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File a tax return 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. File a tax return S. File a tax return Taxpayer Identification NumbersUnexpected payment. File a tax return Depositing Withheld TaxesWhen Deposits Are Required Adjustment for Overwithholding Returns RequiredJoint owners. File a tax return Electronic reporting. File a tax return Partnership Withholding on Effectively Connected IncomeWho Must Withhold Foreign Partner Publicly Traded Partnerships U. File a tax return S. File a tax return Real Property InterestForeign corporations. File a tax return Domestic corporations. File a tax return U. File a tax return S. File a tax return real property holding corporations. File a tax return Partnerships. File a tax return Trusts and estates. File a tax return Domestically controlled QIE. File a tax return Late filing of certifications or notices. File a tax return Certifications. File a tax return Liability of agent or qualified substitute. File a tax return Reporting and Paying the Tax Withholding Certificates Tax Treaty TablesTable 1 Table 2 Table 3 How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). File a tax return Withholding of Tax In most cases, a foreign person is subject to U. File a tax return S. File a tax return tax on its U. File a tax return S. File a tax return source income. File a tax return Most types of U. File a tax return S. File a tax return source income received by a foreign person are subject to U. File a tax return S. File a tax return tax of 30%. File a tax return 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. File a tax return The tax is generally withheld (NRA withholding) from the payment made to the foreign person. File a tax return 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. File a tax return In most cases, NRA withholding describes the withholding regime that requires withholding on a payment of U. File a tax return S. File a tax return source income. File a tax return Payments to foreign persons, including nonresident alien individuals, foreign entities, and governments, may be subject to NRA withholding. File a tax return NRA withholding does not include withholding under section 1445 of the Code (see U. File a tax return S. File a tax return Real Property Interest, later) or under section 1446 of the Code (see Partnership Withholding on Effectively Connected Income , later). File a tax return A withholding agent (defined next) is the person responsible for withholding on payments made to a foreign person. File a tax return However, a withholding agent that can reliably associate the payment with documentation (discussed later) from a U. File a tax return S. File a tax return person is not required to withhold. File a tax return 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. File a tax return Withholding Agent You are a withholding agent if you are a U. File a tax return S. File a tax return 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. File a tax return 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. File a tax return S. File a tax return branch of certain foreign banks and insurance companies. File a tax return 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. File a tax return Although several persons may be withholding agents for a single payment, the full tax is required to be withheld only once. File a tax return In most cases, the U. File a tax return S. File a tax return person who pays an amount subject to NRA withholding is the person responsible for withholding. File a tax return However, other persons may be required to withhold. File a tax return 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. File a tax return 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. File a tax return Liability for tax. File a tax return   As a withholding agent, you are personally liable for any tax required to be withheld. File a tax return This liability is independent of the tax liability of the foreign person to whom the payment is made. File a tax return If you fail to withhold and the foreign payee fails to satisfy its U. File a tax return S. File a tax return tax liability, then both you and the foreign person are liable for tax, as well as interest and any applicable penalties. File a tax return   The applicable tax will be collected only once. File a tax return If the foreign person satisfies its U. File a tax return S. File a tax return tax liability, you are not liable for the tax but remain liable for any interest and penalties for failure to withhold. File a tax return Determination of amount to withhold. File a tax return   You must withhold on the gross amount subject to NRA withholding. File a tax return You cannot reduce the gross amount by any deductions. File a tax return However, see Scholarships and Fellowship Grants and Pay for Personal Services Performed , later, for when a deduction for a personal exemption may be allowed. File a tax return   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. File a tax return In no case, however, should you withhold more than 30% of the total amount paid. File a tax return Or, you may make a reasonable estimate of the amount from U. File a tax return S. File a tax return sources and put a corresponding part of the amount due in escrow until the amount from U. File a tax return S. File a tax return sources can be determined, at which time withholding becomes due. File a tax return When to withhold. File a tax return   Withholding is required at the time you make a payment of an amount subject to withholding. File a tax return 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. File a tax return A payment is considered made to a person if it is paid for that person's benefit. File a tax return 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. File a tax return A payment also is considered made to a person if it is made to that person's agent. File a tax return   A U. File a tax return S. File a tax return partnership should withhold when any distributions that include amounts subject to withholding are made. File a tax return However, if a foreign partner's distributive share of income subject to withholding is not actually distributed, the U. File a tax return S. File a tax return 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. File a tax return If the distributable amount consists of effectively connected income, see Partnership Withholding on Effectively Connected Income , later. File a tax return A U. File a tax return S. File a tax return 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. File a tax return To the extent a U. File a tax return S. File a tax return 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. File a tax return 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. File a tax return (See Returns Required , later. File a tax return ) 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. File a tax return Form 1099 reporting and backup withholding. File a tax return    You also may be responsible as a payer for reporting on Form 1099 payments made to a U. File a tax return S. File a tax return person. File a tax return You must withhold 28% (backup withholding rate) from a reportable payment made to a U. File a tax return S. File a tax return person that is subject to Form 1099 reporting if any of the following apply. File a tax return The U. File a tax return S. File a tax return person has not provided its taxpayer identification number (TIN) in the manner required. File a tax return The IRS notifies you that the TIN furnished by the payee is incorrect. File a tax return There has been a notified payee underreporting. File a tax return There has been a payee certification failure. File a tax return In most cases, a TIN must be provided by a U. File a tax return S. File a tax return non-exempt recipient on Form W-9, Request for Taxpayer Identification Number and Certification. File a tax return A payer files a tax return on Form 945, Annual Return of Withheld Federal Income Tax, for backup withholding. File a tax return 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. File a tax return S. File a tax return person. File a tax return For example, you are required to report income paid to a foreign intermediary or flow-through entity that collects for a U. File a tax return S. File a tax return person subject to Form 1099 reporting. File a tax return See Identifying the Payee , later, for more information. File a tax return Also see Section S. File a tax return 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. File a tax return 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. File a tax return Wages paid to employees. File a tax return   If you are the employer of a nonresident alien, you generally must withhold taxes at graduated rates. File a tax return See Pay for Personal Services Performed , later. File a tax return Effectively connected income by partnerships. File a tax return   A withholding agent that is a partnership (whether U. File a tax return S. File a tax return or foreign) is also responsible for withholding on its income effectively connected with a U. File a tax return S. File a tax return trade or business that is allocable to foreign partners. File a tax return See Partnership Withholding on Effectively Connected Income , later, for more information. File a tax return U. File a tax return S. File a tax return real property interest. File a tax return   A withholding agent also may be responsible for withholding if a foreign person transfers a U. File a tax return S. File a tax return real property interest to the agent, or if it is a corporation, partnership, trust, or estate that distributes a U. File a tax return S. File a tax return real property interest to a shareholder, partner, or beneficiary that is a foreign person. File a tax return See U. File a tax return S. File a tax return Real Property Interest , later. File a tax return Persons Subject to NRA Withholding NRA withholding applies only to payments made to a payee that is a foreign person. File a tax return It does not apply to payments made to U. File a tax return S. File a tax return persons. File a tax return Usually, you determine the payee's status as a U. File a tax return S. File a tax return or foreign person based on the documentation that person provides. File a tax return See Documentation , later. File a tax return 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. File a tax return 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. File a tax return However, there are situations in which the payee is a person other than the one to whom you actually make a payment. File a tax return U. File a tax return S. File a tax return agent of foreign person. File a tax return   If you make a payment to a U. File a tax return S. File a tax return person and you have actual knowledge that the U. File a tax return S. File a tax return person is receiving the payment as an agent of a foreign person, you must treat the payment as made to the foreign person. File a tax return However, if the U. File a tax return S. File a tax return 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. File a tax return   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. File a tax return S. File a tax return person and not as a payment to a foreign person. File a tax return You may be required to report the payment on Form 1099 and, if applicable, backup withhold. File a tax return Disregarded entities. File a tax return   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. File a tax return The payee of a payment made to a disregarded entity is the owner of the entity. File a tax return   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. File a tax return   If the owner is a U. File a tax return S. File a tax return person, you do not apply NRA withholding. File a tax return However, you may be required to report the payment on Form 1099 and, if applicable, backup withhold. File a tax return 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. File a tax return Flow-Through Entities The payees of payments (other than income effectively connected with a U. File a tax return S. File a tax return trade or business) made to a foreign