File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

Late Tax

1040x Amendment FormPenalties For Late Tax ReturnsHow To File An Ammended Tax ReturnAmendment ReturnAmend My TaxesFree E File ExtensionCan I File 2012 Taxes Without Filing 2011Fill Out 1040ez OnlineFree State Tax Return2011 Tax Return Form 1040Schedule C Ez FormE File ExtensionWhere Can I File 2012 TaxesIrs Tax Form 2011Filing Taxes Self Employed2012 Irs Tax Forms 1040aHrblock EfileFiling Form 1040xDo My Taxes Free OnlineFile 2009 Taxes Online For Free2010 Ez Tax FormHow To File State Taxes Free Online10 40 Ez OnlineFederal Income Tax Form 1040ezTax Forms 1040ez 2011Free State And Federal Tax ReturnsForm 1040nr-ez2012 Irs Form 1040ezDownload Irs Form 1040 2010How To File For 2010 TaxesMilitary Tax QuestionsTax Credits For StudentsFile 2011 Tax ReturnWhere To Get Tax Form 1040xHow Do I Amend A Tax Return For 2010File Taxes Online Free 2012E File 1040ez FreeFree Turbotax For StudentsAmended FormFederal Tax Form 1040x

Late Tax

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

Valuation of Assets

This page provides links to useful job aids, articles and white papers on various valuation topics. The items contained herein are offered for reference purposes only and do not represent or suggest official IRS positions. They may not be used or cited as authority for setting any legal position.

Discount for Lack of Marketability - Job Aid for IRS Valuation Professionals
(pdf, 389KB)


Page Last Reviewed or Updated: 13-Mar-2014

The Late Tax

Late tax 4. Late tax   Underpayment Penalty for 2013 Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: General RuleFarmers and fishermen. Late tax Higher income taxpayers. Late tax Minimum required for higher income taxpayers. Late tax Estate or trust payments of estimated tax. Late tax Lowering or eliminating the penalty. Late tax ExceptionsLess Than $1,000 Due No Tax Liability Last Year Figuring Your Required Annual Payment (Part I) Short Method for Figuring the Penalty (Part III) Regular Method for Figuring the Penalty (Part IV)Figuring Your Underpayment (Part IV, Section A) Worksheet for Form 2210, Part IV, Section B—Figuring the Penalty Annualized Income Installment Method (Schedule AI) Farmers and Fishermen Waiver of PenaltyFarmers and fishermen. Late tax Introduction If you did not pay enough tax, either through withholding or by making timely estimated tax payments, you will have underpaid your estimated tax and may have to pay a penalty. Late tax You may understand this chapter better if you can refer to a copy of your latest federal income tax return. Late tax No penalty. Late tax   Generally, you will not have to pay a penalty for 2013 if any of the following apply. Late tax The total of your withholding and timely estimated tax payments was at least as much as your 2012 tax. Late tax (See Special rules for certain individuals for higher income taxpayers and farmers and fishermen. Late tax ) The tax balance due on your 2013 return is no more than 10% of your total 2013 tax, and you paid all required estimated tax payments on time. Late tax Your total tax for 2013 (defined later) minus your withholding is less than $1,000. Late tax You did not have a tax liability for 2012. Late tax You did not have any withholding taxes and your current year tax (less any household employment taxes) is less than $1,000. Late tax IRS can figure the penalty for you. Late tax   If you think you owe the penalty, but you do not want to figure it yourself when you file your tax return, you may not have to. Late tax Generally, the IRS will figure the penalty for you and send you a bill. Late tax   You only need to figure your penalty in the following three situations. Late tax You are requesting a waiver of part, but not all, of the penalty. Late tax You are using the annualized income installment method to figure the penalty. Late tax You are treating the federal income tax withheld from your income as paid on the dates actually withheld. Late tax However, if these situations do not apply to you, and you think you can lower or eliminate your penalty, complete Form 2210 or Form 2210-F and attach it to your return. Late tax See Form 2210 , later. Late tax Topics - This chapter discusses: The general rule for the underpayment penalty, Special rules for certain individuals, Exceptions to the underpayment penalty, How to figure your underpayment and the amount of your penalty on Form 2210, and How to ask the IRS to waive the penalty. Late tax Useful Items - You may want to see: Form (and Instructions) 2210 Underpayment of Estimated Tax by Individuals, Estates, and Trusts 2210-F Underpayment of Estimated Tax by Farmers and Fishermen See chapter 5 for information about getting these forms. Late tax General Rule In general, you may owe a penalty for 2013 if the total of your withholding and timely estimated tax payments did not equal at least the smaller of: 90% of your 2013 tax, or 100% of your 2012 tax. Late tax (Your 2012 tax return must cover a 12-month period. Late tax ) Your 2013 tax, for this purpose, is defined under Total tax for 2013 , later. Late tax Special rules for certain individuals. Late tax   There are special rules for farmers and fishermen and certain higher income taxpayers. Late tax Farmers and fishermen. Late tax   If at least two-thirds of your gross income for 2012 or 2013 is