumption rules, discussed later. Turbotax online 2012 You must determine whether the owners or beneficiaries of a flow-through entity are U. Turbotax online 2012 S. Turbotax online 2012 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. Turbotax online 2012 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. Turbotax online 2012 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. Turbotax online 2012 See Documentation and Presumption Rules , later. Turbotax online 2012 Withholding foreign partnerships and withholding foreign trusts are not flow-through entities. Turbotax online 2012 Foreign partnerships. Turbotax online 2012    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. Turbotax online 2012 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. Turbotax online 2012 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. Turbotax online 2012 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. Turbotax online 2012 Example 1. Turbotax online 2012 A nonwithholding foreign partnership has three partners: a nonresident alien individual; a foreign corporation; and a U. Turbotax online 2012 S. Turbotax online 2012 citizen. Turbotax online 2012 You make a payment of U. Turbotax online 2012 S. Turbotax online 2012 source interest to the partnership. Turbotax online 2012 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. Turbotax online 2012 S. Turbotax online 2012 citizen. Turbotax online 2012 The partnership also gives you a complete withholding statement that enables you to associate a part of the interest payment to each partner. Turbotax online 2012 You must treat all three partners as the payees of the interest payment as if the payment were made directly to them. Turbotax online 2012 Report the payment to the nonresident alien and the foreign corporation on Forms 1042-S. Turbotax online 2012 Report the payment to the U. Turbotax online 2012 S. Turbotax online 2012 citizen on Form 1099-INT. Turbotax online 2012 Example 2. Turbotax online 2012 A nonwithholding foreign partnership has two partners: a foreign corporation and a nonwithholding foreign partnership. Turbotax online 2012 The second partnership has two partners, both nonresident alien individuals. Turbotax online 2012 You make a payment of U. Turbotax online 2012 S. Turbotax online 2012 source interest to the first partnership. Turbotax online 2012 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. Turbotax online 2012 In addition, Forms W-8BEN from the partners are associated with the Form W-8IMY from the second partnership. Turbotax online 2012 The Forms W-8IMY from the partnerships have complete withholding statements associated with them. Turbotax online 2012 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. Turbotax online 2012 Example 3. Turbotax online 2012 You make a payment of U. Turbotax online 2012 S. Turbotax online 2012 source dividends to a withholding foreign partnership. Turbotax online 2012 The partnership has two partners, both foreign corporations. Turbotax online 2012 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. Turbotax online 2012 You must treat the partnership as the payee of the dividends. Turbotax online 2012 Foreign simple and grantor trust. Turbotax online 2012   A trust is foreign unless it meets both of the following tests. Turbotax online 2012 A court within the United States is able to exercise primary supervision over the administration of the trust. Turbotax online 2012 One or more U. Turbotax online 2012 S. Turbotax online 2012 persons have the authority to control all substantial decisions of the trust. Turbotax online 2012   In most cases, a foreign simple trust is a foreign trust that is required to distribute all of its income annually. Turbotax online 2012 A foreign grantor trust is a foreign trust that is treated as a grantor trust under sections 671 through 679 of the Code. Turbotax online 2012   The payees of a payment made to a foreign simple trust are the beneficiaries of the trust. Turbotax online 2012 The payees of a payment made to a foreign grantor trust are the owners of the trust. Turbotax online 2012 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. Turbotax online 2012 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. Turbotax online 2012 Example. Turbotax online 2012 A foreign simple trust has three beneficiaries: two nonresident alien individuals and a U. Turbotax online 2012 S. Turbotax online 2012 citizen. Turbotax online 2012 You make a payment of interest to the foreign trust. Turbotax online 2012 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. Turbotax online 2012 S. Turbotax online 2012 citizen. Turbotax online 2012 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. Turbotax online 2012 You must treat all three beneficiaries as the payees of the interest payment as if the payment were made directly to them. Turbotax online 2012 Report the payment to the nonresident aliens on Forms 1042-S. Turbotax online 2012 Report the payment to the U. Turbotax online 2012 S. Turbotax online 2012 citizen on Form 1099-INT. Turbotax online 2012 Fiscally transparent entity. Turbotax online 2012   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. Turbotax online 2012 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. Turbotax online 2012 ). Turbotax online 2012 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. Turbotax