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Taxact 2012 login in Publication 1212 - Introductory Material Table of Contents Future Developments Photographs of Missing Children IntroductionOrdering forms and publications. Taxact 2012 login in Tax questions. Taxact 2012 login in Useful Items - You may want to see: Future Developments For the latest information about developments related to Pub. Taxact 2012 login in 1212, such as legislation enacted after it was published, go to www. Taxact 2012 login in irs. Taxact 2012 login in gov/pub1212. Taxact 2012 login in Photographs of Missing Children The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Taxact 2012 login in Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Taxact 2012 login in You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Taxact 2012 login in Introduction This publication has two purposes. Taxact 2012 login in Its primary purpose is to help brokers and other middlemen identify publicly offered original issue discount (OID) debt instruments they may hold as nominees for the true owners, so they can file Forms 1099-OID or Forms 1099-INT as required. Taxact 2012 login in The other purpose of the publication is to help owners of publicly offered OID debt instruments determine how much OID to report on their income tax returns. Taxact 2012 login in The list of publicly offered OID debt instruments (OID list) is on the IRS website. Taxact 2012 login in The original issue discount tables, Sections I-A through III-F, are only available on the IRS website at www. Taxact 2012 login in irs. Taxact 2012 login in gov/pub1212 by clicking the link under Recent Developments. Taxact 2012 login in The tables are posted to the website in late November or early December of each year. Taxact 2012 login in The information on these lists come from the issuers of the debt instruments and from financial publications and is updated annually. Taxact 2012 login in (However, see Debt Instruments Not on the OID List, later. Taxact 2012 login in ) Brokers and other middlemen can rely on this list to determine, for information reporting purposes, whether a debt instrument was issued at a discount and the OID to be reported on information returns. Taxact 2012 login in However, because the information in the list has generally not been verified by the IRS as correct, the following tax matters are subject to change upon examination by the IRS. Taxact 2012 login in The OID reported by owners of a debt instrument on their income tax returns. Taxact 2012 login in The issuer's classification of an instrument as debt for federal income tax purposes. Taxact 2012 login in Instructions for issuers of OID debt instruments. Taxact 2012 login in   In general, issuers of publicly offered OID debt instruments must, within 30 days after the issue date, report information about the instruments to the IRS on Form 8281, Information Return for Publicly Offered Original Issue Discount Instruments. Taxact 2012 login in See the form instructions for more information. Taxact 2012 login in Issuers should report errors in and omissions from the list in writing at the following address:  IRS OID Publication Project SE:W:CAR:MP:T  1111 Constitution Ave. Taxact 2012 login in NW, IR-6526 Washington, D. Taxact 2012 login in C. Taxact 2012 login in 20224 REMIC and CDO information reporting requirements. Taxact 2012 login in   Brokers and other middlemen must follow special information reporting requirements for real estate mortgage investment conduits (REMIC) regular, and collateralized debt obligations (CDO) interests. Taxact 2012 login in The rules are explained in Publication 938, Real Estate Mortgage Investment Conduits (REMICs) Reporting Information (And Other Collateralized Debt Obligations (CDOs)). Taxact 2012 login in   Holders of interests in REMICs and CDOs should see chapter 1 of Publication 550 for information on REMICs and CDOs. Taxact 2012 login in Comments and suggestions. Taxact 2012 login in   We welcome your comments about this publication and your suggestions for future editions. Taxact 2012 login in   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Taxact 2012 login in NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Taxact 2012 login in Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Taxact 2012 login in   You can send your comments from www. Taxact 2012 login in irs. Taxact 2012 login in gov/formspubs/. Taxact 2012 login in Click on “More Information” and then on “Comment on Tax Forms and Publications. Taxact 2012 login in ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Taxact 2012 login in Ordering forms and publications. Taxact 2012 login in   Visit www. Taxact 2012 login in irs. Taxact 2012 login in gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Taxact 2012 login in Internal Revenue Service 1201 N. Taxact 2012 login in Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Taxact 2012 login in   If you have a tax question, check the information available on IRS. Taxact 2012 login in gov or call 1-800-829-1040. Taxact 2012 login in We cannot answer tax questions sent to any of the preceding addresses. Taxact 2012 login in Useful Items - You may want to see: Publication 515 Withholding of Tax on Nonresident Aliens and Foreign Entities 550 Investment Income and Expenses 938 Real Estate Mortgage Investment Conduits (REMICs) Reporting Information (And Other Collateralized Debt Obligations (CDOs)). Taxact 2012 login in Form (and Instructions) 1096 Annual Summary and Transmittal of U. Taxact 2012 login in S. Taxact 2012 login in Information Returns 1099-B Proceeds From Broker and Barter Exchange Transactions 1099-INT Interest Income 1099-OID Original Issue Discount 8949 Sales and Other Dispositions of Capital Assets Schedule B (Form 1040A or 1040) Interest and Ordinary Dividends Schedule D (Form 1040) Capital Gains and Losses W-8 Instructions for the Requester of Forms W-8BEN, W-8ECI, W-8EXP, and W-8IMY See How To Get Tax Help near the end of this publication for information about getting publications and forms. Taxact 2012 login in Prev  Up  Next   Home   More Online Publications
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Tax Relief for Victims of Severe Storms in Illinois

IL/KS/MO-2013-50, Nov. 27, 2013

ST. LOUIS — Victims of severe storms, straight-line winds and tornadoes that began on Nov. 17, 2013 in parts of Illinois may qualify for tax relief from the Internal Revenue Service.

