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2011 Tax Form 1040ez

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2011 Tax Form 1040ez

2011 tax form 1040ez 2. 2011 tax form 1040ez   Tax Shelters and Other Reportable Transactions Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Abusive Tax SheltersRules To Curb Abusive Tax Shelters Investor Reporting Penalties Whether To Invest Introduction Investments that yield tax benefits are sometimes called “tax shelters. 2011 tax form 1040ez ” In some cases, Congress has concluded that the loss of revenue is an acceptable side effect of special tax provisions designed to encourage taxpayers to make certain types of investments. 2011 tax form 1040ez In many cases, however, losses from tax shelters produce little or no benefit to society, or the tax benefits are exaggerated beyond those intended. 2011 tax form 1040ez Those cases are called “abusive tax shelters. 2011 tax form 1040ez ” An investment that is considered a tax shelter is subject to restrictions, including the requirement that it be disclosed, as discussed later. 2011 tax form 1040ez Topics - This chapter discusses: Abusive Tax Shelters , Rules To Curb Abusive Tax Shelters , Investor Reporting , Penalties , and Whether To Invest . 2011 tax form 1040ez Useful Items - You may want to see: Publication 538 Accounting Periods and Methods 556 Examination of Returns, Appeal Rights, and Claims for Refund 561 Determining the Value of Donated Property 925 Passive Activity and At-Risk Rules Form (and Instructions) 8275 Disclosure Statement 8275-R Regulation Disclosure Statement 8283 Noncash Charitable Contributions 8886 Reportable Transaction Disclosure Statement See chapter 5, How To Get Tax Help , for information about getting these publications and forms. 2011 tax form 1040ez Abusive Tax Shelters Abusive tax shelters are marketing schemes involving artificial transactions with little or no economic reality. 2011 tax form 1040ez They often make use of unrealistic allocations, inflated appraisals, losses in connection with nonrecourse loans, mismatching of income and deductions, financing techniques that do not conform to standard commercial business practices, or mischaracterization of the substance of the transaction. 2011 tax form 1040ez Despite appearances to the contrary, the taxpayer generally risks little. 2011 tax form 1040ez Abusive tax shelters commonly involve package deals designed from the start to generate losses, deductions, or credits that will be far more than present or future investment. 2011 tax form 1040ez Or, they may promise investors from the start that future inflated appraisals will enable them, for example, to reap charitable contribution deductions based on those appraisals. 2011 tax form 1040ez (But see the appraisal requirements discussed under Rules To Curb Abusive Tax Shelters , later. 2011 tax form 1040ez ) They are commonly marketed in terms of the ratio of tax deductions allegedly available to each dollar invested. 2011 tax form 1040ez This ratio (or “write-off”) is frequently said to be several times greater than one-to-one. 2011 tax form 1040ez Because there are many abusive tax shelters, it is not possible to list all the factors you should consider in determining whether an offering is an abusive tax shelter. 2011 tax form 1040ez However, you should ask the following questions, which might provide a clue to the abusive nature of the plan. 2011 tax form 1040ez Do the tax benefits far outweigh the economic benefits? Is this a transaction you would seriously consider, apart from the tax benefits, if you hoped to make a profit? Do shelter assets really exist and, if so, are they insured for less than their purchase price? Is there a nontax justification for the way profits and losses are allocated to partners? Do the facts and supporting documents make economic sense? In that connection, are there sales and resales of the tax shelter property at ever increasing prices? Does the investment plan involve a gimmick, device, or sham to hide the economic reality of the transaction? Does the promoter offer to backdate documents after the close of the year? Are you instructed to backdate checks covering your investment? Is your debt a real debt or are you assured by the promoter that you will never have to pay it? Does this transaction involve laundering United States source income through foreign corporations incorporated in a tax haven and owned by United States shareholders? Rules To Curb Abusive Tax Shelters Congress has enacted a series of income tax laws designed to halt the growth of abusive tax shelters. 2011 tax form 1040ez These provisions include the following. 2011 tax form 1040ez Disclosure of reportable transactions. 2011 tax form 1040ez   You must disclose information for each reportable transaction in which you participate. 2011 tax form 1040ez See Reportable Transaction Disclosure Statement , later. 2011 tax form 1040ez   Material advisors with respect to any reportable transaction must disclose information about the transaction on Form 8918, Material Advisor Disclosure Statement. 2011 tax form 1040ez To determine whether you are a material advisor to a transaction, see the Instructions for Form 8918. 2011 tax form 1040ez   Material advisors will receive a reportable transaction number for the disclosed reportable transaction. 2011 tax form 1040ez They must provide this number to all persons to whom they acted as a material advisor. 2011 tax form 1040ez They must provide the number at the time the transaction is entered into. 2011 tax form 1040ez If they do not have the number at that time, they must provide it within 60 days from the date the number is mailed to them. 2011 tax form 1040ez For information on penalties for failure to disclose and failure to maintain lists, see Internal Revenue Code sections 6707, 6707A, and 6708. 2011 tax form 1040ez Requirement to maintain list. 2011 tax form 1040ez   Material advisors must maintain a list of persons to whom they provide material aid, assistance, or advice on any reportable transaction. 2011 tax form 1040ez The list must be available for inspection by the IRS, and the information required to be included on the list generally must be kept for 7 years. 2011 tax form 1040ez See Regulations section 301. 2011 tax form 1040ez 6112-1 for more information (including what information is required to be included on the list). 2011 tax form 1040ez Confidentiality privilege. 2011 tax form 1040ez   The confidentiality privilege between you and a federally authorized tax practitioner does not apply to written communications made after October 21, 2004, regarding the promotion of your direct or indirect participation in any tax shelter. 2011 tax form 1040ez Appraisal requirement for donated property. 2011 tax form 1040ez   If you claim a deduction of more than $5,000 for an item or group of similar items of donated property, you generally must get a qualified appraisal from a qualified appraiser and complete and attach section B of Form 8283 to your return. 2011 tax form 1040ez If you claim a deduction of more than $500,000 for the donated property, you generally must attach the qualified appraisal to your return. 2011 tax form 1040ez If you file electronically, see Form 8453, U. 2011 tax form 1040ez S. 2011 tax form 1040ez Individual Income Tax Transmittal for an IRS e-file Return, and its instructions. 2011 tax form 1040ez For more information about appraisals, including exceptions, see Publication 561. 2011 tax form 1040ez Passive activity loss and credit limits. 2011 tax form 1040ez   The passive activity loss and credit rules limit the amount of losses and credits that can be claimed from passive activities and limit the amount that can offset nonpassive income, such as certain portfolio income from investments. 