online 2012 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. Turbotax online 2012 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. Turbotax online 2012   The payees of a payment made to a fiscally transparent entity are the interest holders of the entity. Turbotax online 2012 Example. Turbotax online 2012 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. Turbotax online 2012 A has two interest holders, B and C. Turbotax online 2012 B is a corporation organized under the laws of country Y. Turbotax online 2012 C is a corporation organized under the laws of country Z. Turbotax online 2012 Both countries Y and Z have an income tax treaty in force with the United States. Turbotax online 2012 A receives royalty income from U. Turbotax online 2012 S. Turbotax online 2012 sources that is not effectively connected with the conduct of a trade or business in the United States. Turbotax online 2012 For U. Turbotax online 2012 S. Turbotax online 2012 income tax purposes, A is treated as a partnership. Turbotax online 2012 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. Turbotax online 2012 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. Turbotax online 2012 Accordingly, A is fiscally transparent in its jurisdiction, country X. Turbotax online 2012 B and C are not fiscally transparent under the laws of their respective countries of incorporation. Turbotax online 2012 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. Turbotax online 2012 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. Turbotax online 2012 S. Turbotax online 2012 source royalty income for purposes of the U. Turbotax online 2012 S. Turbotax online 2012 -Y income tax treaty. Turbotax online 2012 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. Turbotax online 2012 Therefore, A is not treated as fiscally transparent under the laws of country Z. Turbotax online 2012 Accordingly, C is not treated as deriving its share of the U. Turbotax online 2012 S. Turbotax online 2012 source royalty income for purposes of the U. Turbotax online 2012 S. Turbotax online 2012 -Z income tax treaty. Turbotax online 2012 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. Turbotax online 2012 This rule applies for purposes of NRA withholding and for Form 1099 reporting and backup withholding. Turbotax online 2012 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. Turbotax online 2012 An intermediary is a custodian, broker, nominee, or any other person that acts as an agent for another person. Turbotax online 2012 A foreign intermediary is either a qualified intermediary or a nonqualified intermediary. Turbotax online 2012 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. Turbotax online 2012 You must determine whether the customers or account holders of a foreign intermediary are U. Turbotax online 2012 S. Turbotax online 2012 or foreign persons and, if the account holder or customer is foreign, whether a reduced rate of NRA withholding applies. Turbotax online 2012 You make these determinations based on the foreign intermediary's Form W-8IMY and associated information and documentation. Turbotax online 2012 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. Turbotax online 2012 See Documentation and Presumption Rules , later. Turbotax online 2012 Nonqualified intermediary. Turbotax online 2012   A nonqualified intermediary (NQI) is any intermediary that is a foreign person and that is not a qualified intermediary. Turbotax online 2012 The payees of a payment made to an NQI are the customers or account holders on whose behalf the NQI is acting. Turbotax online 2012 Example. Turbotax online 2012 You make a payment of interest to a foreign bank that is a nonqualified intermediary. Turbotax online 2012 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. Turbotax online 2012 S. Turbotax online 2012 person for whom the bank is collecting the payments. Turbotax online 2012 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. Turbotax online 2012 The account holders are the payees of the interest payment. Turbotax online 2012 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. Turbotax online 2012 S. Turbotax online 2012 person on Form 1099-INT. Turbotax online 2012 Qualified intermediary. Turbotax online 2012   A qualified intermediary (QI) is any foreign intermediary (or foreign branch of a U. Turbotax online 2012 S. Turbotax online 2012 intermediary) that has entered into a qualified intermediary withholding agreement (discussed later) with the IRS. Turbotax online 2012 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. Turbotax online 2012 In this situation, the QI is required to withhold the tax. Turbotax online 2012 You can determine whether a QI has assumed responsibility from the Form W-8IMY provided by the QI. Turbotax online 2012   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. Turbotax online 2012 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. Turbotax online 2012 S. Turbotax online 2012 person. Turbotax online 2012 Branches of financial institutions. Turbotax online 2012   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. Turbotax online 2012 The countries with approved KYC rules are listed on IRS. Turbotax online 2012 gov. Turbotax online 2012 QI withholding agreement. Turbotax online 2012   Foreign