Following recent disaster declarations for individual assistance issued by the Federal Emergency Management Agency, the IRS announced today that affected taxpayers in Illinois will receive tax relief, and other locations may be added in coming days based on additional damage assessments by FEMA.

The President has declared the counties of Champaign, Douglas, Fayette, Grundy, Jasper, La Salle, Massac, Pope, Tazewell, Vermilion, Wabash, Washington, Wayne, Will and Woodford a federal disaster area. Individuals who reside or have a business in these counties may qualify for tax relief.

The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after Nov. 17, and on or before Feb. 28, 2014, have been postponed to Feb. 28, 2014.

The IRS is also waiving the failure-to-deposit penalties for employment and excise tax deposits due on or after Nov. 17, and on or before Dec. 2, as long as the deposits are made by Dec. 2, 2013.

If an affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the telephone number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply. Penalties or interest will be abated only for taxpayers who have an original or extended filing, payment or deposit due date, including an extended filing or payment due date, that falls within the postponement period.

The IRS automatically identifies taxpayers located in the covered disaster area and applies automatic filing and payment relief. But affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 866-562-5227 to request this tax relief.

Covered Disaster Area

The counties listed above constitute a covered disaster area for purposes of Treas. Reg. § 301.7508A-1(d)(2) and are entitled to the relief detailed below.

Affected Taxpayers

Taxpayers considered to be affected taxpayers eligible for the postponement of time to file returns, pay taxes and perform other time-sensitive acts are those taxpayers listed in Treas. Reg. § 301.7508A-1(d)(1), and include individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline listed in Treas. Reg. § 301.7508A-1(c) are in the covered disaster area, are also entitled to relief. In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area and any individual visiting the covered disaster area who was killed or injured as a result of the disaster are entitled to relief.

Grant of Relief

Under section 7508A, the IRS gives affected taxpayers until Feb. 28, 2014, to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns), or to make tax payments, including estimated tax payments, that have either an original or extended due date occurring on or after Nov. 17 and on or before Feb. 28, 2014.

The IRS also gives affected taxpayers until Feb. 28, 2014, to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2007-56, 2007-34 I.R.B. 388 (Aug. 20, 2007), that are due to be performed on or after Nov. 17 and on or before Feb. 28, 2014.

This relief also includes the filing of Form 5500 series returns, in the manner described in section 8 of Rev. Proc. 2007-56. The relief described in section 17 of Rev. Proc. 2007-56, pertaining to like-kind exchanges of property, also applies to certain taxpayers who are not otherwise affected taxpayers and may include acts required to be performed before or after the period above.

The postponement of time to file and pay does not apply to information returns in the W-2, 1098, 1099 series, or to Forms 1042-S or 8027. Penalties for failure to timely file information returns can be waived under existing procedures for reasonable cause. Likewise, the postponement does not apply to employment and excise tax deposits. The IRS, however, will abate penalties for failure to make timely employment and excise tax deposits due on or after Nov. 17 and on or before Dec. 2 provided the taxpayer makes these deposits by Dec. 2.

Casualty Losses

Affected taxpayers in a federally declared disaster area have the option of claiming disaster-related casualty losses on their federal income tax return for either this year or last year. Claiming the loss on an original or amended return for last year will get the taxpayer an earlier refund, but waiting to claim the loss on this year’s return could result in a greater tax saving, depending on other income factors.

Individuals may deduct personal property losses that are not covered by insurance or other reimbursements. For details, see Form 4684 and its instructions.

Affected taxpayers claiming the disaster loss on last year’s return should put the Disaster Designation “Illinois/ Severe Storms, Straight-line Winds, and Tornadoes” at the top of the form so that the IRS can expedite the processing of the refund.

Other Relief

The IRS will waive the usual fees and expedite requests for copies of previously filed tax returns for affected taxpayers. Taxpayers should put the assigned Disaster Designation in red ink at the top of Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, as appropriate, and submit it to the IRS.

Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case.

Taxpayers may download forms and publications from the official IRS website, irs.gov, or order them by calling 800-TAX-FORM (800-829-3676). The IRS toll-free number for general tax questions is 800-829-1040.

Related Information

Disaster Assistance and Emergency Relief for Individuals and Businesses

Recent IRS Disaster Relief Announcements

Page Last Reviewed or Updated: 27-Nov-2013

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