flow-through entity are the owners or beneficiaries of the flow-through entity. File a tax return This rule applies for purposes of NRA withholding and for Form 1099 reporting and backup withholding. File a tax return Income that is, or is deemed to be, effectively connected with the conduct of a U. File a tax return S. File a tax return trade or business of a flow-through entity is treated as paid to the entity. File a tax return All of the following are flow-through entities. File a tax return A foreign partnership (other than a withholding foreign partnership). File a tax return A foreign simple or foreign grantor trust (other than a withholding foreign trust). File a tax return A fiscally transparent entity receiving income for which treaty benefits are claimed. File a tax return See Fiscally transparent entity , later. File a tax return 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. File a tax return You also may be required to treat the entity as a flow-through entity under the presumption rules, discussed later. File a tax return You must determine whether the owners or beneficiaries of a flow-through entity are U. File a tax return S. File a tax return 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. File a tax return 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. File a tax return 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. File a tax return See Documentation and Presumption Rules , later. File a tax return Withholding foreign partnerships and withholding foreign trusts are not flow-through entities. File a tax return Foreign partnerships. File a tax return    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. File a tax return 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. File a tax return 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. File a tax return 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. File a tax return Example 1. File a tax return A nonwithholding foreign partnership has three partners: a nonresident alien individual; a foreign corporation; and a U. File a tax return S. File a tax return citizen. File a tax return You make a payment of U. File a tax return S. File a tax return source interest to the partnership. File a tax return 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. File a tax return S. File a tax return citizen. File a tax return The partnership also gives you a complete withholding statement that enables you to associate a part of the interest payment to each partner. File a tax return You must treat all three partners as the payees of the interest payment as if the payment were made directly to them. File a tax return Report the payment to the nonresident alien and the foreign corporation on Forms 1042-S. File a tax return Report the payment to the U. File a tax return S. File a tax return citizen on Form 1099-INT. File a tax return Example 2. File a tax return A nonwithholding foreign partnership has two partners: a foreign corporation and a nonwithholding foreign partnership. File a tax return The second partnership has two partners, both nonresident alien individuals. File a tax return You make a payment of U. File a tax return S. File a tax return source interest to the first partnership. File a tax return 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. File a tax return In addition, Forms W-8BEN from the partners are associated with the Form W-8IMY from the second partnership. File a tax return The Forms W-8IMY from the partnerships have complete withholding statements associated with them. File a tax return 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. File a tax return Example 3. File a tax return You make a payment of U. File a tax return S. File a tax return source dividends to a withholding foreign partnership. File a tax return The partnership has two partners, both foreign corporations. File a tax return 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. File a tax return You must treat the partnership as the payee of the dividends. File a tax return Foreign simple and grantor trust. File a tax return   A trust is foreign unless it meets both of the following tests. File a tax return A court within the United States is able to exercise primary supervision over the administration of the trust. File a tax return One or more U. File a tax return S. File a tax return persons have the authority to control all substantial decisions of the trust. File a tax return   In most cases, a foreign simple trust is a foreign trust that is required to distribute all of its income annually. File a tax return A foreign grantor trust is a foreign trust that is treated as a grantor trust under sections 671 through 679 of the Code. File a tax return   The payees of a payment made to a foreign simple trust are the beneficiaries of the trust. File a tax return The payees of a payment made to a foreign grantor trust are the owners of the trust. File a tax return 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. File a tax return 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. File a tax return Example. File a tax return A foreign simple trust has three beneficiaries: two nonresident alien individuals and a U. File a tax return S. File a tax return citizen. File a tax return You make a payment of interest to the foreign trust. File a tax return 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. File a tax return S. File a tax return citizen. File a tax return 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. File a tax return You must treat all three beneficiaries as the payees of the interest payment as if the payment were made directly to them. File a tax return Report the payment to the nonresident aliens on Forms 1042-S. File a tax return Report the payment to the U. File a tax return S. File a tax return citizen on Form 1099-INT. File a tax return Fiscally transparent entity. File a tax return   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. File a tax return 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. File a tax return ). File a tax return 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. File a tax return 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. File a tax return 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. File a tax return   The payees of a payment made to a fiscally transparent entity are the interest holders of the entity. File a tax return Example. File a tax return 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. File a tax return A has two interest holders, B and C. File a tax return B is a corporation organized under the laws of country Y. File a tax return C is a corporation organized under the laws of country Z. File a tax return Both countries Y and Z have an income tax treaty in force with the United States. File a tax return A receives royalty income from U. File a tax return S. File a tax return sources that is not effectively connected with the conduct of a trade or business in the United States. File a tax return For U. File a tax return S. File a tax return income tax purposes, A is treated as a partnership. File a tax return 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. File a tax return 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. File a tax return Accordingly, A is fiscally transparent in its jurisdiction, country X. File a tax return B and C are not fiscally transparent under the laws of their respective countries of incorporation. File a tax return 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. File a tax return 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. File a tax return S. File a tax return source royalty income for purposes of the U. File a tax return S. File a tax return -Y income tax treaty. File a tax return 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. File a tax return Therefore, A is not treated as fiscally transparent under the laws of country Z. File a tax return Accordingly, C is not treated as deriving its share of the U. File a tax return S. File a tax return source royalty income for purposes of the U. File a tax return S. File a tax return -Z income tax treaty. File a tax return 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. File a tax return This rule applies for purposes of NRA withholding and for Form 1099 reporting and backup withholding. File a tax return 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. File a tax return An intermediary is a custodian, broker, nominee, or any other person that acts as an agent for another person. File a tax return A foreign intermediary is either a qualified intermediary or a nonqualified intermediary. File a tax return 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. File a tax return You must determine whether the customers or account holders of a foreign intermediary are U. File a tax return S. File a tax return or foreign persons and, if the account holder or customer is foreign, whether a reduced rate of NRA withholding applies. File a tax return You make these determinations based on the foreign intermediary's Form W-8IMY and associated information and documentation. File a tax return 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. File a tax return See Documentation and Presumption Rules , later. File a tax return Nonqualified intermediary. File a tax return   A nonqualified intermediary (NQI) is any intermediary that is a foreign person and that is not a qualified intermediary. File a tax return The payees of a payment made to an NQI are the customers or account holders on whose behalf the NQI is acting. File a tax return Example. File a tax return You make a payment of interest to a foreign bank that is a nonqualified intermediary. File a tax return 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. File a tax return S. File a tax return person for whom the bank is collecting the payments. File a tax return 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. File a tax return The account holders are the payees of the interest payment. File a tax return 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. File a tax return S. File a tax return person on Form 1099-INT. File a tax return Qualified intermediary. File a tax return   A qualified intermediary (QI) is any foreign intermediary (or foreign branch of a U. File a tax return S. File a tax return intermediary) that has entered into a qualified intermediary withholding agreement (discussed later) with the IRS. File a tax return 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. File a tax return In this situation, the QI is required to withhold the tax. File a tax return You can determine whether a QI has assumed responsibility from the Form W-8IMY provided by the QI. File a tax return   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. File a tax return 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. File a tax return S. File a tax return person. File a tax return Branches of financial institutions. File a tax return   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. File a tax return The countries with approved KYC rules are listed on IRS. File a tax return gov. File a tax return QI withholding agreement. File a tax return   Foreign financial institutions and foreign branches of U. File a tax return S. File a tax return financial institutions can enter into an agreement with the IRS to be a qualified intermediary. File a tax return   A QI is entitled to certain simplified withholding and reporting rules. File a tax return In general, there are three major areas whereby intermediaries with QI status are afforded such simplified treatment. File a tax return   To apply for QI status, complete Form 14345, Qualified Intermediary Application, and Form SS-4, Application for Employer Identification Number. File a tax return These forms, and the procedures required to obtain a QI withholding agreement are available at www. File a tax return irs. File a tax return gov/Businesses/Corporations/Qualified-Intermediaries-(QI). File a tax return Documentation. File a tax return   A QI is not required to forward documentation obtained from foreign account holders to the U. File a tax return S. File a tax return withholding agent from whom the QI receives a payment of U. File a tax