Page 74 - April 2016 Life In Naples Magazine
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FINANCE
INTERNATIONAL TAX FORMS
FOR WITHHOLDING
Cby Michael Wiener, E.A. to a person if that person realizes income, whether or not there
ertain withholding requirements apply that is an actual transfer of cash or other property. A payment is
a foreign person should be aware of when considered made to a person if it is made for that person’s benefit.
purchasing a United States Real Property Interest Additionally, a payment is also considered made to a person
(USRPI). A withholding agent is the person responsible if it is made to that person’s agent. A U.S. partnership should
for withholding on payments made to a foreign person. withhold when any distributions that include amounts subject to
However, certain exceptions apply if (1) a WA can reliably withholding are made. However, if a foreign partner’s distributive
associate the payment with documentation from a U.S. share of income subject to withholding is not actually distributed
person; (2) a reduced rate (including an exemption) to the U.S. partnership must withhold on the foreign partner’s
distributive share of the income on the earlier of the date that a
withholding may apply if a Schedule K-1, Form 1065 is provided or mailed to the partner or
WA can reliably associate the the due date for furnishing that schedule. A U.S. trust is required
payment with documentation to withhold on the amount includible in the gross income of a
from a beneficial owner that is foreign beneficiary to the extent the trust’s distributable net
a foreign person entitled to a income consists of amounts subject to withholding. In most
reduced rate of withholding). cases, you must withhold 30% from the gross amount paid to a
You are a U.S. or foreign foreign payee unless you can reliably associate the payment with
person, when you have control, valid documentation that establishes the following: (1) The payee
receipt, custody, disposal, or is a U.S. person; (2) The payee is a foreign person that is the
payment of an amount subject beneficial owner of the income and is entitled to a reduced rate of
to withholding. Under IRC withholding under the Code or an applicable income tax treaty.
section 1446, a WA may also be If you make a payment to joint payees: e.g. (holders of a joint
an individual, corporation, partnership, trust, association, account) you need to get documentation from each payee. If you
nominee, or any other entity, including any foreign make a payment to joint payees and cannot reliably associate the
intermediary, foreign partnership, or U.S. branch of certain payment with documentation from all of the payees, presume the
foreign banks and insurance companies. payment is made to an unidentified U.S. person. See Forms 1042;
The full tax is required to be withheld only once. As a 1042-S, 8805, 8288, 8288-A, W-8 BEN, W-8 BEN-E, and W-9.
WA, you are personally liable for any tax required to be
withheld. This liability is independent of the tax liability If you should have a topic that you would like me to
of the foreign person to whom the payment is made. If you discuss or if you should have a question, please feel free to
fail to withhold and the foreign payee fails to satisfy its U.S.
tax liability, then both you and the foreign person are liable call 239.403.4410 or e-mail me at
for tax as well as interest and any applicable penalties. In no mike@cctaxandaccounting.com.
case, should you withhold more than 30% of the payment
in escrow until the earlier of the date that the amount of An enrolled agent, licensed by the US Department
income from U.S. sources or the taxable amount can be of the Treasury to represent taxpayers before the IRS
determined or one year from the date the amount is placed for audits, collections and appeals. To attain the enrolled
in escrow at which time the withholding becomes due or, agent designation, candidates must demonstrate expertise in
to the extent that withholding is not required, the escrowed taxation, fulfill continuing education credits and adhere to a
amount must be paid to the payee.
Withholding is required at the time you make a payment stringent code of ethics.
of an amount subject to withholding. A payment is made
74 Life in Naples | April 2016