from farming or fishing, substitute  662/3% for 90% in (1) above. Late tax   See Farmers and Fishermen , later. Late tax Higher income taxpayers. Late tax   If your AGI for 2012 was more than $150,000 ($75,000 if your 2013 filing status is married filing a separate return), substitute 110% for 100% in (2) under General Rule . Late tax This rule does not apply to farmers or fishermen. Late tax   For 2012, AGI is the amount shown on Form 1040, line 37; Form 1040A, line 21; and Form 1040EZ, line 4. Late tax Penalty figured separately for each period. Late tax   Because the penalty is figured separately for each payment period, you may owe a penalty for an earlier payment period even if you later paid enough to make up the underpayment. Late tax This is true even if you are due a refund when you file your income tax return. Late tax Example. Late tax You did not make estimated tax payments for 2013 because you thought you had enough tax withheld from your wages. Late tax Early in January 2014, you made an estimate of your total 2013 tax. Late tax Then you realized that your withholding was $2,000 less than the amount needed to avoid a penalty for underpayment of estimated tax. Late tax On January 10, you made an estimated tax payment of $3,000, which is the difference between your withholding and your estimate of your total tax. Late tax Your final return shows your total tax to be $50 less than your estimate, so you are due a refund. Late tax You do not owe a penalty for your payment due January 15, 2014. Late tax However, you may owe a penalty through January 10, 2014, the day you made the $3,000 payment, for your underpayments for the earlier payment periods. Late tax Minimum required each period. Late tax   You will owe a penalty for any 2013 payment period for which your estimated tax payment plus your withholding for the period and overpayments applied from previous periods was less than the smaller of: 22. Late tax 5% of your 2013 tax, or 25% of your 2012 tax. Late tax (Your 2012 tax return must cover a 12-month period. Late tax ) Minimum required for higher income taxpayers. Late tax   If you are subject to the rule for higher income taxpayers, discussed above, substitute 27. Late tax 5% for 25% in (2) under General Rule . Late tax When penalty is charged. Late tax   If you miss a payment or you paid less than the minimum required in a period, you may be charged an underpayment penalty from the date the amount was due to the date the payment is made. Late tax If a payment is mailed, the date of the U. Late tax S. Late tax postmark is considered the date of payment. Late tax   If a payment is made electronically, the date the payment is shown on your payment account (checking, savings, etc. Late tax ) is considered to be the date of payment. Late tax Estate or trust payments of estimated tax. Late tax   If you have estimated taxes credited to you from an estate or trust (Schedule K-1 (Form 1041)), treat the payment as made by you on January 15, 2014. Late tax Amended returns. Late tax    If you file an amended return by the due date of your original return, use the tax shown on your amended return to figure your required estimated tax payments. Late tax If you file an amended return after the due date of the original return, use the tax shown on the original return. Late tax   However, if you and your spouse file a joint return after the due date to replace separate returns you originally filed by the due date, use the tax shown on the joint return to figure your required estimated tax payments. Late tax This rule applies only if both original separate returns were filed on time. Late tax 2012 separate returns and 2013 joint return. Late tax    If you file a joint return with your spouse for 2013, but you filed separate returns for 2012, your 2012 tax is the total of the tax shown on your separate returns. Late tax You filed a separate return if you filed as single, head of household, or married filing separately. Late tax 2012 joint return and 2013 separate returns. Late tax    If you file a separate return for 2013, but you filed a joint return with your spouse for 2012, your 2012 tax is your share of the tax on the joint return. Late tax You are filing a separate return if you file as single, head of household, or married filing separately. Late tax   To figure your share of the taxes on a joint return, first figure the tax both you and your spouse would have paid had you filed separate returns for 2012 using the same filing status as for 2013. Late tax Then multiply the tax on the joint return by the following fraction. Late tax   The tax you would have paid had you filed a separate return   The total tax you and your spouse would have paid had you filed separate returns Example. Late tax Lisa and Paul filed a joint return for 2012 showing taxable income of $49,000 and a tax of $6,484. Late tax Of the $49,000 taxable income, $41,000 was Lisa's and the rest was Paul's. Late tax For 2013, they file married filing separately. Late tax Lisa figures her share of the tax on the 2012 joint return as follows. Late tax 2012 tax on $41,000 based on a separate return $ 6,286 2012 tax on $8,000 based on a  separate return 803 Total $ 7,089 Lisa's percentage of total tax  ($6,286 ÷ $ 7,089) 88. Late tax 67% Lisa's part of tax on joint return ($6,484 × 88. Late tax 67%) $ 5,749 Form 2210. Late