return S. File a tax return source income. File a tax return The QI maintains such documentation at its location and provides the U. File a tax return S. File a tax return withholding agent with withholding rate pools. File a tax return A withholding rate pool is a payment of a single type of income that is subject to a single rate of withholding. File a tax return   A QI is required to provide the U. File a tax return S. File a tax return withholding agent with information regarding U. File a tax return S. File a tax return persons subject to Form 1099 information reporting unless the QI assumes the primary obligation to do Form 1099 reporting and backup withholding. File a tax return   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. File a tax return 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. File a tax return Form 1042-S reporting. File a tax return   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. File a tax return Pooled basis reporting is not available for payments to certain account holders, such as a nonqualified intermediary or a flow-through entity (discussed earlier). File a tax return Collective refund procedures. File a tax return   A QI may seek a refund on behalf of its direct account holders. File a tax return 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. File a tax return U. File a tax return S. File a tax return branches of foreign banks and foreign insurance companies. File a tax return   Special rules apply to a U. File a tax return S. File a tax return branch of a foreign bank subject to Federal Reserve Board supervision or a foreign insurance company subject to state regulatory supervision. File a tax return If you agree to treat the branch as a U. File a tax return S. File a tax return person, you may treat the branch as a U. File a tax return S. File a tax return payee for a payment subject to NRA withholding provided you receive a Form W-8IMY from the U. File a tax return S. File a tax return branch on which the agreement is evidenced. File a tax return If you treat the branch as a U. File a tax return S. File a tax return payee, you are not required to withhold. File a tax return Even though you agree to treat the branch as a U. File a tax return S. File a tax return person, you must report the payment on Form 1042-S. File a tax return   A financial institution organized in a U. File a tax return S. File a tax return possession is treated as a U. File a tax return S. File a tax return branch. File a tax return The special rules discussed in this section apply to a possessions financial institution. File a tax return   If you are paying a U. File a tax return S. File a tax return 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. File a tax return S. File a tax return person for amounts subject to NRA withholding. File a tax return Consequently, amounts not subject to NRA withholding that are paid to a U. File a tax return S. File a tax return branch are not subject to Form 1099 reporting or backup withholding. File a tax return   Alternatively, a U. File a tax return S. File a tax return branch may provide you with a Form W-8IMY with which it associates the documentation of the persons on whose behalf it acts. File a tax return 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. File a tax return See Nonqualified Intermediaries under  Documentation, later. File a tax return   If the U. File a tax return S. File a tax return 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. File a tax return Withholding foreign partnership and foreign trust. File a tax return   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. File a tax return 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. File a tax return   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. File a tax return A WP or WT acting in that capacity must assume NRA withholding responsibility for these amounts. File a tax return 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. File a tax return WP and WT withholding agreements. File a tax return   The WP and WT withholding agreements and the application procedures for the agreements are in Revenue Procedure 2003-64. File a tax return Also see the following items. File a tax return Revenue Procedure 2004-21. File a tax return Revenue Procedure 2005-77. File a tax return Employer identification number (EIN). File a tax return   A completed Form SS-4 must be submitted with the application for being a WP or WT. File a tax return The WP or WT will be assigned a WP-EIN or WT-EIN to be used only when acting in that capacity. File a tax return Documentation. File a tax return   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. File a tax return 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. File a tax return The Form W-8IMY must contain the WP-EIN or WT-EIN. File a tax return Foreign Persons A payee is subject to NRA withholding only if it is a foreign person. File a tax return 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. File a tax return S. File a tax return person. File a tax return It also includes a foreign branch of a U. File a tax return S. File a tax return financial institution if the foreign branch is a qualified intermediary. File a tax return In most cases, the U. File a tax return S. File a tax return branch of a foreign corporation or partnership is treated as a foreign person. File a tax return Nonresident alien. File a tax return   A nonresident alien is an individual who is not a U. File a tax return S. File a tax return citizen or a resident alien. File a tax return A resident of a foreign country under the residence article of an income tax treaty is a nonresident alien individual for purposes of withholding. File a tax return Married to U. File a tax return S. File a tax return citizen or resident alien. File a tax return   Nonresident alien individuals married to U. File a tax return S. File a tax return citizens or resident aliens may choose to be treated as resident aliens for certain income tax purposes. File a tax return However, these individuals are still subject to the NRA withholding rules that apply to nonresident aliens for all income except wages. File a tax return Wages paid to these individuals are subject to graduated withholding. File a tax return See Wages Paid to Employees—Graduated Withholding . File a tax return Resident alien. File a tax return   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. File a tax return Green card test. File a tax return 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. File a tax return This is known as the green card test because these aliens hold immigrant visas (also known as green cards). File a tax return Substantial presence test. File a tax return An alien is considered a resident alien if the individual meets the substantial presence test for the calendar year. File a tax return 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. File a tax return   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. File a tax return This exception is for a limited period of time. File a tax return   For more information on resident and nonresident status, the tests for residence, and the exceptions to them, see Publication 519. File a tax return Note. File a tax return   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. File a tax return For more information on making adjustments, see chapter 13 of Publication 15 (Circular E). File a tax return Resident of a U. File a tax return S. File a tax return possession. File a tax return   A bona fide resident of Puerto Rico, the U. File a tax return S. File a tax return Virgin Islands, Guam, the Commonwealth of the Northern Mariana Islands (CNMI), or American Samoa who is not a U. File a tax return S. File a tax return citizen or a U. File a tax return S. File a tax return national is treated as a nonresident alien for the withholding rules explained here. File a tax return 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. File a tax return   For more information, see Publication 570, Tax Guide for Individuals With Income From U. File a tax return S. File a tax return Possessions. File a tax return Foreign corporations. File a tax return   A foreign corporation is one that does not fit the definition of a domestic corporation. File a tax return 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. File a tax return Guam or Northern Mariana Islands corporations. File a tax return   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). File a tax return Note. File a tax return   The provisions discussed below under U. File a tax return S. File a tax return 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. File a tax return U. File a tax return S. File a tax return Virgin Islands and American Samoa corporations. File a tax return   A corporation created or organized in, or under the laws of, the U. File a tax return S. File a tax return 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. File a tax return S. File a tax return 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. File a tax return S. File a tax return Virgin Islands, American Samoa, Guam, the CNMI, or the United States. File a tax return Foreign private foundations. File a tax return   A private foundation that was created or organized under the laws of a foreign country is a foreign private foundation. File a tax return 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. File a tax return Other foreign organizations, associations, and charitable institutions. File a tax return   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. File a tax return 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. File a tax return   Payments to these organizations, however, must be reported on Form 1042-S, even though no tax is withheld. File a tax return   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. File a tax return U. File a tax return S. File a tax return branches of foreign persons. File a tax return   In most cases, a payment to a U. File a tax return S. File a tax return branch of a foreign person is a payment made to the foreign person. File a tax return However, you may treat payments to U. File a tax return S. File a tax return branches of foreign banks and foreign insurance companies (discussed earlier) that are subject to U. File a tax return S. File a tax return regulatory supervision as payments made to a U. File a tax return S. File a tax return person, if you and the U. File a tax return S. File a tax return branch have agreed to do so, and if their agreement is evidenced by a withholding certificate, Form W-8IMY. File a tax return For this purpose, a financial institution organized under the laws of a U. File a tax return S. File a tax return possession is treated as a U. File a tax return S. File a tax return branch. File a tax return 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. File a tax return The payee is a U. File a tax return S. File a tax return person. File a tax return The payee is a foreign person that is the beneficial owner of the income and is entitled to a reduced rate of withholding. File a tax return In most cases, you must get the documentation before you make the payment. File a tax return The documentation is not valid if you know, or have reason to know, that it is unreliable or incorrect. File a tax return See Standards of Knowledge , later. File a tax return If you cannot reliably associate a payment with valid documentation, you must use the presumption rules discussed later. File a tax return 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. File a tax return The specific types of documentation are discussed in this section. File a tax return However, see Withholding on Specific Income , later, as well as the instructions to the particular forms. File a tax return 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. File a tax return Section 1446 withholding. File a tax return   Under section 1446 of the Code, a partnership must withhold tax on its effectively connected income allocable to a foreign partner. File a tax return 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. File a tax return 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. File a tax return Joint owners. File a tax return    If you make a payment