2011 tax form 1040ez For more detailed information about determining and reporting income, losses, and credits from passive activities, see Publication 925. 2011 tax form 1040ez Interest on penalties. 2011 tax form 1040ez   If you are assessed an accuracy-related or civil fraud penalty (as discussed under Penalties , later), interest will be imposed on the amount of the penalty from the due date of the return (including any extensions) to the date you pay the penalty. 2011 tax form 1040ez Accounting method restriction. 2011 tax form 1040ez   Tax shelters generally cannot use the cash method of accounting. 2011 tax form 1040ez Uniform capitalization rules. 2011 tax form 1040ez   The uniform capitalization rules generally apply to producing property or acquiring it for resale. 2011 tax form 1040ez Under those rules, the direct cost and part of the indirect cost of the property must be capitalized or included in inventory. 2011 tax form 1040ez For more information, see Publication 538. 2011 tax form 1040ez Denial of deduction for interest on an underpayment due to a reportable transaction. 2011 tax form 1040ez   You cannot deduct any interest you paid or accrued on any part of an underpayment of tax due to an understatement arising from a reportable transaction (discussed later) if the relevant facts affecting the tax treatment of the item are not adequately disclosed. 2011 tax form 1040ez This rule applies to reportable transactions entered into in tax years beginning after October 22, 2004. 2011 tax form 1040ez Authority for Disallowance of Tax Benefits The IRS has published guidance concluding that the claimed tax benefits of various abusive tax shelters should be disallowed. 2011 tax form 1040ez The guidance is the conclusion of the IRS on how the law is applied to a particular set of facts. 2011 tax form 1040ez Guidance is published in the Internal Revenue Bulletin for taxpayers' information and also for use by IRS officials. 2011 tax form 1040ez So, if your return is examined and an abusive tax shelter is identified and challenged, published guidance dealing with that type of shelter, which disallows certain claimed tax shelter benefits, could serve as the basis for the examining official's challenge of the tax benefits you claimed. 2011 tax form 1040ez In such a case, the examiner will not compromise even if you or your representative believes you have authority for the positions taken on your tax return. 2011 tax form 1040ez The courts have generally been unsympathetic to taxpayers involved in abusive tax shelter schemes and have ruled in favor of the IRS in the majority of the cases in which these shelters have been challenged. 2011 tax form 1040ez Investor Reporting You may be required to file a reportable transaction disclosure statement. 2011 tax form 1040ez Reportable Transaction Disclosure Statement Use Form 8886 to disclose information for each reportable transaction (discussed later) in which you participated. 2011 tax form 1040ez Generally, you must attach Form 8886 to your return for each tax year in which you participated in the transaction. 2011 tax form 1040ez Under certain circumstances, a transaction must be disclosed within 90 days of the transaction being identified as a listed transaction or a transaction of interest (discussed later). 2011 tax form 1040ez In addition, for the first year Form 8886 is attached to your return, you must send a copy of the form to: Internal Revenue Service OTSA Mail Stop 4915 1973 North Rulon White Blvd. 2011 tax form 1040ez  Ogden, UT 84404 If you file your return electronically, the copy sent to OTSA must show exactly the same information, word for word, provided with the electronically filed return and it must be provided on the official IRS Form 8886 or an exact copy of the form. 2011 tax form 1040ez If you use a computer-generated or substitute Form 8886, it must be an exact copy of the official IRS form. 2011 tax form 1040ez If you fail to file Form 8886 as required or fail to include any required information on the form, you may have to pay a penalty. 2011 tax form 1040ez See Penalty for failure to disclose a reportable transaction , later under Penalties. 2011 tax form 1040ez The following discussion briefly describes reportable transactions. 2011 tax form 1040ez For more details, see the Instructions for Form 8886. 2011 tax form 1040ez Reportable transaction. 2011 tax form 1040ez   A reportable transaction is any of the following. 2011 tax form 1040ez A listed transaction. 2011 tax form 1040ez A confidential transaction. 2011 tax form 1040ez A transaction with contractual protection. 2011 tax form 1040ez A loss transaction. 2011 tax form 1040ez A transaction of interest entered into after November 1, 2006. 2011 tax form 1040ez Note. 2011 tax form 1040ez Transactions with a brief asset holding period were removed from the definition of reportable transaction for transactions entered into after August 2, 2007. 2011 tax form 1040ez Listed transaction. 2011 tax form 1040ez   A listed transaction is the same as, or substantially similar to, one of the types of transactions the IRS has determined to be a tax-avoidance transaction. 2011 tax form 1040ez These transactions have been identified in notices, regulations, and other published guidance issued by the IRS. 2011 tax form 1040ez For a list of existing guidance, see Notice 2009-59 in Internal Revenue Bulletin 2009-31, available at www. 2011 tax form 1040ez irs. 2011 tax form 1040ez gov/irb/2009-31_IRB/ar07. 2011 tax form 1040ez html. 2011 tax form 1040ez Confidential transaction. 2011 tax form 1040ez   A confidential transaction is offered to you under conditions of confidentiality and for which you have paid an advisor a minimum fee. 2011 tax form 1040ez A transaction is offered under conditions of confidentiality if the advisor who is paid the fee places a limit on your disclosure of the tax treatment or tax structure of the transaction and the limit protects the confidentiality of the advisor's tax strategies. 2011 tax form 1040ez The transaction is treated as confidential even if the conditions of confidentiality are not legally binding on you. 2011 tax form 1040ez Transaction with contractual protection. 2011 tax form 1040ez   Generally, a transaction with contractual protection is one in which you or a related party has the right to a full or partial refund of fees if all or part of the intended tax consequences of the transaction are not sustained, or a transaction for which the fees are contingent on your realizing the tax benefits from the transaction. 2011 tax form 1040ez For information on exceptions, see Revenue Procedure 2007-20 in Internal Revenue Bulletin 2007-7, available at www. 2011 tax form 1040ez irs. 2011 tax form 1040ez gov/irb/2007-07_IRB/ar15. 2011 tax form 1040ez html. 2011 tax form 1040ez Loss transaction. 2011 tax form 1040ez   For individuals, a loss transaction is one that results in a deductible loss if the gross amount of the loss is at least $2 million in a single tax year or $4 million in any combination of tax years. 2011 tax form 1040ez A loss from a foreign currency transaction under Internal Revenue Code section 988 is a loss transaction if the gross amount of the loss is at least $50,000 in a single tax year, whether or not the loss flows through from an S corporation or partnership. 2011 tax form 1040ez   Certain losses (such as losses from casualties, thefts, and condemnations) are excepted from this category and do not have to be reported on Form 8886. 2011 tax form 1040ez For information on other exceptions, see Revenue Procedure 2004-66 in Internal Revenue Bulletin 2004-50, as modified and superseded by Revenue Procedure 2013-11, (or future published guidance) available at www. 2011 tax form 1040ez irs. 2011 tax form 1040ez gov/irb/2004-50_IRB/ar11. 2011 tax form 1040ez html. 2011 tax form 1040ez Transaction of interest. 