financial institutions and foreign branches of U. Turbotax online 2012 S. Turbotax online 2012 financial institutions can enter into an agreement with the IRS to be a qualified intermediary. Turbotax online 2012   A QI is entitled to certain simplified withholding and reporting rules. Turbotax online 2012 In general, there are three major areas whereby intermediaries with QI status are afforded such simplified treatment. Turbotax online 2012   To apply for QI status, complete Form 14345, Qualified Intermediary Application, and Form SS-4, Application for Employer Identification Number. Turbotax online 2012 These forms, and the procedures required to obtain a QI withholding agreement are available at www. Turbotax online 2012 irs. Turbotax online 2012 gov/Businesses/Corporations/Qualified-Intermediaries-(QI). Turbotax online 2012 Documentation. Turbotax online 2012   A QI is not required to forward documentation obtained from foreign account holders to the U. Turbotax online 2012 S. Turbotax online 2012 withholding agent from whom the QI receives a payment of U. Turbotax online 2012 S. Turbotax online 2012 source income. Turbotax online 2012 The QI maintains such documentation at its location and provides the U. Turbotax online 2012 S. Turbotax online 2012 withholding agent with withholding rate pools. Turbotax online 2012 A withholding rate pool is a payment of a single type of income that is subject to a single rate of withholding. Turbotax online 2012   A QI is required to provide the U. Turbotax online 2012 S. Turbotax online 2012 withholding agent with information regarding U. Turbotax online 2012 S. Turbotax online 2012 persons subject to Form 1099 information reporting unless the QI assumes the primary obligation to do Form 1099 reporting and backup withholding. Turbotax online 2012   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. Turbotax online 2012 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. Turbotax online 2012 Form 1042-S reporting. Turbotax online 2012   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. Turbotax online 2012 Pooled basis reporting is not available for payments to certain account holders, such as a nonqualified intermediary or a flow-through entity (discussed earlier). Turbotax online 2012 Collective refund procedures. Turbotax online 2012   A QI may seek a refund on behalf of its direct account holders. Turbotax online 2012 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. Turbotax online 2012 U. Turbotax online 2012 S. Turbotax online 2012 branches of foreign banks and foreign insurance companies. Turbotax online 2012   Special rules apply to a U. Turbotax online 2012 S. Turbotax online 2012 branch of a foreign bank subject to Federal Reserve Board supervision or a foreign insurance company subject to state regulatory supervision. Turbotax online 2012 If you agree to treat the branch as a U. Turbotax online 2012 S. Turbotax online 2012 person, you may treat the branch as a U. Turbotax online 2012 S. Turbotax online 2012 payee for a payment subject to NRA withholding provided you receive a Form W-8IMY from the U. Turbotax online 2012 S. Turbotax online 2012 branch on which the agreement is evidenced. Turbotax online 2012 If you treat the branch as a U. Turbotax online 2012 S. Turbotax online 2012 payee, you are not required to withhold. Turbotax online 2012 Even though you agree to treat the branch as a U. Turbotax online 2012 S. Turbotax online 2012 person, you must report the payment on Form 1042-S. Turbotax online 2012   A financial institution organized in a U. Turbotax online 2012 S. Turbotax online 2012 possession is treated as a U. Turbotax online 2012 S. Turbotax online 2012 branch. Turbotax online 2012 The special rules discussed in this section apply to a possessions financial institution. Turbotax online 2012   If you are paying a U. Turbotax online 2012 S. Turbotax online 2012 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. Turbotax online 2012 S. Turbotax online 2012 person for amounts subject to NRA withholding. Turbotax online 2012 Consequently, amounts not subject to NRA withholding that are paid to a U. Turbotax online 2012 S. Turbotax online 2012 branch are not subject to Form 1099 reporting or backup withholding. Turbotax online 2012   Alternatively, a U. Turbotax online 2012 S. Turbotax online 2012 branch may provide you with a Form W-8IMY with which it associates the documentation of the persons on whose behalf it acts. Turbotax online 2012 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. Turbotax online 2012 See Nonqualified Intermediaries under  Documentation, later. Turbotax online 2012   If the U. Turbotax online 2012 S. Turbotax online 2012 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. Turbotax online 2012 Withholding foreign partnership and foreign trust. Turbotax online 2012   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. Turbotax online 2012 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. Turbotax online 2012   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. Turbotax online 2012 A WP or WT acting in that capacity must assume NRA withholding responsibility for these amounts. Turbotax online 2012 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. Turbotax online 2012 WP and WT withholding agreements. Turbotax online 2012   The WP and WT