to joint owners, you need to get documentation from each owner. File a tax return Form W-9. File a tax return   In most cases, you can treat the payee as a U. File a tax return S. File a tax return person if the payee gives you a Form W-9. File a tax return The Form W-9 can be used only by a U. File a tax return S. File a tax return person and must contain the payee's taxpayer identification number (TIN). File a tax return If there is more than one owner, you may treat the total amount as paid to a U. File a tax return S. File a tax return person if any one of the owners gives you a Form W-9. File a tax return See U. File a tax return S. File a tax return Taxpayer Identification Numbers , later. File a tax return U. File a tax return S. File a tax return persons are not subject to NRA withholding, but may be subject to Form 1099 reporting and backup withholding. File a tax return Form W-8. File a tax return   In most cases, a foreign payee of the income should give you a form in the Form W-8 series. File a tax return Until further notice, you can rely upon Forms W-8 that contain a P. File a tax return O. File a tax return 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. File a tax return S. File a tax return person and that a street address is available. File a tax return You may rely on Forms W-8 for which there is a U. File a tax return S. File a tax return mailing address provided you received the form prior to December 31, 2001. File a tax return   If certain requirements are met, the foreign person can give you documentary evidence, rather than a Form W-8. File a tax return You can rely on documentary evidence in lieu of a Form W-8 for a payment made in a U. File a tax return S. File a tax return possession. File a tax return Other documentation. File a tax return   Other documentation may be required to claim an exemption from, or a reduced rate of, withholding on pay for personal services. File a tax return 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. File a tax return These forms are discussed in Pay for Personal Services Performed under Withholding on Specific Income. File a tax return 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. File a tax return Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding. File a tax return   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. File a tax return   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. File a tax return 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. File a tax return Claiming treaty benefits. File a tax return   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. File a tax return S. File a tax return 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. File a tax return   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. File a tax return   An entity derives income for which it is claiming treaty benefits only if the entity is not treated as fiscally transparent for that income. File a tax return See Fiscally transparent entity discussed earlier under Flow-Through Entities. File a tax return   Limitations on benefits provisions generally prohibit third country residents from obtaining treaty benefits. File a tax return 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. File a tax return   The exemptions from, or reduced rates of, U. File a tax return S. File a tax return tax vary under each treaty. File a tax return You must check the provisions of the tax treaty that apply. File a tax return 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. File a tax return   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. File a tax return 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. File a tax return Exceptions to TIN requirement. File a tax return   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. File a tax return Income from marketable securities (discussed next). File a tax return Unexpected payments to an individual (discussed under U. File a tax return S. File a tax return Taxpayer Identification Numbers ). File a tax return Marketable securities. File a tax return   A Form W-8BEN provided to claim treaty benefits does not need a U. File a tax return S. File a tax return TIN if the foreign beneficial owner is claiming the benefits on income from marketable securities. File a tax return For this purpose, income from a marketable security consists of the following items. File a tax return Dividends and interest from stocks and debt obligations that are actively traded. File a tax return Dividends from any redeemable security issued by an investment company registered under the Investment Company Act of 1940 (mutual fund). File a tax return 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. File a tax return Income related to loans of any of the above securities. File a tax return Offshore accounts. File a tax return   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. File a tax return   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. File a tax return 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. File a tax return An offshore account is an account maintained at an office or branch of a U. File a tax return S. File a tax return or foreign bank or other financial institution at any location outside the United States. File a tax return   You may rely on documentary evidence given to you by a nonqualified intermediary or a flow-through entity with its Form W-8IMY. File a tax return This rule applies even though you make the payment to a nonqualified intermediary or flow-through entity in the United States. File a tax return 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. File a tax return Documentary evidence. File a tax return   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. File a tax return 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. File a tax return 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. File a tax return 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. File a tax return 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. File a tax return 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. File a tax return   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. File a tax return (See Effectively Connected Income , later. File a tax return )   Effectively connected income for which a valid Form W-8ECI has been provided is generally not subject to NRA withholding. File a tax return   If a partner submits this form to a partnership, the income claimed to be effectively connected with the conduct of a U. File a tax return S. File a tax return trade or business is subject to withholding under section 1446. File a tax return 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. File a tax return    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. File a tax return Form W-8EXP, Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding. File a tax return   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. File a tax return S. File a tax return 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. File a tax return   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. File a tax return   See Foreign Governments and Certain Other Foreign Organizations , later. File a tax return 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. File a tax return 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. File a tax return The additional information required depends on the type of intermediary or flow-through entity and the extent of the withholding responsibilities it assumes. File a tax return Form W-8IMY, Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U. File a tax return S. File a tax return Branches for United States Tax Withholding. File a tax return   This form is used by foreign intermediaries and foreign flow-through entities, as well as certain U. File a tax return S. File a tax return 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. File a tax return S. File a tax return branch of a foreign bank or insurance company and either is agreeing to be treated as a U. File a tax return S. File a tax return 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. File a tax return For information on qualifying as an upper-tier foreign partnership, see Regulations section 1. File a tax return 1446-5. File a tax return Qualified Intermediaries In most cases, a QI is any foreign intermediary that has entered into a QI withholding agreement (discussed earlier) with the IRS. File a tax return 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. File a tax return The intermediary can claim that it is a QI until the IRS revokes its QI-EIN. File a tax return 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. File a tax return Responsibilities. File a tax return   Payments made to a QI that does not assume NRA withholding responsibility are treated as paid to its account holders and customers. File a tax return However, a QI is not required to provide you with documentation it obtains from its foreign account holders and customers. File a tax return Instead, it provides you with a withholding statement that contains withholding rate pool information. File a tax return 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. File a tax return A qualified intermediary is required to provide you with information regarding U. File a tax return S. File a tax return persons subject to Form 1099 reporting and to provide you withholding rate pool information separately for each such U. File a tax return S. File a tax return person unless it has assumed Form 1099 reporting and backup withholding responsibility. File a tax return For the alternative procedure for providing rate pool information for U. File a tax return S. File a tax return non-exempt persons, see the Form W-8IMY instructions. File a tax return   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. File a tax return   The extent to which you must have withholding rate pool information depends on the withholding and reporting obligations assumed by the QI. File a tax return Primary responsibility not assumed. File a tax return   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. File a tax return Unless the alternative procedure applies, the qualified intermediary must provide you with a separate withholding rate pool for each U. File a tax return S. File a tax return person subject to Form 1099 reporting and/or backup withholding. File a tax return 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. File a tax return Primary NRA withholding responsibility assumed. File a tax return   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. File a tax return S. File a tax return person, unless the alternative procedure applies, subject to Form 1099 reporting and/or backup withholding. File a tax return 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. File a tax return Primary NRA and Form 1099 responsibility assumed. File a tax return   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. File a tax return It is not necessary to associate the payment with withholding rate pools. File a tax return Example. File a tax return You make a payment of dividends to a QI. File a tax return 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. File a tax return S. File a tax return individual who provides it with a Form W-9. File a tax return Each customer is entitled to 20% of the dividend payment. File a tax return The QI does not assume any primary withholding responsibility. File a tax return 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. File a tax return S. File a tax return individual. File a tax return 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. File a tax return The part of the payment allocable to the U. File a tax return S. File a tax return individual (20%) is reportable on Form 1099-DIV. File a tax return Smaller partnerships and trusts. File a tax return   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. File a tax return It is a foreign partnership or foreign simple or grantor trust. File a tax return It is a direct account holder of the QI. File a tax return It does not have any partner, beneficiary, or owner that is a U. File a tax return S. File a tax return person or a pass- through partner, beneficiary, or owner. File a tax return   For information on these