2011 tax form 1040ez   A transaction of interest is a transaction entered into after November 1, 2006, that is the same as, or substantially similar to, one of the types of transactions that the IRS has identified by notice, regulation, or other form of published guidance as a transaction of interest. 2011 tax form 1040ez The IRS has identified the following transactions of interest. 2011 tax form 1040ez “Toggling” grantor trusts as described in Notice 2007-73, 2007-36 I. 2011 tax form 1040ez R. 2011 tax form 1040ez B. 2011 tax form 1040ez 545, available at www. 2011 tax form 1040ez irs. 2011 tax form 1040ez gov/irb/2007-36_IRB/ar20. 2011 tax form 1040ez html. 2011 tax form 1040ez Certain transactions involving contributions of a successor member interest in a limited liability company as described in Notice 2007-72, 2007-36 I. 2011 tax form 1040ez R. 2011 tax form 1040ez B. 2011 tax form 1040ez 544, available at www. 2011 tax form 1040ez irs. 2011 tax form 1040ez gov/irb/2007-36_IRB/ar19. 2011 tax form 1040ez html. 2011 tax form 1040ez Certain transactions involving the sale or other disposition of all interests in a charitable remainder trust and claiming little or no taxable gain as described in Notice 2008-99, 2008-47 I. 2011 tax form 1040ez R. 2011 tax form 1040ez B. 2011 tax form 1040ez 1194, available at www. 2011 tax form 1040ez irs. 2011 tax form 1040ez gov/irb/2008-47_IRB/ar11. 2011 tax form 1040ez html. 2011 tax form 1040ez Certain transactions involving a U. 2011 tax form 1040ez S. 2011 tax form 1040ez taxpayer owning controlled foreign corporations (CFCs) that hold stock of a lower-tier CFC through a domestic partnership to avoid reporting income as described in Notice 2009-7, 2009-3 I. 2011 tax form 1040ez R. 2011 tax form 1040ez B. 2011 tax form 1040ez 312, available at www. 2011 tax form 1040ez irs. 2011 tax form 1040ez gov/irb/2009-03_IRB/ar10. 2011 tax form 1040ez html. 2011 tax form 1040ez   For updates to this list, go to www. 2011 tax form 1040ez irs. 2011 tax form 1040ez gov/Businesses/Corporations/Abusive-Tax-Shelters-and-Transactions. 2011 tax form 1040ez Penalties Investing in an abusive tax shelter may lead to substantial expenses. 2011 tax form 1040ez First, the promoter generally charges a substantial fee. 2011 tax form 1040ez If your return is examined by the IRS and a tax deficiency is determined, you will be faced with payment of more tax, interest on the underpayment, possibly a 20%, 30%, or even 40% accuracy-related penalty, or a 75% civil fraud penalty. 2011 tax form 1040ez You may also be subject to the penalty for failure to pay tax. 2011 tax form 1040ez These penalties are explained in the following paragraphs. 2011 tax form 1040ez Accuracy-related penalties. 2011 tax form 1040ez   An accuracy-related penalty of 20% can be imposed for underpayments of tax due to: Negligence or disregard of rules or regulations, Substantial understatement of tax, Substantial valuation misstatement (increased to 40% for gross valuation misstatement), Transaction lacking economic substance (increased to 40% for undisclosed transaction lacking economic substance), or Undisclosed foreign financial asset understatement (40% in all cases). 2011 tax form 1040ez Except for a transaction lacking economic substance, this penalty will not be imposed if you can show you had reasonable cause for any understatement of tax and that you acted in good faith. 2011 tax form 1040ez Your failure to disclose a reportable transaction is a strong indication that you failed to act in good faith. 2011 tax form 1040ez   If you are charged an accuracy-related penalty, interest will be imposed on the amount of the penalty from the due date of the return (including extensions) to the date you pay the penalty. 2011 tax form 1040ez   The 20% penalties do not apply to any underpayment attributable to a reportable transaction understatement subject to an accuracy-related penalty (discussed later). 2011 tax form 1040ez Negligence or disregard of rules or regulations. 2011 tax form 1040ez   The penalty for negligence or disregard of rules or regulations is imposed only on the part of the underpayment due to negligence or disregard of rules or regulations. 2011 tax form 1040ez The penalty will not be charged if you can show you had reasonable cause for understating your tax and that you acted in good faith. 2011 tax form 1040ez    Negligence includes any failure to make a reasonable attempt to comply with the provisions of the Internal Revenue Code. 2011 tax form 1040ez It also includes any failure to keep adequate books and records. 2011 tax form 1040ez A return position that has a reasonable basis is not negligence. 2011 tax form 1040ez   Disregard includes any careless, reckless, or intentional disregard of rules or regulations. 2011 tax form 1040ez   The penalty for disregard of rules and regulations can be avoided if all the following are true. 2011 tax form 1040ez You keep adequate books and records. 2011 tax form 1040ez You have a reasonable basis for your position on the tax issue. 2011 tax form 1040ez You make an adequate disclosure of your position. 2011 tax form 1040ez Use Form 8275 to make your disclosure and attach it to your return. 2011 tax form 1040ez To disclose a position contrary to a regulation, use Form 8275-R. 2011 tax form 1040ez Use Form 8886 to disclose a reportable transaction (discussed earlier). 2011 tax form 1040ez Substantial understatement of tax. 2011 tax form 1040ez   An understatement is considered to be substantial if it is more than the greater of: 10% of the tax required to be shown on the return, or $5,000. 2011 tax form 1040ez An “understatement” is the amount of tax required to be shown on your return for a tax year minus the amount of tax shown on the return, reduced by any rebates. 2011 tax form 1040ez The term “rebate” generally means a decrease in the tax shown on your original return as the result of your filing an amended return or claim for refund. 2011 tax form 1040ez   For items other than tax shelters, you can file Form 8275 or Form 8275-R to disclose items that could cause a substantial understatement of income tax. 2011 tax form 1040ez In that way, you can avoid the substantial understatement penalty if you have a reasonable basis for your position on the tax issue. 2011 tax form 1040ez Disclosure of the tax shelter item on a tax return does not reduce the amount of the understatement. 2011 tax form 1040ez   Also, the understatement penalty will not be imposed if you can show there was reasonable cause for the underpayment caused by the understatement and that you acted in good faith. 2011 tax form 1040ez An important factor in establishing reasonable cause and good faith will be the extent of your effort to determine your proper tax liability under the law. 2011 tax form 1040ez Substantial valuation misstatement. 2011 tax form 1040ez   In general, you are liable for a 20% penalty for a substantial valuation misstatement if all the following are true. 2011 tax form 1040ez The value or adjusted basis of any property claimed on the return is 150% or more of the correct amount. 2011 tax form 1040ez You underpaid your tax by more than $5,000 because of the misstatement. 2011 tax form 1040ez You cannot establish that you had reasonable cause for the underpayment and that you acted in good faith. 2011 tax form 1040ez   You may be assessed a penalty of 40% for a gross valuation misstatement. 2011 tax form 1040ez If you misstate the value or the adjusted basis of property by 200% or more of the amount determined to be correct, you will be assessed a penalty of 40%, instead of 20%, of the amount you underpaid because of the gross valuation misstatement. 2011 tax form 1040ez The penalty rate is also 40% if the property's correct value or adjusted basis is zero. 2011 tax form 1040ez Transaction lacking economic substance. 