withholding agreements and the application procedures for the agreements are in Revenue Procedure 2003-64. Turbotax online 2012 Also see the following items. Turbotax online 2012 Revenue Procedure 2004-21. Turbotax online 2012 Revenue Procedure 2005-77. Turbotax online 2012 Employer identification number (EIN). Turbotax online 2012   A completed Form SS-4 must be submitted with the application for being a WP or WT. Turbotax online 2012 The WP or WT will be assigned a WP-EIN or WT-EIN to be used only when acting in that capacity. Turbotax online 2012 Documentation. Turbotax online 2012   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. Turbotax online 2012 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. Turbotax online 2012 The Form W-8IMY must contain the WP-EIN or WT-EIN. Turbotax online 2012 Foreign Persons A payee is subject to NRA withholding only if it is a foreign person. Turbotax online 2012 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. Turbotax online 2012 S. Turbotax online 2012 person. Turbotax online 2012 It also includes a foreign branch of a U. Turbotax online 2012 S. Turbotax online 2012 financial institution if the foreign branch is a qualified intermediary. Turbotax online 2012 In most cases, the U. Turbotax online 2012 S. Turbotax online 2012 branch of a foreign corporation or partnership is treated as a foreign person. Turbotax online 2012 Nonresident alien. Turbotax online 2012   A nonresident alien is an individual who is not a U. Turbotax online 2012 S. Turbotax online 2012 citizen or a resident alien. Turbotax online 2012 A resident of a foreign country under the residence article of an income tax treaty is a nonresident alien individual for purposes of withholding. Turbotax online 2012 Married to U. Turbotax online 2012 S. Turbotax online 2012 citizen or resident alien. Turbotax online 2012   Nonresident alien individuals married to U. Turbotax online 2012 S. Turbotax online 2012 citizens or resident aliens may choose to be treated as resident aliens for certain income tax purposes. Turbotax online 2012 However, these individuals are still subject to the NRA withholding rules that apply to nonresident aliens for all income except wages. Turbotax online 2012 Wages paid to these individuals are subject to graduated withholding. Turbotax online 2012 See Wages Paid to Employees—Graduated Withholding . Turbotax online 2012 Resident alien. Turbotax online 2012   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. Turbotax online 2012 Green card test. Turbotax online 2012 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. Turbotax online 2012 This is known as the green card test because these aliens hold immigrant visas (also known as green cards). Turbotax online 2012 Substantial presence test. Turbotax online 2012 An alien is considered a resident alien if the individual meets the substantial presence test for the calendar year. Turbotax online 2012 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. Turbotax online 2012   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. Turbotax online 2012 This exception is for a limited period of time. Turbotax online 2012   For more information on resident and nonresident status, the tests for residence, and the exceptions to them, see Publication 519. Turbotax online 2012 Note. Turbotax online 2012   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. Turbotax online 2012 For more information on making adjustments, see chapter 13 of Publication 15 (Circular E). Turbotax online 2012 Resident of a U. Turbotax online 2012 S. Turbotax online 2012 possession. Turbotax online 2012   A bona fide resident of Puerto Rico, the U. Turbotax online 2012 S. Turbotax online 2012 Virgin Islands, Guam, the Commonwealth of the Northern Mariana Islands (CNMI), or American Samoa who is not a U. Turbotax online 2012 S. Turbotax online 2012 citizen or a U. Turbotax online 2012 S. Turbotax online 2012 national is treated as a nonresident alien for the withholding rules explained here. Turbotax online 2012 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. Turbotax online 2012   For more information, see Publication 570, Tax Guide for Individuals With Income From U. Turbotax online 2012 S. Turbotax online 2012 Possessions. Turbotax online 2012 Foreign corporations. Turbotax online 2012   A foreign corporation is one that does not fit the definition of a domestic corporation. Turbotax online 2012 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. Turbotax online 2012 Guam or Northern Mariana Islands corporations. Turbotax online 2012   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). Turbotax online 2012 Note. Turbotax online 2012   The provisions discussed below under U. Turbotax online 2012 S. Turbotax online 2012 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. Turbotax online 2012 U. Turbotax online 2012 S. Turbotax online 2012 Virgin Islands and American Samoa corporations. Turbotax online 2012   A corporation created or organized in, or under the laws of, the U. Turbotax online 2012 S. Turbotax online 2012 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. Turbotax online 2012 S. Turbotax online 2012 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. Turbotax online 2012 S. Turbotax online 2012 Virgin Islands, American Samoa, Guam, the CNMI, or the United