rules, see section 4A. File a tax return 01 of the QI agreement. File a tax return This is found in Appendix 3 of Revenue Procedure 2003-64. File a tax return Also see Revenue Procedure 2004-21. File a tax return Related partnerships and trusts. File a tax return    A QI may apply special rules to a related partnership or trust only if the partnership or trust meets the following conditions. File a tax return It is a foreign partnership or foreign simple or grantor trust. File a tax return 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. File a tax return For information on these rules, see section 4A. File a tax return 02 of the QI agreement. File a tax return This is found in Appendix 3 of Revenue Procedure 2003-64. File a tax return Also see Revenue Procedure 2005-77. File a tax return Nonqualified Intermediaries If you are making a payment to an NQI, foreign flow-through entity, or U. File a tax return S. File a tax return 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. File a tax return S. File a tax return branch), and You have sufficient information to report the payment on Form 1042-S or Form 1099, if reporting is required. File a tax return The NQI, flow-through entity, or U. File a tax return S. File a tax return branch must give you certain information on a withholding statement that is associated with the Form W-8IMY. File a tax return A withholding statement must be updated to keep the information accurate prior to each payment. File a tax return Withholding statement. File a tax return   In most cases, a withholding statement must contain the following information. File a tax return The name, address, and TIN (if any, or if required) of each person for whom documentation is provided. File a tax return The type of documentation (documentary evidence, Form W-8, or Form W-9) for every person for whom documentation has been provided. File a tax return The status of the person for whom the documentation has been provided, such as whether the person is a U. File a tax return S. File a tax return exempt recipient (U. File a tax return S. File a tax return person exempt from Form 1099 reporting), U. File a tax return S. File a tax return non-exempt recipient (U. File a tax return S. File a tax return person subject to Form 1099 reporting), or a foreign person. File a tax return 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. File a tax return S. File a tax return branch. File a tax return The type of recipient the person is, based on the recipient codes used on Form 1042-S. File a tax return Information allocating each payment, by income type, to each payee (including U. File a tax return S. File a tax return exempt and U. File a tax return S. File a tax return non-exempt recipients) for whom documentation has been provided. File a tax return The rate of withholding that applies to each foreign person to whom a payment is allocated. File a tax return A foreign payee's country of residence. File a tax return If a reduced rate of withholding is claimed, the basis for a reduced rate of withholding (for example, portfolio interest, treaty benefit, etc. File a tax return ). File a tax return 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. File a tax return The name, address, and TIN (if any) of any other NQI, flow-through entity, or U. File a tax return S. File a tax return branch from which the payee will directly receive a payment. File a tax return Any other information a withholding agent requests to fulfill its reporting and withholding obligations. File a tax return Alternative procedure. File a tax return   Under this alternative procedure the NQI can give you the information that allocates each payment to each foreign and U. File a tax return S. File a tax return exempt recipient by January 31 following the calendar year of payment, rather than prior to the payment being made as otherwise required. File a tax return 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. File a tax return You must receive the withholding statement with all the required information (other than item 5) prior to making the payment. File a tax return    This alternative procedure cannot be used for payments to U. File a tax return S. File a tax return non-exempt recipients. File a tax return Therefore, an NQI must always provide you with allocation information for all U. File a tax return S. File a tax return non-exempt recipients prior to a payment being made. File a tax return Pooled withholding information. File a tax return   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. File a tax return 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. File a tax return 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). File a tax return 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. File a tax return Failure to provide allocation information. File a tax return   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. File a tax return You must treat the payees as undocumented and apply the presumption rules, discussed later in Presumption Rules . File a tax return An NQI is deemed to have f
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File a tax return 13. File a tax return   Employment Taxes Table of Contents What's New for 2013 What's New for 2014 Reminders Important Dates for 2014 Introduction Topics - This chapter discusses: Useful Items - You may want to see: Farm Employment Family Employees Crew Leaders Social Security and Medicare TaxesReligious exemption. File a tax return Wage limit. File a tax return Federal Income Tax WithholdingNew Form W-4 for 2014. File a tax return Required Notice to Employees About Earned Income Credit (EIC) Reporting and Paying Social Security, Medicare, and Withheld Federal Income TaxesElectronic deposit requirement. File a tax return Federal Unemployment (FUTA) TaxReporting and Paying FUTA Tax What's New for 2013 Social security and Medicare tax for 2013. File a tax return  The employee tax rate for social security is 6. File a tax return 2%. File a tax return Previously, the employee tax rate for social security was 4. File a tax return 2%. File a tax return The employer tax rate for social security remains unchanged at 6. File a tax return 2%. File a tax return The social security wage base limit is $113,700. File a tax return The Medicare tax rate is 1. File a tax return 45% each for the employee and employer, unchanged from 2012. File a tax return There is no wage base limit for Medicare tax. File a tax return Additional Medicare Tax. File a tax return  In addition to withholding Medicare tax at 1. File a tax return 45%, you must withhold a 0. File a tax return 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. File a tax return You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. File a tax return Additional Medicare Tax is only imposed on the employee. File a tax return There is no employer share of Additional Medicare Tax. File a tax return All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 threshold. File a tax return For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15 (Circular E), Employer's Tax Guide. File a tax return For more information on Additional Medicare Tax, visit IRS. File a tax return gov and enter “Additional Medicare Tax” in the search box. File a tax return Leave-based donation programs to aid victims of Hurricane Sandy. File a tax return  Under these programs, employees may donate their vacation, sick, or personal leave in exchange for employer cash payments made before January 1, 2014, to qualified tax-exempt organizations providing relief for the victims of Hurricane Sandy. File a tax return The donated leave will not be included in the income or wages of the employee. File a tax return The employer may deduct the cash payments as business expenses or charitable contributions. File a tax return For more information, see Notice 2012-69, 2012-51 I. File a tax return R. File a tax return B. File a tax return 712, available at www. File a tax return irs. File a tax return gov/irb/2012-51_IRB/ar09. File a tax return html. File a tax return Work opportunity tax credit for qualified tax-exempt organizations hiring qualified veterans extended. File a tax return  The work opportunity tax credit is now available for eligible unemployed veterans who begin work before January 1, 2014. File a tax return Previously, the credit was available for unemployed veterans who began work on or after November 22, 2011, and before January 1, 2013. File a tax return Qualified tax-exempt organizations that hire eligible unemployed veterans can claim the work opportunity tax credit against their payroll tax liability using Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans. File a tax return For more information, visit IRS. File a tax return gov and enter “work opportunity credit” in the search box. File a tax return What's New for 2014 Social security and Medicare tax for 2014. File a tax return  The employee and employer tax rates for social security and the maximum amount of wages subject to social security tax for 2014 will be discussed in Publication 51 (Circular A), Agricultural Employer's Tax Guide (For use in 2014). File a tax return The Medicare tax rate for 2014 will also be discussed in Publication 51 (Circular A) (For use in 2014). File a tax return There is no limit on the amount of wages subject to Medicare tax. File a tax return Reminders Additional employment tax information for farmers. File a tax return  See Publication 51 (Circular A) for more detailed guidance on employment taxes. File a tax return For the latest information about employment tax developments impacting farmers, go to www. File a tax return irs. File a tax return gov/pub51. File a tax return Correcting a previously filed Form 943. File a tax return  If you discover an error on a previously filed Form 943, Employer's Annual Federal Tax Return for Agricultural Employees, make the correction using Form 943-X, Adjusted Employer's Annual Federal Tax Return for Agricultural Employees or Claim for Refund. File a tax return Form 943-X is filed separately from Form 943. File a tax return For more information on correcting Form 943, see the Instructions for Form 943-X. File a tax return Federal tax deposits must be made by electronic funds transfer. File a tax return  You must use electronic funds transfer to make all federal tax deposits. File a tax return Generally, electronic funds transfers are made using the Electronic Federal Tax Payment System (EFTPS). File a tax return If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. File a tax return Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. File a tax return EFTPS is a free service provided by the Department of Treasury. File a tax return Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. File a tax return For more information on making federal tax deposits, see section 7 of Publication 51 (Circular A). File a tax return To get more information about EFTPS or to enroll in EFTPS, visit www. File a tax return eftps. File a tax return gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). File a tax return Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide To Getting Started. File a tax return Important Dates for 2014 You should take the action indicated by the dates listed. File a tax return See By February 15 and On February 16 for Form W-4, Employee's Withholding Allowance Certificate, information. File a tax return Due dates for deposits of withheld federal income taxes, social security taxes, and Medicare taxes are not listed here. File a tax return For these dates, see Publication 509, Tax Calendars (For use in 2014). File a tax return Note. File a tax return  If any date shown below for filing a return, furnishing a form, or depositing taxes falls on a Saturday, Sunday, or legal holiday, the due date is the next business day. File a tax return A statewide legal holiday delays a filing or furnishing due date only if the IRS office where you are required to file a return or furnish a form is located in that state. File a tax return For any due date, you will meet the “file” or “furnish” date requirement if the envelope containing the tax return or form is properly addressed, contains sufficient postage, and is postmarked by the U. File a tax return