tax   In most cases, you do not need to file Form 2210. Late tax The IRS will figure the penalty for you and send you a bill. Late tax If you want us to figure the penalty for you, leave the penalty line on your return blank. Late tax Do not file Form 2210. Late tax   To determine if you should file Form 2210, see Part II of Form 2210. Late tax If you decide to figure your penalty, complete Part I, Part II, and either Part III or Part IV of the form and the Penalty Worksheet in the Instructions for Form 2210. Late tax If you use Form 2210, you cannot file Form 1040EZ. Late tax   On Form 1040, enter the amount of your penalty on line 77. Late tax If you owe tax on line 76, add the penalty to your tax due and show your total payment on line 76. Late tax If you are due a refund, subtract the penalty from the overpayment and enter the result on line 73. Late tax   On Form 1040A, enter the amount of your penalty on line 46. Late tax If you owe tax on line 45, add the penalty to your tax due and show your total payment on line 45. Late tax If you are due a refund, subtract the penalty from the overpayment and enter the result on line 42. Late tax Lowering or eliminating the penalty. Late tax    You may be able to lower or eliminate your penalty if you file Form 2210. Late tax You must file Form 2210 with your return if any of the following applies. Late tax You request a waiver. Late tax See Waiver of Penalty , later. Late tax You use the annualized income installment method. Late tax See the explanation of this method under Annualized Income Installment Method (Schedule AI) . Late tax You use your actual withholding for each payment period for estimated tax purposes. Late tax See Actual withholding method under Figuring Your Underpayment (Part IV, Section A). Late tax You base any of your required installments on the tax shown on your 2012 return and you filed or are filing a joint return for either 2012 or 2013, but not for both years. Late tax Exceptions Generally, you do not have to pay an underpayment penalty if either: Your total tax is less than $1,000, or You had no tax liability last year. Late tax Less Than $1,000 Due You do not owe a penalty if the total tax shown on your return minus the amount you paid through withholding (including excess social security and tier 1 railroad retirement (RRTA) tax withholding) is less than $1,000. Late tax Total tax for 2013. Late tax   For 2013, your total tax on Form 1040 is the amount on line 61 reduced by the following. Late tax    Unreported social security and Medicare tax or RRTA tax from Forms 4137 or 8919 (line 57). Late tax Any tax included on line 58 for excess contributions to IRAs, Archer MSAs, Coverdell education savings accounts, and health savings accounts, or any tax on excess accumulations in qualified retirement plans. Late tax The following write-ins on line 60: Uncollected social security and Medicare tax or RRTA tax on tips or group-term life insurance, Tax on excess golden parachute payments, Excise tax on insider stock compensation from an expatriated corporation, Look-back interest due under section 167(g), Look-back interest due under section 460(b), Recapture of federal mortgage subsidy, and Additional tax on advance payments of health coverage tax credit when not eligible. Late tax Any refundable credit amounts listed on lines 64a, 65, 66, 70, and any credit from Form 8885 included on line 71. Late tax   If you filed Form 1040A, your 2013 total tax is the amount on line 35 reduced by any refundable credits on lines 38a, 39, and 40. Late tax   If you filed Form 1040EZ, your 2013 total tax is the amount on line 10 reduced by the amount on line 8a. Late tax Note. Late tax When figuring the amount on line 60, include household employment taxes only if you had federal income tax withheld from your income or you would owe the penalty even if you did not include those taxes. Late tax Paid through withholding. Late tax    For 2013, the amount you paid through withholding on Form 1040 is the amount on line 62 plus any excess social security or tier 1 RRTA tax withholding on line 69. Late tax Add to that any write-in amount on line 72 identified as “Form 8689. Late tax ” On Form 1040A, the amount you paid through withholding is the amount on line 36 plus any excess social security or tier 1 RRTA tax withholding included on line 41. Late tax On Form 1040EZ, it is the amount on line 7. Late tax No Tax Liability Last Year You do not owe a penalty if you had no tax liability last year and you were a U. Late tax S. Late tax citizen or resident for the whole year. Late tax For this rule to apply, your tax year must have included all 12 months of the year. Late tax You had no tax liability for 2012 if your total tax was zero or you were not required to file an income tax return. Late tax Example. Late tax Ray, who is single and 22 years old, was unemployed for a few months during 2012. Late tax He earned $6,700 in wages before he was laid off, and he received $1,400 in unemployment compensation afterwards. Late tax He had no other income. Late tax Even though he had gross income of $8,100, he did not have to pay income tax because his gross income was less than the filing requirement for a single person under age 65 ($9,750 for 2012). Late tax He filed a return only to have his withheld income tax refunded to him. Late tax In 2013, Ray began