States. Turbotax online 2012 Foreign private foundations. Turbotax online 2012   A private foundation that was created or organized under the laws of a foreign country is a foreign private foundation. Turbotax online 2012 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. Turbotax online 2012 Other foreign organizations, associations, and charitable institutions. Turbotax online 2012   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. Turbotax online 2012 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. Turbotax online 2012   Payments to these organizations, however, must be reported on Form 1042-S, even though no tax is withheld. Turbotax online 2012   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. Turbotax online 2012 U. Turbotax online 2012 S. Turbotax online 2012 branches of foreign persons. Turbotax online 2012   In most cases, a payment to a U. Turbotax online 2012 S. Turbotax online 2012 branch of a foreign person is a payment made to the foreign person. Turbotax online 2012 However, you may treat payments to U. Turbotax online 2012 S. Turbotax online 2012 branches of foreign banks and foreign insurance companies (discussed earlier) that are subject to U. Turbotax online 2012 S. Turbotax online 2012 regulatory supervision as payments made to a U. Turbotax online 2012 S. Turbotax online 2012 person, if you and the U. Turbotax online 2012 S. Turbotax online 2012 branch have agreed to do so, and if their agreement is evidenced by a withholding certificate, Form W-8IMY. Turbotax online 2012 For this purpose, a financial institution organized under the laws of a U. Turbotax online 2012 S. Turbotax online 2012 possession is treated as a U. Turbotax online 2012 S. Turbotax online 2012 branch. Turbotax online 2012 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. Turbotax online 2012 The payee is a U. Turbotax online 2012 S. Turbotax online 2012 person. Turbotax online 2012 The payee is a foreign person that is the beneficial owner of the income and is entitled to a reduced rate of withholding. Turbotax online 2012 In most cases, you must get the documentation before you make the payment. Turbotax online 2012 The documentation is not valid if you know, or have reason to know, that it is unreliable or incorrect. Turbotax online 2012 See Standards of Knowledge , later. Turbotax online 2012 If you cannot reliably associate a payment with valid documentation, you must use the presumption rules discussed later. Turbotax online 2012 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. Turbotax online 2012 The specific types of documentation are discussed in this section. Turbotax online 2012 However, see Withholding on Specific Income , later, as well as the instructions to the particular forms. Turbotax online 2012 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. Turbotax online 2012 Section 1446 withholding. Turbotax online 2012   Under section 1446 of the Code, a partnership must withhold tax on its effectively connected income allocable to a foreign partner. Turbotax online 2012 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. Turbotax online 2012 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. Turbotax online 2012 Joint owners. Turbotax online 2012    If you make a payment to joint owners, you need to get documentation from each owner. Turbotax online 2012 Form W-9. Turbotax online 2012   In most cases, you can treat the payee as a U. Turbotax online 2012 S. Turbotax online 2012 person if the payee gives you a Form W-9. Turbotax online 2012 The Form W-9 can be used only by a U. Turbotax online 2012 S. Turbotax online 2012 person and must contain the payee's taxpayer identification number (TIN). Turbotax online 2012 If there is more than one owner, you may treat the total amount as paid to a U. Turbotax online 2012 S. Turbotax online 2012 person if any one of the owners gives you a Form W-9. Turbotax online 2012 See U. Turbotax online 2012 S. Turbotax online 2012 Taxpayer Identification Numbers , later. Turbotax online 2012 U. Turbotax online 2012 S. Turbotax online 2012 persons are not subject to NRA withholding, but may be subject to Form 1099 reporting and backup withholding. Turbotax online 2012 Form W-8. Turbotax online 2012   In most cases, a foreign payee of the income should give you a form in the Form W-8 series. Turbotax online 2012 Until further notice, you can rely upon Forms W-8 that contain a P. Turbotax online 2012 O. Turbotax online 2012 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. Turbotax online 2012 S. Turbotax online 2012 person and that a street address is available. Turbotax online 2012 You may rely on Forms W-8 for which there is a U. Turbotax online 2012 S. Turbotax online 2012 mailing address provided you received the form prior to December 31, 2001. Turbotax online 2012   If certain requirements are met, the foreign person can give you documentary evidence, rather than a Form W-8. Turbotax online 2012 You can rely on documentary evidence in lieu of a Form W-8 for a payment made in a U. Turbotax online 2012 S. Turbotax online 2012 possession. Turbotax online 2012 Other documentation. Turbotax online 2012   Other documentation may be required to claim an exemption from, or a reduced rate of, withholding on pay for personal services. Turbotax online 2012 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. Turbotax