2011 tax form 1040ez   The economic substance doctrine only applies to an individual that entered into a transaction in connection with a trade or business or an activity engaged in for the production of income. 2011 tax form 1040ez For transactions entered into after March 30, 2010, a transaction has economic substance for you as an individual taxpayer only if: The transaction changes your economic position in a meaningful way (apart from federal income tax effects), or You have a substantial purpose (apart from federal income tax effects) for entering into the transaction. 2011 tax form 1040ez   For purposes of determining whether economic substance exists, a transaction's profit potential will only be taken into account if the present value of the reasonably expected pre-tax profit from the transaction is substantial compared to the present value of the expected net tax benefits that would be allowed if the transaction were respected. 2011 tax form 1040ez   If any part of your underpayment is due to any disallowance of claimed tax benefits by reason of a transaction lacking economic substance or failing to meet the requirements of any similar rule of law, that part of your underpayment will be subject to the 20% accuracy-related penalty even if you had a reasonable cause and acted in good faith concerning that part. 2011 tax form 1040ez   Additionally, the penalty increases to 40% if you do not adequately disclose on your return or in a statement attached to your return the relevant facts affecting the tax treatment of a transaction that lacks economic substance. 2011 tax form 1040ez Relevant facts include any facts affecting the tax treatment of the transaction. 2011 tax form 1040ez    Any excessive amount of an erroneous claim for an income tax refund or credit (other than a refund or credit related to the earned income credit) that results from a transaction found to be lacking economic substance will not be treated as having a reasonable basis and could be subject to a 20% penalty. 2011 tax form 1040ez Undisclosed foreign financial asset understatement. 2011 tax form 1040ez   For tax years beginning after March 18, 2010, you may be liable for a 40% penalty for an understatement of your tax liability due to an undisclosed foreign financial asset. 2011 tax form 1040ez An undisclosed foreign financial asset is any asset for which an information return, required to be provided under Internal Revenue Code section 6038, 6038B, 6038D, 6046A, or 6048 for any taxable year, is not provided. 2011 tax form 1040ez The penalty applies to any part of an underpayment related to the following undisclosed foreign financial assets. 2011 tax form 1040ez Any foreign business you control, reportable on Form 5471, Information Return of U. 2011 tax form 1040ez S. 2011 tax form 1040ez Persons With Respect To Certain Foreign Corporations, or Form 8865, Return of U. 2011 tax form 1040ez S. 2011 tax form 1040ez Persons With Respect to Certain Foreign Partnerships. 2011 tax form 1040ez Certain transfers of property to a foreign corporation or partnership, reportable on Form 926, Return by a U. 2011 tax form 1040ez S. 2011 tax form 1040ez Transferor of Property to a Foreign Corporation, or certain distributions to a foreign person, reportable on Form 8865. 2011 tax form 1040ez Your ownership interest in certain foreign financial assets, temporarily reportable on Form 8275 or 8275-R. 2011 tax form 1040ez    Instead of, or in addition to, Form 8275 or 8275-R, you may have to file Form 8938, Statement of Specified Foreign Financial Assets, with your tax return. 2011 tax form 1040ez See the Instructions for Form 8938 for details. 2011 tax form 1040ez    Your acquisition, disposition, or substantial change in ownership interest in a foreign partnership, reportable on Form 8865. 2011 tax form 1040ez Creation or transfer of money or property to certain foreign trusts, reportable on Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. 2011 tax form 1040ez Penalty for incorrect appraisals. 2011 tax form 1040ez   The person who prepares an appraisal of the value of property may have to pay a penalty if: He or she knows, or reasonably should have known, that the appraisal would be used in connection with a return or claim for refund; and The claimed value of the property on a return or claim for refund based on that appraisal results in a substantial valuation misstatement or a gross valuation misstatement as discussed earlier. 2011 tax form 1040ez For details on the penalty amount and exceptions, see Publication 561. 2011 tax form 1040ez Penalty for failure to disclose a reportable transaction. 2011 tax form 1040ez   If you fail to include any required information regarding a reportable transaction (discussed earlier) on a return or statement, you may have to pay a penalty of 75% of the decrease in tax shown on your return as a result of such transaction (or that would have resulted if the transaction were respected for federal tax purposes). 2011 tax form 1040ez For an individual, the minimum penalty is $5,000 and the maximum is $10,000 (or $100,000 for a listed transaction). 2011 tax form 1040ez This penalty is in addition to any other penalty that may be imposed. 2011 tax form 1040ez   The IRS may rescind or abate the penalty for failing to disclose a reportable transaction under certain limited circumstances but cannot rescind the penalty for failing to disclose a listed transaction. 2011 tax form 1040ez For information on rescission, see Revenue Procedure 2007-21 in Internal Revenue Bulletin 2007-9 available at www. 2011 tax form 1040ez irs. 2011 tax form 1040ez gov/irb/2007-09_IRB/ar12. 2011 tax form 1040ez html. 2011 tax form 1040ez Accuracy-related penalty for a reportable transaction understatement. 2011 tax form 1040ez   If you have a reportable transaction understatement, you may have to pay a penalty equal to 20% of the amount of that understatement. 2011 tax form 1040ez This applies to any item due to a listed transaction or other reportable transaction with a significant purpose of avoiding or evading federal income tax. 2011 tax form 1040ez The penalty is 30% rather than 20% for the part of any reportable transaction understatement if the transaction was not properly disclosed. 2011 tax form 1040ez You may not have to pay the 20% penalty if you meet the strengthened reasonable cause and good faith exception. 2011 tax form 1040ez The reasonable cause and good faith exception does not apply to any part of a reportable transaction understatement attributable to one or more transactions that lack economic substance. 2011 tax form 1040ez   This penalty does not apply to the part of an understatement on which the fraud penalty, gross valuation misstatement penalty, or penalty for nondisclosure of noneconomic substance transactions is imposed. 2011 tax form 1040ez Civil fraud penalty. 2011 tax form 1040ez   If any underpayment of tax on your return is due to fraud, a penalty of 75% of the underpayment will be added to your tax. 2011 tax form 1040ez Joint return. 2011 tax form 1040ez   The fraud penalty on a joint return applies to a spouse only if some part of the underpayment is due to the fraud of that spouse. 2011 tax form 1040ez Failure to pay tax. 2011 tax form 1040ez   If a deficiency is assessed and is not paid within 10 days of the demand for payment, an investor can be penalized with up to a 25% addition to tax if the failure to pay continues. 2011 tax form 1040ez Whether To Invest In light of the adverse tax consequences and the substantial amount of penalties and interest that will result if the claimed tax benefits are disallowed, you should consider tax shelter investments carefully and seek competent legal and financial advice. 2011 tax form 1040ez Prev  Up  Next   Home   More Online Publications
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Contact My Local Office in Iowa