regular work as an independent contractor. Late tax Ray made no estimated tax payments in 2013. Late tax Even though he did owe tax at the end of the year, Ray does not owe the underpayment penalty for 2013 because he had no tax liability in 2012. Late tax Total tax for 2012. Late tax   For 2012, your total tax on Form 1040 is the amount on line 61 reduced by the following. Late tax    Unreported social security and Medicare tax or RRTA tax from Forms 4137 or 8919 (line 57). Late tax Any tax included on line 58 for excess contributions to IRAs, Archer MSAs, Coverdell education savings accounts, and health savings accounts, or any tax on excess accumulations in qualified retirement plans. Late tax The following write-ins on line 60: Uncollected social security and Medicare tax or RRTA tax on tips or group-term life insurance, Tax on excess golden parachute payments, Excise tax on insider stock compensation from an expatriated corporation, Look-back interest due under section 167(g), Look-back interest due under section 460(b), Recapture of federal mortgage subsidy, and Additional tax on advance payments of health coverage tax credit when not eligible. Late tax Any refundable credit amounts listed on lines 64a, 65, 66, 70, and credits from Forms 8801 (line 27 only), and 8885 included on line 71. Late tax   If you filed Form 1040A, your 2012 total tax is the amount on line 35 reduced by any refundable credits on lines 38a, 39, and 40. Late tax   If you filed Form 1040EZ, your 2012 total tax is the amount on line 11 reduced by the amount on line 8a. Late tax Figuring Your Required Annual Payment (Part I) Figure your required annual payment in Part I of Form 2210, following the line-by-line instructions. Late tax If you rounded the entries on your tax return to whole dollars, you can round on Form 2210. Late tax Example. Late tax The tax on Lori Lane's 2012 return was $12,400. Late tax Her AGI was not more than $150,000 for either 2012 or 2013. Late tax The tax on her 2013 return (Form 1040, line 55) is $13,044. Late tax Line 56 (self-employment tax) is $8,902. Late tax Her 2013 total tax is $21,946. Late tax For 2013, Lori had $1,600 income tax withheld and made four equal estimated tax payments ($1,000 each). Late tax 90% of her 2013 tax is $19,751. Late tax Because she paid less than her 2012 tax ($12,400) and less than 90% of her 2013 tax ($19,751), and does not meet an exception, Lori knows that she owes a penalty for underpayment of estimated tax. Late tax The IRS will figure the penalty for Lori, but she decides to figure it herself on Form 2210 and pay it with her taxes when she files her tax return. Late tax Lori's required annual payment is $12,400 (100% of 2012 tax) because that is smaller than 90% of her 2013 tax. Late tax Different 2012 filing status. Late tax    If you file a separate return for 2013, but you filed a joint return with your spouse for 2012, see 2012 joint return and 2013 separate returns , earlier, to figure the amount to enter as your 2012 tax on line 8 of Form 2210. Late tax Short Method for Figuring the Penalty (Part III) You may be able to use the short method in Part III of Form 2210 to figure your penalty for underpayment of estimated tax. Late tax If you qualify to use this method, it will result in the same penalty amount as the regular method. Late tax However, either the annualized income installment method or the actual withholding method, explained later, may result in a smaller penalty. Late tax You can use the short method only if you meet one of the following requirements. Late tax You made no estimated tax payments for 2013 (it does not matter whether you had income tax withholding). Late tax You paid the same amount of estimated tax on each of the four payment due dates. Late tax If you do not meet either requirement, figure your penalty using the regular method in Part IV of Form 2210 and the Penalty Worksheet in the instructions. Late tax Note. Late tax If any payment was made before the due date, you can use the short method, but the penalty may be less if you use the regular method. Late tax However, if the payment was only a few days early, the difference is likely to be small. Late tax You cannot use the short method if any of the following apply. Late tax You made any estimated tax payments late. Late tax You checked box C or D in Part II of Form 2210. Late tax You are filing Form 1040NR or 1040NR-EZ and you did not receive wages as an employee subject to U. Late tax S. Late tax income tax withholding. Late tax If you use the short method, you cannot use the annualized income installment method to figure your underpayment for each payment period. Late tax Also, you cannot use your actual withholding during each period to figure your payments for each period. Late tax These methods, which may give you a smaller penalty amount, are explained under Figuring Your Underpayment (Part IV, Section A). Late tax Complete Part III of Form 2210 following the line-by-line instructions in the Instructions for Form 2210. Late tax Regular Method for Figuring the Penalty (Part IV) You can use the regular method in Part IV of Form 2210 to figure your penalty for underpayment of estimated tax if you paid one or more estimated tax payments earlier than the due date. Late tax You must use the regular method in Part IV of Form 2210 to figure your penalty for