online 2012 These forms are discussed in Pay for Personal Services Performed under Withholding on Specific Income. Turbotax online 2012 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. Turbotax online 2012 Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding. Turbotax online 2012   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. Turbotax online 2012   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. Turbotax online 2012 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. Turbotax online 2012 Claiming treaty benefits. Turbotax online 2012   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. Turbotax online 2012 S. Turbotax online 2012 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. Turbotax online 2012   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. Turbotax online 2012   An entity derives income for which it is claiming treaty benefits only if the entity is not treated as fiscally transparent for that income. Turbotax online 2012 See Fiscally transparent entity discussed earlier under Flow-Through Entities. Turbotax online 2012   Limitations on benefits provisions generally prohibit third country residents from obtaining treaty benefits. Turbotax online 2012 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. Turbotax online 2012   The exemptions from, or reduced rates of, U. Turbotax online 2012 S. Turbotax online 2012 tax vary under each treaty. Turbotax online 2012 You must check the provisions of the tax treaty that apply. Turbotax online 2012 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. Turbotax online 2012   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. Turbotax online 2012 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. Turbotax online 2012 Exceptions to TIN requirement. Turbotax online 2012   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. Turbotax online 2012 Income from marketable securities (discussed next). Turbotax online 2012 Unexpected payments to an individual (discussed under U. Turbotax online 2012 S. Turbotax online 2012 Taxpayer Identification Numbers ). Turbotax online 2012 Marketable securities. Turbotax online 2012   A Form W-8BEN provided to claim treaty benefits does not need a U. Turbotax online 2012 S. Turbotax online 2012 TIN if the foreign beneficial owner is claiming the benefits on income from marketable securities. Turbotax online 2012 For this purpose, income from a marketable security consists of the following items. Turbotax online 2012 Dividends and interest from stocks and debt obligations that are actively traded. Turbotax online 2012 Dividends from any redeemable security issued by an investment company registered under the Investment Company Act of 1940 (mutual fund). Turbotax online 2012 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. Turbotax online 2012 Income related to loans of any of the above securities. Turbotax online 2012 Offshore accounts. Turbotax online 2012   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. Turbotax online 2012   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. Turbotax online 2012 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. Turbotax online 2012 An offshore account is an account maintained at an office or branch of a U. Turbotax online 2012 S. Turbotax online 2012 or foreign bank or other financial institution at any location outside the United States. Turbotax online 2012   You may rely on documentary evidence given to you by a nonqualified intermediary or a flow-through entity with its Form W-8IMY. Turbotax online 2012 This rule applies even though you make the payment to a nonqualified intermediary or flow-through entity in the United States. Turbotax online 2012 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. Turbotax online 2012 Documentary evidence. Turbotax online 2012   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. Turbotax online 2012 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. Turbotax online 2012 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. Turbotax online 2012 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. Turbotax online 2012 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. Turbotax online 2012 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. Turbotax online 2012   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. Turbotax online 2012 (See Effectively Connected Income , later. Turbotax online 2012 )   Effectively connected income for which a valid Form W-8ECI has been provided is generally not subject to NRA withholding. Turbotax online 2012   If a partner submits this form to a partnership, the income claimed to be effectively connected with the conduct of a U. Turbotax online 2012 S. Turbotax online 2012 trade or business is subject to withholding under section 1446. Turbotax online 2012 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. Turbotax online 2012    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. Turbotax online 2012 Form W-8EXP, Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding. Turbotax online 2012   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. Turbotax online 2012 S. Turbotax online 2012 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. Turbotax online 2012   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. Turbotax online 