Face-to-face Tax Help

IRS Taxpayer Assistance Centers (TACs) are your source for personal tax help when you believe your tax issue can only be handled face-to-face. No appointment is necessary.

Keep in mind, many questions can be resolved online without waiting in line. Through IRS.gov you can:
• Set up a payment plan.
• Get a transcript of your tax return.
• Make a payment.
• Check on your refund.
• Find answers to many of your tax questions.

We are now referring all requests for tax return preparation services to other available resources. You can take advantage of free tax preparation through Free File, Free File Fillable Forms or through a volunteer site in your community. To find the nearest volunteer site location or to get more information about Free File, go to the top of the page and enter “Free Tax Help” in the Search box.

If you have a tax account issues and feel that it requires talking with someone face-to-face, visit your local TAC.

Caution:  Many of our offices are located in Federal Office Buildings. These buildings may not allow visitors to bring in cell phones with camera capabilities.

Multilingual assistance is available in every office. Hours of operation are subject to change.

Before visiting your local office click on "Services Provided" in the chart below to see what services are available. Services are limited and not all services are available at every TAC office and may vary from site to site. You can get these services on a walk-in basis.

City Street Address Days/Hours of Service Telephone*
Cedar Rapids 425 Second St. SE
Cedar Rapids, IA 52401

Monday - Friday 8:30 a.m.-4:30 p.m.
(Closed for lunch 12:00 noon - 1:00 p.m.)

 

Services Provided

(319) 364-5327 
Davenport  101 W. 2nd St.
Davenport, IA 52801

Monday-Wednesday 8:30 a.m.-4:30 p.m.
(Closed for lunch from 12:00 noon - 1:00 p.m.)

 

**This office will be open 10:30 a.m. - 4:30 p.m. on Mondays**

 

**This office will be open normal hours on Tuesdays**

 

**This office will be open 8:30 a.m. - 2:00 p.m. on Wednesdays**

 

**This office will be closed Thursdays and Fridays until further notice**

 

Services Provided

(563) 326-6052 
Des Moines  210 Walnut St.
Des Moines, IA 50309 

Monday-Friday 8:30 a.m.-4:30 p.m.
(Closed for lunch from 12:00 noon - 1:00 p.m.)

 

Services Provided

(515) 564-6618 
Fort Dodge**  1728 Central Ave.
Fort Dodge, IA 50501 

January - April: This office will be open the 1st and 3rd Monday of each month.

May - December: This office will be open only the 1st Monday of each month..

Monday 10:00 a.m.-3:30 p.m.
(Closed for lunch 12:00 noon - 1:00 p.m.)

 

**Whenever a Federal Holiday falls on the Monday we are scheduled to be open, we will be open on Tuesday of that week.
 

Services Provided

(515) 576-1744 
Sioux City  3539 Southern Hills Drive
Sioux City, IA
51106 

Monday-Friday 8:30 a.m.-4:30 p.m.
(Closed for lunch 11:30 a.m. - 12:30 p.m.)

 

Services Provided

(712) 274-8019 
Waterloo  201 Tower Park Dr.
Suite 102
Waterloo, IA 50701 

Monday - Friday 8:30 a.m.- 4:30 p.m.
(Closed for lunch 12:00 noon - 1:00 p.m.) 

 

Services Provided

(319) 234-5719 
Waterloo/remote
Taxpayer Assistance
available at Eastside Ministerial Alliance
205 Adams Street,
Suite 1
Waterloo, IA 50703

Monday-Thursday-9:30 a.m.-4:00 p.m.; 
Friday-9:00 a.m.-2:00 p.m.
(Closed for lunch 12:00 noon - 1:00 p.m.)
 

Services Provided

 

* Note: The phone numbers in the chart above are not toll-free for all locations. When you call, you will reach a recorded business message with information about office hours, locations and services provided in that office. If face-to-face assistance is not a priority for you, you may also get help with IRS letters or resolve tax account issues by phone, toll free at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses). For information on where to file your tax return please see Where to File Addresses.

The Taxpayer Advocate Service: Call (515) 564-6888 in Des Moines or 1-877-777-4778 elsewhere, or see  Publication 1546, The Taxpayer Advocate Service of the IRS. For further information, see  Tax Topic 104.

Partnerships

IRS and organizations all over the country are partnering to assist taxpayers. Through these partnerships, organizations are also achieving their own goals. These mutually beneficial partnerships are strengthening outreach efforts and bringing education and assistance to millions.

For more information about these programs for individuals and families, contact the Stakeholder Partnerships, Education and Communication Office at:

Internal Revenue Service
210 Walnut St. Stop 4312
Des Moines, IA 50309

For more information about these programs for businesses, your local Stakeholder Liaison office establishes relationships with organizations representing small business and self-employed taxpayers. They provide information about the policies, practices and procedures the IRS uses to ensure compliance with the tax laws. To establish a relationship with us, use this list to find a contact in your state:

Stakeholder Liaison (SL) Phone Numbers for Organizations Representing Small Businesses and Self-employed Taxpayers.