underpayment of estimated tax if any of the following apply to you. Late tax You paid one or more estimated tax payments on a date after the due date. Late tax You paid at least one, but less than four, installments of estimated tax. Late tax You paid estimated tax payments in un- equal amounts. Late tax You use the annualized income installment method to figure your underpayment for each payment period. Late tax You use your actual withholding during each payment period to figure your payments. Late tax Under the regular method, figure your underpayment for each payment period in Section A, then figure your penalty using the Penalty Worksheet in the Instructions for Form 2210. Late tax Enter the results on line 27 of Section B. Late tax Figuring Your Underpayment (Part IV, Section A) Figure your underpayment of estimated tax for each payment period in Section A following the line-by-line instructions in the Instructions for Form 2210. Late tax Complete lines 20 through 26 of the first column before going to line 20 of the next column. Late tax Required installments—line 18. Late tax   Your required payment for each payment period (line 18) is usually one-fourth of your required annual payment (Part I, line 9). Late tax This method—the regular method—is the one to use if you received your income evenly throughout the year. Late tax   However, if you did not receive your income evenly throughout the year, you may be able to lower or eliminate your penalty by figuring your underpayment using the annualized income installment method. Late tax First complete Schedule AI (Form 2210), then enter the amounts from line 25 of that schedule on line 18 of Form 2210, Part IV. Late tax See Annualized Income Installment Method (Schedule AI), later. Late tax Payments made—line 19. Late tax   Enter in each column the total of: Your estimated tax paid after the due date for the previous column and by the due date shown at the top of the column, and One-fourth of your withholding. Late tax For special rules for figuring your payments, see Form 2210 instructions for line 19. Late tax   If you file Form 1040, your withholding is the amount on line 62, plus any excess social security or tier 1 RRTA tax withholding on line 69. Late tax If you file Form 1040A, your withholding is the amount on line 36 plus any excess social security or tier 1 RRTA tax withholding included in line 41. Late tax Actual withholding method. Late tax    Instead of using one-fourth of your withholding for each quarter, you can choose to use the amounts actually withheld by each due date. Late tax You can make this choice separately for the tax withheld from your wages and for all other withholding. Late tax This includes any excess social security and tier 1 RRTA tax withheld. Late tax   Using your actual withholding may result in a smaller penalty if most of your withholding occurred early in the year. Late tax   If you use your actual withholding, you must check box D in Form 2210, Part II. Late tax Then complete Form 2210 using the regular method (Part IV) and file it with your return. Late tax Worksheet for Form 2210, Part IV, Section B—Figuring the Penalty Figure the amount of your penalty for Section B using the Penalty Worksheet in the Form 2210 instructions. Late tax The penalty is imposed on each underpayment amount shown on Form 2210, Section A, line 25, for the number of days that it remained unpaid. Late tax For 2013, there are four rate periods—April 16 through June 30, July 1 through September 30, October 1 through December 31, and January 1, 2014 through April 15, 2014. Late tax A 3% rate applies to all four periods. Late tax Payments. Late tax    Before completing the Penalty Worksheet, it may be helpful to make a list of the payments you made and income tax withheld after the due date (or the last day payments could be made on time) for the earliest payment period an underpayment occurred. Late tax For example, if you had an underpayment for the first payment period, list your payments after April 15, 2013. Late tax You can use the table in the Form 2210 instructions to make your list. Late tax Follow those instructions for listing income tax withheld and payments made with your return. Late tax Use the list to determine when each underpayment was paid. Late tax   If you mail your estimated tax payments, use the date of the U. Late tax S. Late tax postmark as the date of payment. Late tax Line 1b. Late tax   Apply the payments listed to underpayment balance in the first column until it is fully paid. Late tax Apply payments in the order made. Late tax Figuring the penalty. Late tax   If an underpayment was paid in two or more payments on different dates, you must figure the penalty separately for each payment. Late tax On line 3 of the Penalty Worksheet enter the number of days between the due date (line 2) and the date of each payment on line 1b. Late tax On line 4 figure the penalty for the amount of each payment applied on line 1b or the amount remaining unpaid. Late tax If no payments are applied, figure the penalty on the amount on line 1a. Late tax Aid for counting days. Late tax    Table 4-1 provides a simple method for counting the number of days between a due date and a payment date. Late tax Find the number for the date the payment was due by going across to the column of the month the payment was due and moving down