2012   See Foreign Governments and Certain Other Foreign Organizations , later. Turbotax online 2012 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. Turbotax online 2012 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. Turbotax online 2012 The additional information required depends on the type of intermediary or flow-through entity and the extent of the withholding responsibilities it assumes. Turbotax online 2012 Form W-8IMY, Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U. Turbotax online 2012 S. Turbotax online 2012 Branches for United States Tax Withholding. Turbotax online 2012   This form is used by foreign intermediaries and foreign flow-through entities, as well as certain U. Turbotax online 2012 S. Turbotax online 2012 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. Turbotax online 2012 S. Turbotax online 2012 branch of a foreign bank or insurance company and either is agreeing to be treated as a U. Turbotax online 2012 S. Turbotax online 2012 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. Turbotax online 2012 For information on qualifying as an upper-tier foreign partnership, see Regulations section 1. Turbotax online 2012 1446-5. Turbotax online 2012 Qualified Intermediaries In most cases, a QI is any foreign intermediary that has entered into a QI withholding agreement (discussed earlier) with the IRS. Turbotax online 2012 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. Turbotax online 2012 The intermediary can claim that it is a QI until the IRS revokes its QI-EIN. Turbotax online 2012 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. Turbotax online 2012 Responsibilities. Turbotax online 2012   Payments made to a QI that does not assume NRA withholding responsibility are treated as paid to its account holders and customers. Turbotax online 2012 However, a QI is not required to provide you with documentation it obtains from its foreign account holders and customers. Turbotax online 2012 Instead, it provides you with a withholding statement that contains withholding rate pool information. Turbotax online 2012 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. Turbotax online 2012 A qualified intermediary is required to provide you with information regarding U. Turbotax online 2012 S. Turbotax online 2012 persons subject to Form 1099 reporting and to provide you withholding rate pool information separately for each such U. Turbotax online 2012 S. Turbotax online 2012 person unless it has assumed Form 1099 reporting and backup withholding responsibility. Turbotax online 2012 For the alternative procedure for providing rate pool information for U. Turbotax online 2012 S. Turbotax online 2012 non-exempt persons, see the Form W-8IMY instructions. Turbotax online 2012   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. Turbotax online 2012   The extent to which you must have withholding rate pool information depends on the withholding and reporting obligations assumed by the QI. Turbotax online 2012 Primary responsibility not assumed. Turbotax online 2012   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. Turbotax online 2012 Unless the alternative procedure applies, the qualified intermediary must provide you with a separate withholding rate pool for each U. Turbotax online 2012 S. Turbotax online 2012 person subject to Form 1099 reporting and/or backup withholding. Turbotax online 2012 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. Turbotax online 2012 Primary NRA withholding responsibility assumed. Turbotax online 2012   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. Turbotax online 2012 S. Turbotax online 2012 person, unless the alternative procedure applies, subject to Form 1099 reporting and/or backup withholding. Turbotax online 2012 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. Turbotax online 2012 Primary NRA and Form 1099 responsibility assumed. Turbotax online 2012   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. Turbotax online 2012 It is not necessary to associate the payment with withholding rate pools. Turbotax online 2012 Example. Turbotax online 2012 You make a payment of dividends to a QI. Turbotax online 2012 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. Turbotax online 2012 S. Turbotax online 2012 individual who provides it with a Form W-9. Turbotax online 2012 Each customer is entitled to 20% of the dividend payment. Turbotax online 2012 The QI does not assume any primary withholding responsibility. Turbotax online 2012 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. Turbotax online 2012 S. Turbotax online 2012 individual. Turbotax online 2012 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. Turbotax online 2012 The part of the payment allocable to the U. Turbotax online 2012 S. Turbotax online 2012 individual (20%) is reportable on Form 1099-DIV. Turbotax online 2012 Smaller partnerships and trusts. Turbotax online 2012   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. Turbotax online 2012 It is a foreign partnership or foreign simple or grantor trust. Turbotax online 2012 It is a direct account holder of the QI. Turbotax online 2012 It does not have any partner, beneficiary, or owner that is a U. Turbotax online 2012 S. Turbotax online 2012 person or a pass- through partner, beneficiary, or owner. Turbotax online 