Page Last Reviewed or Updated: 28-Mar-2014

The 2011 Tax Form 1040ez

2011 tax form 1040ez 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. 2011 tax form 1040ez S. 2011 tax form 1040ez Taxpayer Identification NumbersUnexpected payment. 2011 tax form 1040ez Depositing Withheld TaxesWhen Deposits Are Required Adjustment for Overwithholding Returns RequiredJoint owners. 2011 tax form 1040ez Electronic reporting. 2011 tax form 1040ez Partnership Withholding on Effectively Connected IncomeWho Must Withhold Foreign Partner Publicly Traded Partnerships U. 2011 tax form 1040ez S. 2011 tax form 1040ez Real Property InterestForeign corporations. 2011 tax form 1040ez Domestic corporations. 2011 tax form 1040ez U. 2011 tax form 1040ez S. 2011 tax form 1040ez real property holding corporations. 2011 tax form 1040ez Partnerships. 2011 tax form 1040ez Trusts and estates. 2011 tax form 1040ez Domestically controlled QIE. 2011 tax form 1040ez Late filing of certifications or notices. 2011 tax form 1040ez Certifications. 2011 tax form 1040ez Liability of agent or qualified substitute. 2011 tax form 1040ez Reporting and Paying the Tax Withholding Certificates Tax Treaty TablesTable 1 Table 2 Table 3 How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). 2011 tax form 1040ez Withholding of Tax In most cases, a foreign person is subject to U. 2011 tax form 1040ez S. 2011 tax form 1040ez tax on its U. 2011 tax form 1040ez S. 2011 tax form 1040ez source income. 2011 tax form 1040ez Most types of U. 2011 tax form 1040ez S. 2011 tax form 1040ez source income received by a foreign person are subject to U. 2011 tax form 1040ez S. 2011 tax form 1040ez tax of 30%. 2011 tax form 1040ez 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. 2011 tax form 1040ez The tax is generally withheld (NRA withholding) from the payment made to the foreign person. 2011 tax form 1040ez 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. 2011 tax form 1040ez In most cases, NRA withholding describes the withholding regime that requires withholding on a payment of U. 2011 tax form 1040ez S. 2011 tax form 1040ez source income. 2011 tax form 1040ez Payments to foreign persons, including nonresident alien individuals, foreign entities, and governments, may be subject to NRA withholding. 2011 tax form 1040ez NRA withholding does not include withholding under section 1445 of the Code (see U. 2011 tax form 1040ez S. 2011 tax form 1040ez Real Property Interest, later) or under section 1446 of the Code (see Partnership Withholding on Effectively Connected Income , later). 2011 tax form 1040ez A withholding agent (defined next) is the person responsible for withholding on payments made to a foreign person. 2011 tax form 1040ez However, a withholding agent that can reliably associate the payment with documentation (discussed later) from a U. 2011 tax form 1040ez S. 2011 tax form 1040ez person is not required to withhold. 2011 tax form 1040ez 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. 2011 tax form 1040ez Withholding Agent You are a withholding agent if you are a U. 2011 tax form 1040ez S. 2011 tax form 1040ez 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. 2011 tax form 1040ez 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. 2011 tax form 1040ez S. 2011 tax form 1040ez branch of certain foreign banks and insurance companies. 2011 tax form 1040ez 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. 2011 tax form 1040ez Although several persons may be withholding agents for a single payment, the full tax is required to be withheld only once. 2011 tax form 1040ez In most cases, the U. 2011 tax form 1040ez S. 2011 tax form 1040ez person who pays an amount subject to NRA withholding is the person responsible for withholding. 2011 tax form 1040ez However, other persons may be required to withhold. 2011 tax form 1040ez 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. 2011 tax form 1040ez 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. 2011 tax form 1040ez Liability for tax. 2011 tax form 1040ez   As a withholding agent, you are personally liable for any tax required to be withheld. 2011 tax form 1040ez This liability is independent of the tax liability of the foreign person to whom the payment is made. 2011 tax form 1040ez If you fail to withhold and the foreign payee fails to satisfy its U. 2011 tax form 1040ez S. 2011 tax form 1040ez tax liability, then both you and the foreign person are liable for tax, as well as interest and any applicable penalties. 2011 tax form 1040ez   The applicable tax will be collected only once. 2011 tax form 1040ez If the foreign person satisfies its U. 2011 tax form 1040ez S. 2011 tax form 1040ez tax liability, you are not liable for the tax but remain liable for any interest and penalties for failure to withhold. 2011 tax form 1040ez Determination of amount to withhold. 2011 tax form 1040ez   You must withhold on the gross amount subject to NRA withholding. 2011 tax form 1040ez You cannot reduce the gross amount by any deductions. 2011 tax form 1040ez However, see Scholarships and Fellowship Grants and Pay for Personal Services Performed , later, for when a deduction for a personal exemption may be allowed. 2011 tax form 1040ez   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. 2011 tax form 1040ez In no case, however, should you withhold more than 30% of the total amount paid. 2011 tax form 1040ez Or, you may make a reasonable estimate of the amount from U. 2011 tax form 1040ez S. 2011 tax form 1040ez sources and put a corresponding part of the amount due in escrow until the amount from U. 2011 tax form 1040ez S. 2011 tax form 1040ez sources can be determined, at which time withholding becomes due. 2011 tax form 1040ez When to withhold. 2011 tax form 1040ez   Withholding is required at the time you make a payment of an amount subject to withholding. 2011 tax form 1040ez 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. 2011 tax form 1040ez A payment is considered made to a person if it is paid for that person's benefit. 2011 tax form 1040ez 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. 2011 tax form 1040ez A payment also is considered made to a person if it is made to that person's agent. 2011 tax form 1040ez   A U. 2011 tax form 1040ez S. 2011 tax form 1040ez partnership should withhold when any distributions that include amounts subject to withholding are made. 2011 tax form 1040ez However, if a foreign partner's distributive share of income subject to withholding is not actually distributed, the U. 2011 tax form 1040ez S. 2011 tax form 1040ez 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. 2011 tax form 1040ez If the distributable amount consists of effectively connected income, see Partnership Withholding on Effectively Connected Income , later. 2011 tax form 1040ez A U. 2011 tax form 1040ez S. 2011 tax form 1040ez 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. 2011 tax form 1040ez To the extent a U. 2011 tax form 1040ez S. 2011 tax form 1040ez 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. 2011 tax form 1040ez 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. 2011 tax form 1040ez (See Returns Required , later. 2011 tax form 1040ez ) 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. 2011 tax form 1040ez Form 1099 reporting and backup withholding. 2011 tax form 1040ez    You also may be responsible as a payer for reporting on Form 1099 payments made to a U. 2011 tax form 1040ez S. 2011 tax form 1040ez person. 2011 tax form 1040ez You must withhold 28% (backup withholding rate) from a reportable payment made to a U. 2011 tax form 1040ez S. 2011 tax form 1040ez person that is subject to Form 1099 reporting if any of the following apply. 2011 tax form 1040ez The U. 2011 tax form 1040ez S. 2011 tax form 1040ez person has not provided its taxpayer identification number (TIN) in the manner required. 2011 tax form 1040ez The IRS notifies you that the TIN furnished by the payee is incorrect. 2011 tax form 1040ez There has been a notified payee underreporting. 2011 tax form 1040ez There has been a payee certification failure. 2011 tax form 1040ez In most cases, a TIN must be provided by a U. 2011 tax form 1040ez S. 2011 tax form 1040ez non-exempt recipient on Form W-9, Request for Taxpayer Identification Number and Certification. 2011 tax form 1040ez A payer files a tax return on Form 945, Annual Return of Withheld Federal Income Tax, for backup withholding. 2011 tax form 1040ez 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. 2011 tax form 1040ez S. 2011 tax form 1040ez person. 2011 tax form 1040ez For example, you are required to report income paid to a foreign intermediary or flow-through entity that collects for a U. 2011 tax form 1040ez S. 2011 tax form 1040ez person subject to Form 1099 reporting. 2011 tax form 1040ez See Identifying the Payee , later, for more information. 