the column to the due date. Late tax In the same manner, find the number for the date the payment was made. Late tax Subtract the due date “number” from the payment date “number. Late tax ”   For example, if a payment was due on June 15 (61), but was not paid until September 1 (139), the payment was 78 (139 – 61) days late. Late tax Table 4-1. Late tax Calendar To Determine the Number of Days a Payment Is Late Instructions. Late tax Use this table with Form 2210 if you are completing Part IV, Section B. Late tax First, find the number for the payment due date by going across to the column of the month the payment was due and moving down the column to the due date. Late tax Then, in the same manner, find the number for the date the payment was made. Late tax Finally, subtract the due date number from the payment date number. Late tax The result is the number of days the payment is late. Late tax Example. Late tax The payment due date is June 15 (61). Late tax The payment was made on November 4 (203). Late tax The payment is 142 days late (203 – 61). Late tax Tax Year 2013 Day of 2013 2013 2013 2013 2013 2013 2013 2013 2013 2014 2014 2014 2014 Month April May June July Aug. Late tax Sept. Late tax Oct. Late tax Nov. Late tax Dec. Late tax Jan. Late tax Feb. Late tax Mar. Late tax Apr. Late tax 1   16 47 77 108 139 169 200 230 261 292 320 351 2   17 48 78 109 140 170 201 231 262 293 321 352 3   18 49 79 110 141 171 202 232 263 294 322 353 4   19 50 80 111 142 172 203 233 264 295 323 354 5   20 51 81 112 143 173 204 234 265 296 324 355 6   21 52 82 113 144 174 205 235 266 297 325 356 7   22 53 83 114 145 175 206 236 267 298 326 357 8   23 54 84 115 146 176 207 237 268 299 327 358 9   24 55 85 116 147 177 208 238 269 300 328 359 10   25 56 86 117 148 178 209 239 270 301 329 360 11   26 57 87 118 149 179 210 240 271 302 330 361 12   27 58 88 119 150 180 211 241 272 303 331 362 13   28 59 89 120 151 181 212 242 273 304 332 363 14   29 60 90 121 152 182 213 243 274 305 333 364 15 0 30 61 91 122 153 183 214 244 275 306 334 365 16 1 31 62 92 123 154 184 215 245 276 307 335   17 2 32 63 93 124 155 185 216 246 277 308 336   18 3 33 64 94 125 156 186 217 247 278 309 337   19 4 34 65 95 126 157 187 218 248 279 310 338   20 5 35 66 96 127 158 188 219 249 280 311 339   21 6 36 67 97 128 159 189 220 250 281 312 340   22 7 37 68 98 129 160 190 221 251 282 313 341   23 8 38 69 99 130 161 191 222 252 283 314 342   24 9 39 70 100 131 162 192 223 253 284 315 343   25 10 40 71 101 132 163 193 224 254 285 316 344   26 11 41 72 102 133 164 194 225 255 286 317 345   27 12 42 73 103 134 165 195 226 256 287 318 346   28 13 43 74 104 135 166 196 227 257 288 319 347   29 14 44 75 105 136 167 197 228 258 289   348   30 15 45 76 106 137 168 198 229 259 290   349   31   46   107 138   199   260 291   350   Annualized Income Installment Method (Schedule AI) If you did not receive your income evenly throughout the year (for example, your income from a shop you operated at a marina was much larger in the summer than it was during the rest of the year), you may be able to lower or eliminate your penalty by figuring your underpayment using the annualized income installment method. Late tax Under this method, your required installment (Part IV, line 18) for one or more payment periods may be less than one-fourth of your required annual payment. Late tax To figure your underpayment using this method, complete Form 2210, Schedule AI. Late tax Schedule AI annualizes your tax at the end of each payment period based on your income, deductions, and other items relating to events that occurred from the beginning of the tax year through the end of the period. Late tax If you use the annualized income installment method, you must check box C in Part II of Form 2210. Late tax Also, you must attach Form 2210 and Schedule AI to your return. Late tax If you use Schedule AI for any payment due date, you must use it for all payment due dates. Late tax Completing Schedule AI. Late tax   Follow the Form 2210 instructions to complete Schedule AI. Late tax For each period shown on Schedule AI, figure your income and deductions based on your method of accounting. Late tax If you use the cash method of accounting (used by most people), include all income actually or constructively received during the period and all deductions actually paid during the period. Late tax Note. Late tax Each period includes amounts from the previous period(s). Late tax Period (a) includes items for January 1 through March 31. Late tax Period (b) includes items for January 1 through May 31. Late tax Period (c) includes items for January 1 through August 31. Late tax Period (d) includes items for the entire year. Late tax Farmers and Fishermen If you are a farmer or fisherman, the following special rules for underpayment of estimated tax apply to you. Late tax The penalty for underpaying your 2013 estimated tax will not apply if you file your return and pay all the tax due by March 3, 2014. Late tax If you are a fiscal year taxpayer, the penalty will not apply if you file your return and pay the tax due by the first day of the third month after the end of your tax year. Late tax Any penalty you owe for underpaying your 2013 estimated tax will be figured from one payment due date, January 15, 2014. Late tax The underpayment penalty for 2013 is figured on the difference