S. File a tax return Postal Service by the due date, or sent by an IRS-designated delivery service by the due date. File a tax return See Private delivery services in Publication 51 (Circular A). File a tax return Federal tax deposits can only be made by electronic funds transfer and are governed by legal holidays in the District of Columbia. File a tax return Statewide holidays no longer apply. File a tax return For a list of legal holidays that delay the due date of a federal tax deposit, see section 7 of Publication 51 (Circular A). File a tax return Fiscal year taxpayers. File a tax return  The due dates listed below apply whether you use a calendar or a fiscal year. File a tax return By January 31. File a tax return   File Form 943 with the IRS. File a tax return If you deposited all Form 943 taxes when due, you have 10 additional days to file. File a tax return Furnish each employee with a completed Form W-2, Wage and Tax Statement. File a tax return Furnish each recipient to whom you paid $600 or more in nonemployee compensation with a completed Form 1099 (for example, Form 1099-MISC). File a tax return File Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, with the IRS. File a tax return If you deposited all the FUTA tax when due, you have 10 additional days to file. File a tax return File Form 945, Annual Return of Withheld Federal Income Tax, with the IRS to report any nonpayroll income tax withheld during 2013. File a tax return If you deposited all Form 945 taxes when due, you have 10 additional days to file. File a tax return By February 15. File a tax return  Ask for a new Form W-4 or Formulario W-4(SP), Certificado de Exención de Retenciones del Empleado, from each employee who claimed exemption from federal income tax withholding last year. File a tax return On February 16. File a tax return  Any Form W-4 claiming exemption from withholding for the previous year has now expired. File a tax return Begin withholding for any employee who previously claimed exemption from withholding but has not given you a new Form W-4 for the current year. File a tax return If the employee does not give you a new Form W-4, withhold taxes based on the last valid Form W-4 you have for the employee that does not claim exemption from withholding or, if one does not exist, as if he or she is single with zero withholding allowances. File a tax return If the employee furnishes a new Form W-4 claiming exemption from withholding after February 15, you may apply the exemption to future wages, but do not refund taxes withheld while the exempt status was not in place. File a tax return By February 28. File a tax return   File paper Forms 1099 and 1096. File a tax return File Copy A of all paper Forms 1099 with Form 1096, Annual Summary and Transmittal of U. File a tax return S. File a tax return Information Returns, with the IRS. File a tax return For electronically filed returns, see By March 31 below. File a tax return File paper Forms W-2 and W-3. File a tax return File Copy A of all paper Forms W-2 with Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration (SSA). File a tax return For electronically filed returns, see By March 31 below. File a tax return By March 31. File a tax return   File electronic Forms W-2 and 1099. File a tax return File electronic Forms W-2 with the SSA and Forms 1099 with the IRS. File a tax return For more information on reporting Form W-2 information to the SSA electronically, visit the SSA's Employer W-2 Filing Instructions & Information webpage at www. File a tax return socialsecurity. File a tax return gov/employer. File a tax return For information on filing information returns electronically with the IRS, see Publication 1220, Specifications for Filing Forms 1097, 1098, 1099, 3921, 3922, 5498, 8935, and W-2G Electronically. File a tax return By April 30, July 31, October 31, and January 31. File a tax return   Deposit FUTA taxes. File a tax return Deposit FUTA tax due if it is more than $500. File a tax return Before December 1. File a tax return  Remind employees to submit a new Form W-4 if their withholding allowances have changed or will change for the next year. File a tax return Introduction You are generally required to withhold federal income tax from the wages of your employees. File a tax return You may also be subject to social security and Medicare taxes under the Federal Insurance Contributions Act (FICA) and federal unemployment tax under the Federal Unemployment Tax Act (FUTA). File a tax return You must also withhold Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. File a tax return This chapter includes information about these taxes. File a tax return You must also pay self-employment tax on your net earnings from farming. File a tax return See chapter 12 for information on self-employment tax. File a tax return Topics - This chapter discusses: Farm employment, Family employees, Crew leaders, Social security and Medicare taxes, Additional Medicare Tax withholding, Federal income tax withholding, Reporting and paying social security, Medicare, and withheld federal income taxes, and FUTA tax. File a tax return Useful Items - You may want to see: Publication 15 (Circular E), Employer's Tax Guide 15-A Employer's Supplemental Tax Guide 15-B Employer's Tax Guide to Fringe Benefits 51 (Circular A), Agricultural Employer's Tax Guide 926 Household Employer's Tax Guide Form (and Instructions) W-2 Wage and Tax Statement W-4 Employee's Withholding Allowance Certificate W-9 Request for Taxpayer Identification Number and Certification 940 Employer's Annual Federal Unemployment (FUTA) Tax Return 943 Employer's Annual Federal Tax Return for Agricultural Employees 943-X Adjusted Employer's Annual Federal Tax Return for Agricultural Employees or Claim for Refund See chapter 16 for information about getting publications and forms. File a tax return Farm Employment In general, you are an employer of farmworkers if your employees do any of the following types of work. File a tax return Raising or harvesting agricultural or horticultural products on a farm, including raising and feeding of livestock. File a tax return Operating, managing, conserving, improving, or maintaining your farm and its tools and equipment. File a tax return Services performed in salvaging timber, or clearing land of brush and other debris, left by a hurricane (also known as hurricane labor). File a tax return Handling, processing, or packaging any agricultural or horticultural commodity if you produced more than half of the commodity (for a group of up to 20 unincorporated operators, all of the commodity). File a tax return Work related to cotton ginning, turpentine, gum resin products, or the operation and maintenance of irrigation facilities. File a tax return For more information, see Publication 51 (Circular A). File a tax return Generally, a worker who performs services for you is your employee if you have the right to control what will be done and how it will be done. File a tax return This is so even when you give the employee freedom of action. File a tax return What matters is that you have the right to control the details of how the services are performed. File a tax return You are responsible for withholding and paying employment taxes for your employees. File a tax return You are also required to file employment tax returns. File a tax return These requirements do not apply to amounts that you pay to independent contractors. File a tax return See Publication 15-A for more information on how to determine whether an individual providing services is an independent contractor or an employee. File a tax return If you employ a family of workers, each worker subject to your control (not just the head of the family) is an employee. File a tax return Special rules apply to crew leaders. File a tax return See Crew Leaders , later. File a tax return Employer identification number (EIN). File a tax return   If you have employees, you must have an EIN. File a tax return If you do not have an EIN, you may apply for one online. File a tax return Go to IRS. File a tax return gov and click on the Apply for an EIN Online link under Tools. File a tax return You may also apply for an EIN by calling 1-800-829-4933 or 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability). File a tax return The hours of operation for both numbers are Monday–Friday form 7:00 a. File a tax return m. File a tax return –7:00 p. File a tax return m. File a tax return local time (Alaska and Hawaii follow Pacific time). File a tax return You can also fax or mail Form SS-4, Application for Employer Identification Number, to the IRS. File a tax return Employee's social security number (SSN). File a tax return   An employee who does not have an SSN should submit Form SS-5, Application for a Social Security Card, to the Social Security Administration (SSA). File a tax return Form SS-5 is available from any SSA office or by calling 1-800-772-1213 (operates 24 hours per day). File a tax return It is also available from the SSA's website at www. File a tax return socialsecurity. File a tax return gov. File a tax return   The employee must furnish evidence of age, identity, and U. File a tax return S. File a tax return citizenship or lawful immigration status permitting employment with the Form SS-5. File a tax return An employee who is age 18 or older must appear in person with this evidence at an SSA office. File a tax return Form I-9. File a tax return    You must verify that each new employee is legally eligible to work in the United States. File a tax return This includes completing the Form I-9, Employment Eligibility Verification. File a tax return Form I-9 is available from the U. File a tax return S. File a tax return Citizenship and Immigration Services (USCIS) offices or by calling the Bureau of Citizenship and Immigration Services Forms Request Line at 1-800-870-3676. File a tax return Form I-9 is also available from the USCIS website at www. File a tax return uscis. File a tax return gov. File a tax return You can also contact the USCIS at 1-800-375-5283 for more information. File a tax return New hire reporting. File a tax return   You are required to report any new employee to a designated state new hire registry. File a tax return Many states accept a copy of Form W-4 with employer information added. File a tax return Visit the Office of Child Support Enforcement website at www. File a tax return acf. File a tax return hhs. File a tax return gov/programs/cse/newhire for more information. File a tax return Family Employees Generally, the wages you pay to family members who are your employees are subject to employment taxes. File a tax return However, certain exemptions may apply to wages paid to your child, spouse, or parent. File a tax return Exemptions for your child. File a tax return   Payments for the services of your child under age 18 who works for you in your trade or business (including a farm) are not subject to social security and Medicare taxes. File a tax return However, see Nonexempt services of a child or spouse , later. File a tax return Payments for the services of your child under age 21 employed by you in other than a trade or business, such as payments for household services in your home, are also not subject to social security or Medicare taxes. File a tax return Payments for the services of your child under age 21 employed by you, whether or not in your trade or business, are not subject to FUTA tax. File a tax return Although not subject to social security, Medicare, or FUTA tax, the child's wages still may be subject to federal income tax withholding. File a tax return Exemptions for your spouse. File a tax return   Payments for the services of your spouse who works for you in your trade or business are subject to federal income tax withholding and social security and Medicare taxes, but not FUTA tax. File a tax return   Payments for the services of your spouse employed by you in other than a trade or business, such as payments for household services in your home, are not subject to social security, Medicare, or FUTA taxes. File a tax return Nonexempt services of a child or spouse. File a tax return   Payments for the services of your child or spouse are subject to federal income tax