2011 tax form 1040ez Also see Section S. 2011 tax form 1040ez 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. 2011 tax form 1040ez 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. 2011 tax form 1040ez Wages paid to employees. 2011 tax form 1040ez   If you are the employer of a nonresident alien, you generally must withhold taxes at graduated rates. 2011 tax form 1040ez See Pay for Personal Services Performed , later. 2011 tax form 1040ez Effectively connected income by partnerships. 2011 tax form 1040ez   A withholding agent that is a partnership (whether U. 2011 tax form 1040ez S. 2011 tax form 1040ez or foreign) is also responsible for withholding on its income effectively connected with a U. 2011 tax form 1040ez S. 2011 tax form 1040ez trade or business that is allocable to foreign partners. 2011 tax form 1040ez See Partnership Withholding on Effectively Connected Income , later, for more information. 2011 tax form 1040ez U. 2011 tax form 1040ez S. 2011 tax form 1040ez real property interest. 2011 tax form 1040ez   A withholding agent also may be responsible for withholding if a foreign person transfers a U. 2011 tax form 1040ez S. 2011 tax form 1040ez real property interest to the agent, or if it is a corporation, partnership, trust, or estate that distributes a U. 2011 tax form 1040ez S. 2011 tax form 1040ez real property interest to a shareholder, partner, or beneficiary that is a foreign person. 2011 tax form 1040ez See U. 2011 tax form 1040ez S. 2011 tax form 1040ez Real Property Interest , later. 2011 tax form 1040ez Persons Subject to NRA Withholding NRA withholding applies only to payments made to a payee that is a foreign person. 2011 tax form 1040ez It does not apply to payments made to U. 2011 tax form 1040ez S. 2011 tax form 1040ez persons. 2011 tax form 1040ez Usually, you determine the payee's status as a U. 2011 tax form 1040ez S. 2011 tax form 1040ez or foreign person based on the documentation that person provides. 2011 tax form 1040ez See Documentation , later. 2011 tax form 1040ez 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. 2011 tax form 1040ez 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. 2011 tax form 1040ez However, there are situations in which the payee is a person other than the one to whom you actually make a payment. 2011 tax form 1040ez U. 2011 tax form 1040ez S. 2011 tax form 1040ez agent of foreign person. 2011 tax form 1040ez   If you make a payment to a U. 2011 tax form 1040ez S. 2011 tax form 1040ez person and you have actual knowledge that the U. 2011 tax form 1040ez S. 2011 tax form 1040ez person is receiving the payment as an agent of a foreign person, you must treat the payment as made to the foreign person. 2011 tax form 1040ez However, if the U. 2011 tax form 1040ez S. 2011 tax form 1040ez 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. 2011 tax form 1040ez   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. 2011 tax form 1040ez S. 2011 tax form 1040ez person and not as a payment to a foreign person. 2011 tax form 1040ez You may be required to report the payment on Form 1099 and, if applicable, backup withhold. 2011 tax form 1040ez Disregarded entities. 2011 tax form 1040ez   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. 2011 tax form 1040ez The payee of a payment made to a disregarded entity is the owner of the entity. 2011 tax form 1040ez   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. 2011 tax form 1040ez   If the owner is a U. 2011 tax form 1040ez S. 2011 tax form 1040ez person, you do not apply NRA withholding. 2011 tax form 1040ez However, you may be required to report the payment on Form 1099 and, if applicable, backup withhold. 2011 tax form 1040ez 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. 2011 tax form 1040ez Flow-Through Entities The payees of payments (other than income effectively connected with a U. 2011 tax form 1040ez S. 2011 tax form 1040ez trade or business) made to a foreign flow-through entity are the owners or beneficiaries of the flow-through entity. 2011 tax form 1040ez This rule applies for purposes of NRA withholding and for Form 1099 reporting and backup withholding. 2011 tax form 1040ez Income that is, or is deemed to be, effectively connected with the conduct of a U. 2011 tax form 1040ez S. 2011 tax form 1040ez trade or business of a flow-through entity is treated as paid to the entity. 2011 tax form 1040ez All of the following are flow-through entities. 2011 tax form 1040ez A foreign partnership (other than a withholding foreign partnership). 2011 tax form 1040ez A foreign simple or foreign grantor trust (other than a withholding foreign trust). 2011 tax form 1040ez A fiscally transparent entity receiving income for which treaty benefits are claimed. 2011 tax form 1040ez See Fiscally transparent entity , later. 2011 tax form 1040ez 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. 2011 tax form 1040ez You also may be required to treat the entity as a flow-through entity under the presumption rules, discussed later. 2011 tax form 1040ez You must determine whether the owners or beneficiaries of a flow-through entity are U. 2011 tax form 1040ez S. 2011 tax form 1040ez 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. 2011 tax form 1040ez 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. 2011 tax form 1040ez 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. 2011 tax form 1040ez See Documentation and Presumption Rules , later. 2011 tax form 1040ez Withholding foreign partnerships and withholding foreign trusts are not flow-through entities. 2011 tax form 1040ez Foreign partnerships. 2011 tax form 1040ez    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. 2011 tax form 1040ez 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. 2011 tax form 1040ez 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. 2011 tax form 1040ez 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. 2011 tax form 1040ez Example 1. 2011 tax form 1040ez A nonwithholding foreign partnership has three partners: a nonresident alien individual; a foreign corporation; and a U. 2011 tax form 1040ez S. 2011 tax form 1040ez citizen. 2011 tax form 1040ez You make a payment of U. 2011 tax form 1040ez S. 2011 tax form 1040ez source interest to the partnership. 2011 tax form 1040ez 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. 2011 tax form 1040ez S. 2011 tax form 1040ez citizen. 2011 tax form 1040ez The partnership also gives you a complete withholding statement that enables you to associate a part of the interest payment to each partner. 2011 tax form 1040ez You must treat all three partners as the payees of the interest payment as if the payment were made directly to them. 2011 tax form 1040ez Report the payment to the nonresident alien and the foreign corporation on Forms 1042-S. 2011 tax form 1040ez Report the payment to the U. 2011 tax form 1040ez S. 2011 tax form 1040ez citizen on Form 1099-INT. 2011 tax form 1040ez Example 2. 2011 tax form 1040ez A nonwithholding foreign partnership has two partners: a foreign corporation and a nonwithholding foreign partnership. 2011 tax form 1040ez The second partnership has two partners, both nonresident alien individuals. 2011 tax form 1040ez You make a payment of U. 2011 tax form 1040ez S. 2011 tax form 1040ez source interest to the first partnership. 2011 tax form 1040ez 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. 2011 tax form 1040ez In addition, Forms W-8BEN from the partners are associated with the Form W-8IMY from the second partnership. 2011 tax form 1040ez The Forms W-8IMY from the partnerships have complete withholding statements associated with them. 2011 tax form 1040ez 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. 2011 tax form 1040ez Example 3. 2011 tax form 1040ez You make a payment of U. 2011 tax form 1040ez S. 2011 tax form 1040ez source dividends to a withholding foreign partnership. 2011 tax form 1040ez The partnership has two partners, both foreign corporations. 2011 tax form 1040ez 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. 2011 tax form 1040ez You must treat the partnership as the payee of the dividends. 2011 tax form 1040ez Foreign simple and grantor trust. 2011 tax form 1040ez   A trust is foreign unless it meets both of the following tests. 2011 tax form 1040ez A court within the United States is able to exercise primary supervision over the administration of the trust. 2011 tax form 1040ez One or more U. 2011 tax form 1040ez S. 2011 tax form 1040ez persons have the authority to control all substantial decisions of the trust. 2011 tax form 1040ez   In most cases, a foreign simple trust is a foreign trust that is required to distribute all of its income annually. 2011 tax form 1040ez A foreign grantor trust is a foreign trust that is treated as a grantor trust under sections 671 through 679 of the Code. 2011 tax form 1040ez   The payees of a payment made to a foreign simple trust are the beneficiaries of the trust. 