between the amount of 2013 withholding plus estimated tax paid by the due date and the smaller of: 662/3% (rather than 90%) of your 2013 tax, or 100% of the tax shown on your 2012 return. Late tax Even if these special rules apply to you, you will not owe the penalty if you meet either of the two conditions discussed under Exceptions . Late tax See Who Must Pay Estimated Tax in chapter 2 for the definition of a farmer or fisherman who is eligible for these special rules. Late tax Form 2210-F. Late tax   Use Form 2210-F to figure any underpayment penalty. Late tax Do not attach it to your return unless you check a box in Part I. Late tax However, if none of the boxes apply to you and you owe a penalty, you do not need to attach Form 2210-F. Late tax Enter the amount from line 16 on Form 1040, line 77 and add the penalty to any balance due on your return or subtract it from your refund. Late tax Keep your filled-in Form 2210-F for your records. Late tax    If none of the boxes on Form 2210-F apply to you and you owe a penalty, the IRS can figure your penalty and send you a bill. Late tax Waiver of Penalty The IRS can waive the penalty for underpayment if either of the following applies. Late tax You did not make a payment because of a casualty, disaster, or other unusual circumstance and it would be inequitable to impose the penalty. Late tax You retired (after reaching age 62) or became disabled in 2012 or 2013 and both the following requirements are met. Late tax You had a reasonable cause for not making the payment. Late tax Your underpayment was not due to willful neglect. Late tax How to request a waiver. Late tax   To request a waiver, see the Instructions for Form 2210. Late tax Farmers and fishermen. Late tax   To request a waiver, see the Instructions for Form 2210-F. Late tax Federally declared disaster. Late tax   Certain estimated tax payment deadlines for taxpayers who reside or have a business in a federally declared disaster area are postponed for a period during and after the disaster. Late tax During the processing of your tax return, the IRS automatically identifies taxpayers located in a covered disaster area (by county or parish) and applies the appropriate penalty relief. Late tax Do not file Form 2210 or 2210-F if your underpayment was due to a federally declared disaster. Late tax If you still owe a penalty after the automatic waiver is applied, we will send you a bill. Late tax   Individuals, estates, and trusts not in a covered disaster area but whose books, records, or tax professionals' offices are in a covered area are also entitled to relief. Late tax Also eligible are relief workers affiliated with a recognized government or charitable organization assisting in the relief activities in a covered disaster area. Late tax If you meet either of these eligibility requirements, you must call the IRS disaster hotline at 1-866-562-5227 and identify yourself as eligible for this relief. Late tax   Details on the applicable disaster postponement period can be found at IRS. Late tax gov. Late tax Enter Tax Relief in Disaster Situations. Late tax Select the federally declared disaster that affected you. Late tax    Worksheet 4-1. Late tax 2013 Form 2210, Schedule AI—Line 12 Qualified Dividends and Capital Gain Tax Worksheet Note. Late tax To figure the annualized entries for lines 2, 3, and 5 below, multiply the expected amount for the period by the  annualization amount on line 2 of Schedule AI for the same period. Late tax                   1. Late tax Enter line 11 of your Schedule AI, or line 3 from Worksheet 4-2 1. Late tax       2. Late tax Enter your annualized qualified dividends for the period 2. Late tax           3. Late tax Are you filing Schedule D?               □ Yes. Late tax Enter the smaller of your annualized amount from line 15 or line 16 of Schedule D. Late tax If either line 15 or line 16 is blank or a loss, enter -0-. Late tax 3. Late tax             □ No. Late tax Enter your annualized capital gain distributions from Form 1040, line 13             4. Late tax Add lines 2 and 3   4. Late tax           5. Late tax If you are claiming investment interest expense on Form 4952, enter your annualized amount from line 4g of that form. Late tax Otherwise, enter -0-   5. Late tax           6. Late tax Subtract line 5 from line 4. Late tax If zero or less, enter -0- 6. Late tax       7. Late tax Subtract line 6 from line 1. Late tax If zero or less, enter -0- 7. Late tax       8. Late tax Enter: $36,900 if single or married filing separately, $73,800 if married filing jointly or qualifying widow(er), $49,400 if head of household. Late tax 8. Late tax       9. Late tax Enter the smaller of line 1 or line 8 9. Late tax       10. Late tax Enter the smaller of line 7 or line 9 10. Late tax       11. Late tax Subtract line 10 from line 9. Late tax This amount is taxed at 0% 11. Late tax       12. Late tax Enter the smaller of line 1 or line 6 12. Late tax       13. Late tax Enter the amount from line 11 13. Late tax       14. Late tax Subtract line 13 from line 12 14. Late tax       15. Late tax Multiply line 14 by 15% (. Late tax 15) 15. Late tax   16. Late tax Figure the tax on the amount on line 7. Late tax If the amount on line 7 is less than $100,000, use the Tax Table in the 2013 Form 1040 instructions to figure this tax. Late tax If the amount on line 7 is $100,000 or more, use the Tax Computation Worksheet in the 2013 Form 1040 instructions 16. Late tax   17. Late tax Add lines 15 and 16 17. Late tax   18. Late tax Figure the tax on the amount on line 1. Late tax If the amount on line 1 is less than $100,000, use the Tax Table in the 2013 Form 1040 instructions to figure this tax. Late tax If the amount on line 1 is $100,000 or more, use the Tax Computation Worksheet in the 2013 Form 1040 instructions 18. Late tax   19. Late tax Tax on all taxable income. Late tax Enter the smaller of line 17 or line 18. Late tax Also enter this amount on line 12 of Schedule AI in the appropriate column. Late tax However, if you are using this worksheet to figure the tax on the amount on line 3 of Worksheet 4-2, enter the amount from line 19 on Worksheet 4-2, line 4 19. Late tax   Worksheet 4-2. Late tax 2013 Form 2210, Schedule AI—Line 12 Foreign Earned Income Tax Worksheet Before you begin:If Schedule AI, line 11, is zero for the period, do not complete this worksheet. Late tax             1. Late tax Enter the amount from line 11 of Schedule AI for the period 1. Late tax   2. Late tax Enter the annualized amount* of foreign earned income and housing amount excluded or deducted (from  Form 2555, lines 45 and 50, or Form 2555-EZ, line 18) in figuring the amount entered for the period on line 1  of Schedule AI 2. Late tax   3. Late tax Add lines 1 and 2 3. Late tax   4. Late tax Tax on the amount on line 3. Late tax Use the Tax Table, Tax Computation Worksheet, Form 8615**, Qualified Dividends and Capital Gain Tax Worksheet***, or Schedule D Tax Worksheet***, whichever applies. Late tax See the 2013 Instructions for Form 1040, line 44, to find out which tax computation method to use. Late tax (Note. Late tax You do not have to use the same method for each period on Schedule AI. Late tax ) 4. Late tax   5. Late tax Tax on the amount on line 2. Late tax If the amount on line 2 is less than $100,000, use the Tax Table in the 2013 Form 1040 instructions to figure this tax. Late tax If the amount on line 7 is $100,000 or more, use the Tax Computation Worksheet in the 2013 Form 1040 instructions 5. Late tax   6. Late tax Subtract line 5 from line 4. Late tax Enter the result here and on line 12 of Schedule AI. Late tax If zero or less,  enter -0- 6. Late tax             * To figure the annualized amount for line 2, multiply the exclusion or deduction for the period by the annualization amount on line 2 of Schedule AI for the same period. Late tax     ** If you use Form 8615 to figure the tax on line 4 above, enter the amount from line 3 above on line 4 of Form 8615. Late tax If the child's parent files Form 2555 or 2555-EZ, enter the amounts from lines 3 and 4 of the parent's Foreign Earned Income Tax Worksheet on lines 6 and 10, respectively, of Form 8615. Late tax Complete the rest of Form 8615 according to its instructions. Late tax Then complete lines 5 and 6 above. Late tax     *** Enter the amount from line 3 above on line 1 of the Qualified Dividends and Capital Gain Tax Worksheet (or Worksheet 4-1 in this chapter) or the Schedule D Tax Worksheet, whichever worksheet you use to figure the tax on line 4 above. Late tax Complete that worksheet through line 6 (line 10 if you use the Schedule D Tax Worksheet). Late tax Next, determine if you have a capital gain excess. Late tax     Figuring capital gain excess. Late tax To find out if you have a capital gain excess for the appropriate period, subtract line 11 of Schedule AI from line 6 of Worksheet 4-1 or your Qualified Dividends and Capital Gain Tax Worksheet (line 10 of your Schedule D Tax Worksheet). Late tax If the result is more than zero, that amount is your capital gain excess. Late tax     No capital gain excess. Late tax If you do not have a capital gain excess, complete the rest of Worksheet 4-1, Qualified Dividends and Capital Gain Tax Worksheet, or the Schedule D Tax Worksheet according to the worksheet's instructions. Late tax Then complete lines 5 and 6 above. Late tax     Capital gain excess. Late tax If you have a capital gain excess, complete a second Worksheet 4-1, Qualified Dividends and Capital Gain Tax Worksheet, or Schedule D Tax Worksheet (whichever applies) as instructed above but in its entirety and with the following additional modifications. Late tax Then complete lines 5 and 6 above. Late tax     Make the modifications below only for purposes of filling out Worksheet 4-2 above. Late tax     a. Late tax Reduce (but not below zero) the amount you otherwise would enter on line 3 of your Worksheet 4-1, line 3 of your Qualified Dividends and Capital Gain Tax Worksheet, or line 9 of your Schedule D Tax Worksheet by your capital gain excess. Late tax     b. Late tax Reduce (but not below zero) the amount you otherwise would enter on line 2 of your Worksheet 4-1, line 2 of your Qualified Dividends and Capital Gain Tax Worksheet, or line 6 of your Schedule D Tax Worksheet by any of your capital gain excess not used in (a) above. Late tax     c. Late tax Reduce (but not below zero) the amount on your Schedule D (Form 1040), line 18, by your capital gain excess. Late tax     d. Late tax Include your capital gain excess as a loss on line 16 of your Unrecaptured Section 1250 Gain Worksheet in the 2013 Instructions for Schedule D (Form 1040). Late tax   Prev  Up  Next   Home   More Online Publications