withholding as well as social security, Medicare, and FUTA taxes if he or she works for any of the following entities. File a tax return A corporation, even if it is controlled by you. File a tax return A partnership, even if you are a partner. File a tax return This does not apply to wages paid to your child if each partner is a parent of the child. File a tax return An estate or trust, even if it is the estate of a deceased parent. File a tax return In these situations, the child or spouse is considered to work for the corporation, partnership, or estate, not you. File a tax return Exemptions for your parent. File a tax return   Payments for the services of your parent employed by you in your trade or business are subject to federal income tax withholding and social security and Medicare taxes. File a tax return Social security and Medicare taxes do not apply to wages paid to your parent for services not in your trade or business, but they do apply to payments for household services in your home if both the following conditions are satisfied. File a tax return You have a child living in your home who is under age 18 or has a physical or mental condition that requires care by an adult for at least 4 continuous weeks in a calendar quarter. File a tax return You are a widow or widower; or divorced and not remarried; or have a spouse in the home who, because of a physical or mental condition, cannot care for your child for at least 4 continuous weeks in the quarter. File a tax return   Wages you pay to your parent are not subject to FUTA tax, regardless of the type of services provided. File a tax return Qualified joint venture. File a tax return   If spouses elect to be treated as a qualified joint venture instead of a partnership, either spouse may report and pay the employment taxes due on the wages paid to employees using the EIN of that spouse's sole proprietorship. File a tax return For more information about qualified joint ventures, see chapter 12. File a tax return Crew Leaders If farmworkers are provided by a crew leader, the crew leader may be the employer of the workers. File a tax return Social security and Medicare taxes. File a tax return   For social security and Medicare tax purposes, the crew leader is the employer of the workers if both of the following requirements are met. File a tax return The crew leader pays (either on his or her own behalf or on behalf of the farmer) the workers for their farm labor. File a tax return The crew leader has not entered into a written agreement with the farmer under which the crew leader is designated as an employee of the farmer. File a tax return Federal income tax withholding. File a tax return   If the crew leader is the employer for social security and Medicare tax purposes, the crew leader is the employer for federal income tax withholding purposes. File a tax return Federal unemployment (FUTA) tax. File a tax return   For FUTA tax purposes, the crew leader is the employer of the workers if, in addition to the earlier requirements, either of the following requirements are met. File a tax return The crew leader is registered under the Migrant and Seasonal Agricultural Worker Protection Act. File a tax return Substantially all crew members operate or maintain mechanized equipment provided by the crew leader as part of the service to the farmer. File a tax return   The farmer is the employer of workers furnished by a crew leader in all other situations. File a tax return In addition, the farmer is the employer of workers furnished by a registered crew leader if the workers are the employees of the farmer under the common-law test. File a tax return For example, some farmers employ individuals to recruit farmworkers exclusively for them. File a tax return Although these individuals may be required to register under the Migrant and Seasonal Agricultural Worker Protection Act, the workers are employed directly by the farmer. File a tax return The farmer is the employer in these cases. File a tax return For information about common-law employees, see section 1 of Publication 15-A. File a tax return For information about crew leaders, see the Department of Labor website at www. File a tax return dol. File a tax return gov/whd/regs/compliance/whdfs49. File a tax return htm. File a tax return Social Security and Medicare Taxes All cash wages you pay to an employee during the year for farmwork are subject to social security and Medicare taxes if you meet either of the following tests. File a tax return You pay the employee $150 or more in cash wages (count all wages paid on a time, piecework, or other basis) during the year for farmwork (the $150 test). File a tax return The $150 test applies separately to each farmworker that you employ. File a tax return If you employ a family of workers, each member is treated separately. File a tax return Do not count wages paid by other employers. File a tax return You pay cash and noncash wages of $2,500 or more during the year to all your employees for farmwork (the $2,500 test). File a tax return If the $2,500 test for the group is not met, the $150 test for an employee still applies. File a tax return Exceptions. File a tax return   Annual cash wages of less than $150 you pay to a seasonal farmworker are not subject to social security and Medicare taxes, even if you pay $2,500 or more to all your farmworkers. File a tax return However, these wages count toward the $2,500 test for determining whether other farmworkers' wages are subject to social security and Medicare taxes. File a tax return   A seasonal farmworker is a worker who: Works as a hand-harvest laborer, Is paid piece rates in an operation usually paid on this basis in the region of employment, Commutes daily from his or her permanent home to the farm, and Worked in agriculture less than 13 weeks in the preceding calendar year. File a tax return   See Family Employees , earlier, for certain exemptions from social security and Medicare taxes that apply to your child, spouse, and parent. File a tax return Religious exemption. File a tax return   An exemption from social security and Medicare taxes is available to members of a recognized religious group or division opposed to public insurance. File a tax return This exemption is available only if both the employee and the employer are members of the group or division. File a tax return   For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. File a tax return Cash wages. File a tax return   Only cash wages paid to farmworkers are subject to social security and Medicare taxes. File a tax return Cash wages include checks, money orders, and any kind of money or cash. File a tax return   Only cash wages subject to social security and Medicare taxes are credited to your employees for social security benefit purposes. File a tax return Payments not subject to these taxes, such as commodity wages, do not contribute to your employees' social security coverage. File a tax return For information about social security benefits, contact the SSA at 1-800-772-1213 or online at www. File a tax return socialsecurity. File a tax return gov. File a tax return Noncash wages. File a tax return    Noncash wages include food, lodging, clothing, transportation passes, and other goods and services. File a tax return Noncash wages paid to farmworkers, including commodity wages, are not subject to social security and Medicare taxes. File a tax return However, they are subject to these taxes if the substance of the transaction is a cash payment. File a tax return For information on lodging provided as a condition of employment, see Publication 15-B. File a tax return   Report the value of noncash wages in box 1 of Form W-2 together with cash wages. File a tax return Do not show noncash wages in box 3 or in box 5, (unless the substance of the transaction is a cash payment). File a tax return Tax rates and social security wage limit. File a tax return   For 2013, the employer and the employee will pay the following taxes. File a tax return The employer and employee each pay 6. File a tax return 2% of cash wages for social security tax (old-age, survivors, and disability insurance). File a tax return The employer and employee each pay 1. File a tax return 45% of cash wages for Medicare tax (hospital insurance). File a tax return The employee pays 0. File a tax return 9% of cash wages in excess of $200,000 for Additional Medicare Tax. File a tax return Wage limit. File a tax return   The limit on wages subject to the social security tax for 2013 is $113,700. File a tax return There is no limit on wages subject to the Medicare tax. File a tax return All covered wages are subject to the Medicare tax. File a tax return Additionally, all wages in excess of $200,000 are subject to Additional Medicare Tax withholding. File a tax return Paying employee's share. File a tax return   If you would rather pay the employee's share of social security and Medicare taxes without deducting it from his or her wages, you may do so. File a tax return It is additional income to the employee. File a tax return You must include it in box 1 of the employee's Form W-2, but do not count it as social security and Medicare wages (boxes 3 and 5 on Form W-2) or as wages for federal unemployment (FUTA) tax purposes. File a tax return Example. File a tax return Jane operates a small family fruit farm. File a tax return She employs day laborers in the picking season to enable her to timely get her crop to market. File a tax return She does not deduct the employees' share of social security and Medicare taxes from their pay; instead, she pays it on their behalf. File a tax return When her accountant, Susan, prepares the employees' Forms W-2, she adds each employee's share of social security and Medicare taxes paid by Jane to the employee's wage income (box 1 of Form W-2), but does not include it in box 3 (social security wages) or box 5 (Medicare wages and tips). File a tax return For 2013, Jane paid Mary $1,000 during the year. File a tax return Susan enters $1,076. File a tax return 50 in box 1 of Mary's Form W-2 ($1,000 wages plus $76. File a tax return 50 social security and Medicare taxes paid for Mary). File a tax return She enters $1,000 in boxes 3 and 5 of Mary's Form W-2. File a tax return Additional Medicare Tax. File a tax return   In addition to withholding Medicare tax at 1. File a tax return 45%, you must withhold a 0. File a tax return 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. File a tax return You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. File a tax return Additional Medicare Tax is only imposed on the employee. File a tax return There is no employer share of Additional Medicare Tax. File a tax return All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 threshold. File a tax return   For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15 (Circular E). File a tax return For more information on Additional Medicare Tax, visit IRS. File a tax return gov and enter “Additional Medicare Tax” in the search box. File a tax return Federal Income Tax Withholding If the cash wages you pay to farmworkers are subject to social security and Medicare taxes, they are also subject to federal income tax withholding. File a tax return Although noncash wages are subject to federal income tax, withhold income tax only if you and the employee agree to do so. File a tax return The amount to withhold is figured on gross wages without taking out social security and Medicare taxes, union dues, insurance, etc. File a tax return Form W-4. File a tax return   Generally, the amount of federal income tax you withhold is based on the employee's marital status and withholding allowances claimed on the employee's Form W-4. File a tax return In general, an employee can claim withholding allowances on Form W-4 equal to the number of exemptions the employee will be entitled to claim on his or her tax return. File a tax return An employee may also be able to claim a special withholding allowance and allowances for estimated deductions and credits. File a tax return   Do not withhold federal income tax from the wages of an employee who, by filing Form W-4, certifies that he or she had no federal income tax liability last year and anticipates no liability