2012   For information on these rules, see section 4A. Turbotax online 2012 01 of the QI agreement. Turbotax online 2012 This is found in Appendix 3 of Revenue Procedure 2003-64. Turbotax online 2012 Also see Revenue Procedure 2004-21. Turbotax online 2012 Related partnerships and trusts. Turbotax online 2012    A QI may apply special rules to a related partnership or trust only if the partnership or trust meets the following conditions. Turbotax online 2012 It is a foreign partnership or foreign simple or grantor trust. Turbotax online 2012 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. Turbotax online 2012 For information on these rules, see section 4A. Turbotax online 2012 02 of the QI agreement. Turbotax online 2012 This is found in Appendix 3 of Revenue Procedure 2003-64. Turbotax online 2012 Also see Revenue Procedure 2005-77. Turbotax online 2012 Nonqualified Intermediaries If you are making a payment to an NQI, foreign flow-through entity, or U. Turbotax online 2012 S. Turbotax online 2012 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. Turbotax online 2012 S. Turbotax online 2012 branch), and You have sufficient information to report the payment on Form 1042-S or Form 1099, if reporting is required. Turbotax online 2012 The NQI, flow-through entity, or U. Turbotax online 2012 S. Turbotax online 2012 branch must give you certain information on a withholding statement that is associated with the Form W-8IMY. Turbotax online 2012 A withholding statement must be updated to keep the information accurate prior to each payment. Turbotax online 2012 Withholding statement. Turbotax online 2012   In most cases, a withholding statement must contain the following information. Turbotax online 2012 The name, address, and TIN (if any, or if required) of each person for whom documentation is provided. Turbotax online 2012 The type of documentation (documentary evidence, Form W-8, or Form W-9) for every person for whom documentation has been provided. Turbotax online 2012 The status of the person for whom the documentation has been provided, such as whether the person is a U. Turbotax online 2012 S. Turbotax online 2012 exempt recipient (U. Turbotax online 2012 S. Turbotax online 2012 person exempt from Form 1099 reporting), U. Turbotax online 2012 S. Turbotax online 2012 non-exempt recipient (U. Turbotax online 2012 S. Turbotax online 2012 person subject to Form 1099 reporting), or a foreign person. Turbotax online 2012 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. Turbotax online 2012 S. Turbotax online 2012 branch. Turbotax online 2012 The type of recipient the person is, based on the recipient codes used on Form 1042-S. Turbotax online 2012 Information allocating each payment, by income type, to each payee (including U. Turbotax online 2012 S. Turbotax online 2012 exempt and U. Turbotax online 2012 S. Turbotax online 2012 non-exempt recipients) for whom documentation has been provided. Turbotax online 2012 The rate of withholding that applies to each foreign person to whom a payment is allocated. Turbotax online 2012 A foreign payee's country of residence. Turbotax online 2012 If a reduced rate of withholding is claimed, the basis for a reduced rate of withholding (for example, portfolio interest, treaty benefit, etc. Turbotax online 2012 ). Turbotax online 2012 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. Turbotax online 2012 The name, address, and TIN (if any) of any other NQI, flow-through entity, or U. Turbotax online 2012 S. Turbotax online 2012 branch from which the payee will directly receive a payment. Turbotax online 2012 Any other information a withholding agent requests to fulfill its reporting and withholding obligations. Turbotax online 2012 Alternative procedure. Turbotax online 2012   Under this alternative procedure the NQI can give you the information that allocates each payment to each foreign and U. Turbotax online 2012 S. Turbotax online 2012 exempt recipient by January 31 following the calendar year of payment, rather than prior to the payment being made as otherwise required. Turbotax online 2012 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. Turbotax online 2012 You must receive the withholding statement with all the required information (other than item 5) prior to making the payment. Turbotax online 2012    This alternative procedure cannot be used for payments to U. Turbotax online 2012 S. Turbotax online 2012 non-exempt recipients. Turbotax online 2012 Therefore, an NQI must always provide you with allocation information for all U. Turbotax online 2012 S. Turbotax online 2012 non-exempt recipients prior to a payment being made. Turbotax online 2012 Pooled withholding information. Turbotax online 2012   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. Turbotax online 2012 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. Turbotax online 2012 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). Turbotax online 2012 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. Turbotax online 2012 Failure to provide allocation information. Turbotax online 2012   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. Turbotax online 2012 You must treat the payees as undocumented and apply the presumption rules, discussed later in Presumption Rules . Turbotax online 2012 An NQI is deemed to have f