for the current year. File a tax return   You should give each new employee a Form W-4 as soon as you hire the employee. File a tax return For Spanish-speaking employees, you may use Formulario W-4(SP) which is the Spanish translation of Form W-4. File a tax return Have the employee complete and return the form to you before the first payday. File a tax return If the employee does not return the completed form, you must withhold federal income tax as if the employee is single and claims no withholding allowances. File a tax return New Form W-4 for 2014. File a tax return   You should make the 2014 Form W-4 available to your employees and encourage them to check their income tax withholding for 2014. File a tax return Those employees who owed a large amount of tax or received a large refund for 2013 may want to submit a new Form W-4. File a tax return You cannot accept substitute Forms W-4 developed by employees. File a tax return How to figure withholding. File a tax return   You can use one of several methods to determine the amount to withhold. File a tax return The methods are described in Publication 51 (Circular A), which contains tables showing the correct amount of federal income tax you should withhold. File a tax return Publication 51 (Circular A) also contains additional information about federal income tax withholding. File a tax return Nonemployee compensation. File a tax return   Generally, you do not have to withhold federal income tax on payments for services to individuals who are not your employees. File a tax return However, you may be required to report these payments on Form 1099-MISC, Miscellaneous Income, and to withhold under the backup withholding rules. File a tax return For more information, see the Instructions for Form 1099-MISC. File a tax return Required Notice to Employees About Earned Income Credit (EIC) You must provide notification about EIC to each employee who worked for you at any time during the year and from whom you did not withhold any federal income tax. File a tax return However, you do not have to notify employees who claim exemption from federal income tax withholding on Form W-4. File a tax return You meet the notification requirement by giving each employee any of the following. File a tax return Form W-2, which contains EIC notification on the back of Copy B. File a tax return A substitute Form W-2 with the exact EIC wording shown on the back of copy B of Form W-2. File a tax return Notice 797, Possible Federal Tax Refund Due to the Earned Income Credit (EIC). File a tax return Your own written statement with the exact wording of Notice 797. File a tax return For more information, see Publication 51 (Circular A). File a tax return Reporting and Paying Social Security, Medicare, and Withheld Federal Income Taxes You must withhold federal income, social security, and Medicare taxes required to be withheld from the salaries and wages of your employees. File a tax return You are liable for the payment of these taxes to the federal government whether or not you collect them from your employees. File a tax return If, for example, you withhold less than the correct tax from an employee's wages, you are still liable for the full amount. File a tax return You must also pay the employer's share of social security and Medicare taxes. File a tax return There is no employer share of Additional Medicare Tax. File a tax return Form 943. File a tax return   Report withheld federal income tax, social security tax, and Medicare tax on Form 943. File a tax return Your 2013 Form 943 is due by January 31, 2014 (or February 10, 2014, if you made deposits on time in full payment of the taxes due for the year). File a tax return Deposits. File a tax return   Generally, you must deposit both the employer and employee shares of social security and Medicare taxes and federal income tax withheld during the year. File a tax return However, you may make payments with Form 943 instead of depositing them if you accumulate less than a $2,500 tax liability (“Total taxes after adjustments” line on Form 943) during the year and you pay in full with a timely filed return. File a tax return   For more information on deposit rules, see Publication 51 (Circular A). File a tax return Electronic deposit requirement. File a tax return   You must use electronic funds transfer to make all federal tax deposits. File a tax return Generally, electronic funds transfers are made using EFTPS. File a tax return If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. File a tax return Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. File a tax return EFTPS is a free service provided by the Department of Treasury. File a tax return Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. File a tax return   For more information on making federal tax deposits, see section 7 of Publication 51 (Circular A). File a tax return To get more information about EFTPS or to enroll in EFTPS, visit www. File a tax return eftps. File a tax return gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). File a tax return Additional information about EFTPS is also available in Publication 966. File a tax return Form W-2. File a tax return   By January 31, you must furnish each employee a Form W-2 showing total wages for the previous year and total federal income tax, social security tax, and Medicare tax withheld. File a tax return However, if an employee stops working for you and requests the form earlier, you must give it to the employee within 30 days of the later of the following dates. File a tax return The date the employee requests the form. File a tax return The date you make your final payment of wages to the employee. File a tax return Compensation paid to H-2A visa holders. File a tax return   Report compensation of $600 or more paid to foreign agricultural workers who entered the country on H-2A visas in box 1 of Form W-2. File a tax return Compensation paid to H-2A workers for agricultural labor performed in connection with this visa is not subject to social security and Medicare taxes, and therefore should not be reported as wages subject to social security tax (line 2), Medicare tax (line 4), or Additional Medicare Tax (line 6) on Form 943, and should not be reported as social security wages (box 3) or Medicare wages (box 5) on Form W-2. File a tax return   An employer is not required to withhold federal income tax from compensation it pays to an H-2A worker for agricultural labor performed in connection with this visa unless the worker asks for withholding and the employer agrees. File a tax return In this case, the worker must give the employer a completed Form W-4. File a tax return Federal income tax withheld should be reported on Form 943, line 8, and in box 2 of Form W-2. File a tax return   These reporting rules apply when the H-2A worker provides his or her taxpayer identification number (TIN) to the employer. File a tax return For the rules relating to backup withholding and reporting when the H-2A worker does not provide a TIN, see the Instructions for Form 1099-MISC and the Instructions for Form 945. File a tax return Trust fund recovery penalty. File a tax return   If you are responsible for withholding, accounting for, depositing, or paying federal withholding taxes and willfully fail to do so, you can be held liable for a penalty equal to the withheld tax not paid. File a tax return A responsible person can be an officer of a corporation, a partner, a sole proprietor, or an employee of any form of business. File a tax return A trustee or agent with authority over the funds of the business can also be held responsible for the penalty. File a tax return   Willfully means voluntarily, consciously, and intentionally. File a tax return Paying other expenses of the business instead of the taxes due is acting willfully. File a tax return Consequences of treating an employee as an independent contractor. File a tax return   If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker. File a tax return See Publication 15-A for more information. File a tax return Federal Unemployment (FUTA) Tax You must pay FUTA tax if you meet either of the following tests. File a tax return You paid cash wages of $20,000 or more to farmworkers in any calendar quarter during the current or preceding calendar year. File a tax return You employed 10 or more farmworkers for some part of at least 1 day during any 20 or more different calendar weeks during the current or preceding calendar year. File a tax return These rules do not apply to exempt services of your spouse, your parents, or your children under age 21. File a tax return See Family Employees , earlier. File a tax return Alien farmworkers. File a tax return   Wages paid to aliens admitted on a temporary basis to the United States to perform farmwork (also known as “H-2A visa workers”) are exempt from FUTA tax. File a tax return However, include your employment of these workers and the wages you paid them to determine whether you meet either of the above tests. File a tax return Commodity wages. File a tax return   Payments in kind for farm labor are not cash wages. File a tax return Do not count them to figure whether you are subject to FUTA tax or to figure how much tax you owe. File a tax return Tax rate and credit. File a tax return   The gross FUTA tax rate is 6. File a tax return 0% of the first $7,000 cash wages you pay to each employee during the year. File a tax return However, you are given a credit of up to 5. File a tax return 4% of the first $7,000 cash wages you pay to each employee for the state unemployment tax you pay. File a tax return If your state tax rate (experience rate) is less than 5. File a tax return 4%, you may still be allowed the full 5. File a tax return 4% credit. File a tax return   If you do not pay the state tax, you cannot take the credit. File a tax return If you are exempt from state unemployment tax for any reason, the full 6. File a tax return 0% rate applies. File a tax return See the Instructions for Form 940 for additional information. File a tax return More information. File a tax return   For more information on FUTA tax, see Publication 51 (Circular A). File a tax return Reporting and Paying FUTA Tax The FUTA tax is imposed on you as the employer. File a tax return It must not be collected or deducted from the wages of your employees. File a tax return Form 940. File a tax return   Report FUTA tax on Form 940. File a tax return The 2013 Form 940 is due January 31, 2014 (or February 10, 2014, if you timely deposited the full amount of your 2013 FUTA tax). File a tax return Deposits. File a tax return   If at the end of any calendar quarter you owe, but have not yet deposited, more than $500 in FUTA tax for the year, you must make a deposit by the end of the following month. File a tax return If the undeposited tax is $500 or less at the end of a quarter, you do not have to deposit it. File a tax return You can add it to the tax for the next quarter. File a tax return If the total undeposited tax is more than $500 at the end of the next quarter, a deposit will be required. File a tax return If the total undeposited tax at the end of the 4th quarter is $500 or less, you can either make a deposit or pay it with your return by the January 31, 2014, due date. File a tax return Electronic deposit requirement. File a tax return   You must use electronic funds transfer to make all federal tax deposits. File a tax return Generally, electronic funds transfers are made using EFTPS. File a tax return If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. File a tax return Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. File a tax return EFTPS is a free service provided by the Department of Treasury. File a tax return Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. File a tax return   For more information on making federal tax deposits, see section 7 of Publication 51 (Circular A). File a tax return To get more information about EFTPS or to enroll in EFTPS, visit www. File a tax return eftps. File a tax return gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). File a tax return Additional information about EFTPS is also available in Publication 966. 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