2011 tax form 1040ez The payees of a payment made to a foreign grantor trust are the owners of the trust. 2011 tax form 1040ez 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. 2011 tax form 1040ez 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. 2011 tax form 1040ez Example. 2011 tax form 1040ez A foreign simple trust has three beneficiaries: two nonresident alien individuals and a U. 2011 tax form 1040ez S. 2011 tax form 1040ez citizen. 2011 tax form 1040ez You make a payment of interest to the foreign trust. 2011 tax form 1040ez 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. 2011 tax form 1040ez S. 2011 tax form 1040ez citizen. 2011 tax form 1040ez 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. 2011 tax form 1040ez You must treat all three beneficiaries as the payees of the interest payment as if the payment were made directly to them. 2011 tax form 1040ez Report the payment to the nonresident aliens on Forms 1042-S. 2011 tax form 1040ez Report the payment to the U. 2011 tax form 1040ez S. 2011 tax form 1040ez citizen on Form 1099-INT. 2011 tax form 1040ez Fiscally transparent entity. 2011 tax form 1040ez   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. 2011 tax form 1040ez 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. 2011 tax form 1040ez ). 2011 tax form 1040ez 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. 2011 tax form 1040ez 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. 2011 tax form 1040ez 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. 2011 tax form 1040ez   The payees of a payment made to a fiscally transparent entity are the interest holders of the entity. 2011 tax form 1040ez Example. 2011 tax form 1040ez 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. 2011 tax form 1040ez A has two interest holders, B and C. 2011 tax form 1040ez B is a corporation organized under the laws of country Y. 2011 tax form 1040ez C is a corporation organized under the laws of country Z. 2011 tax form 1040ez Both countries Y and Z have an income tax treaty in force with the United States. 2011 tax form 1040ez A receives royalty income from U. 2011 tax form 1040ez S. 2011 tax form 1040ez sources that is not effectively connected with the conduct of a trade or business in the United States. 2011 tax form 1040ez For U. 2011 tax form 1040ez S. 2011 tax form 1040ez income tax purposes, A is treated as a partnership. 2011 tax form 1040ez 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. 2011 tax form 1040ez 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. 2011 tax form 1040ez Accordingly, A is fiscally transparent in its jurisdiction, country X. 2011 tax form 1040ez B and C are not fiscally transparent under the laws of their respective countries of incorporation. 2011 tax form 1040ez 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. 2011 tax form 1040ez 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. 2011 tax form 1040ez S. 2011 tax form 1040ez source royalty income for purposes of the U. 2011 tax form 1040ez S. 2011 tax form 1040ez -Y income tax treaty. 2011 tax form 1040ez 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. 2011 tax form 1040ez Therefore, A is not treated as fiscally transparent under the laws of country Z. 2011 tax form 1040ez Accordingly, C is not treated as deriving its share of the U. 2011 tax form 1040ez S. 2011 tax form 1040ez source royalty income for purposes of the U. 2011 tax form 1040ez S. 2011 tax form 1040ez -Z income tax treaty. 2011 tax form 1040ez 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. 2011 tax form 1040ez This rule applies for purposes of NRA withholding and for Form 1099 reporting and backup withholding. 2011 tax form 1040ez 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. 2011 tax form 1040ez An intermediary is a custodian, broker, nominee, or any other person that acts as an agent for another person. 2011 tax form 1040ez A foreign intermediary is either a qualified intermediary or a nonqualified intermediary. 2011 tax form 1040ez 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. 2011 tax form 1040ez You must determine whether the customers or account holders of a foreign intermediary are U. 2011 tax form 1040ez S. 2011 tax form 1040ez or foreign persons and, if the account holder or customer is foreign, whether a reduced rate of NRA withholding applies. 2011 tax form 1040ez You make these determinations based on the foreign intermediary's Form W-8IMY and associated information and documentation. 2011 tax form 1040ez 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. 2011 tax form 1040ez See Documentation and Presumption Rules , later. 2011 tax form 1040ez Nonqualified intermediary. 2011 tax form 1040ez   A nonqualified intermediary (NQI) is any intermediary that is a foreign person and that is not a qualified intermediary. 2011 tax form 1040ez The payees of a payment made to an NQI are the customers or account holders on whose behalf the NQI is acting. 2011 tax form 1040ez Example. 2011 tax form 1040ez You make a payment of interest to a foreign bank that is a nonqualified intermediary. 2011 tax form 1040ez 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. 2011 tax form 1040ez S. 2011 tax form 1040ez person for whom the bank is collecting the payments. 2011 tax form 1040ez 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. 2011 tax form 1040ez The account holders are the payees of the interest payment. 2011 tax form 1040ez 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. 2011 tax form 1040ez S. 2011 tax form 1040ez person on Form 1099-INT. 2011 tax form 1040ez Qualified intermediary. 2011 tax form 1040ez   A qualified intermediary (QI) is any foreign intermediary (or foreign branch of a U. 2011 tax form 1040ez S. 2011 tax form 1040ez intermediary) that has entered into a qualified intermediary withholding agreement (discussed later) with the IRS. 2011 tax form 1040ez 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. 2011 tax form 1040ez In this situation, the QI is required to withhold the tax. 2011 tax form 1040ez You can determine whether a QI has assumed responsibility from the Form W-8IMY provided by the QI. 2011 tax form 1040ez   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. 2011 tax form 1040ez 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. 2011 tax form 1040ez S. 2011 tax form 1040ez person. 2011 tax form 1040ez Branches of financial institutions. 2011 tax form 1040ez   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. 2011 tax form 1040ez The countries with approved KYC rules are listed on IRS. 2011 tax form 1040ez gov. 2011 tax form 1040ez QI withholding agreement. 2011 tax form 1040ez   Foreign financial institutions and foreign branches of U. 2011 tax form 1040ez S. 2011 tax form 1040ez financial institutions can enter into an agreement with the IRS to be a qualified intermediary. 2011 tax form 1040ez   A QI is entitled to certain simplified withholding and reporting rules. 2011 tax form 1040ez In general, there are three major areas whereby intermediaries with QI status are afforded such simplified treatment. 2011 tax form 1040ez   To apply for QI status, complete Form 14345, Qualified Intermediary Application, and Form SS-4, Application for Employer Identification Number. 2011 tax form 1040ez These forms, and the procedures required to obtain a QI withholding agreement are available at www. 2011 tax form 1040ez irs. 2011 tax form 1040ez gov/Businesses/Corporations/Qualified-Intermediaries-(QI). 2011 tax form 1040ez Documentation. 2011 tax form 1040ez   A QI is not required to forward documentation obtained from foreign account holders to the U. 2011 tax form 1040ez S. 2011 tax form 1040ez withholding agent from whom the QI receives a payment of U. 2011 tax form 1040ez S. 2011 tax form 1040ez source income. 2011 tax form 1040ez The QI maintains such documentation at its location and provides the U. 2011 tax form 1040ez S. 2011 tax form 1040ez withholding agent with withholding rate pools. 2011 tax form 1040ez A withholding rate pool is a payment of a single type of income that is subject to a single rate of withholding. 2011 tax form 1040ez   A QI is required to provide the U. 2011 tax form 1040ez S. 2011 tax form 1040ez withholding agent with information regarding U. 2011 tax form 1040ez S. 2011 tax form 1040ez persons subject to Form 1099 information reporting unless the QI assumes the primary obligation to do Form 1099 reporting and backup withholding. 2011 tax form 1040ez   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. 2011 tax form 1040ez 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. 2011 tax form 1040ez Form 1042-S reporting. 2011 tax form 1040ez   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. 2011 tax form 1040ez Pooled basis reporting is not available for payments to certain account holders, such as a nonqualified intermediary or a flow-through entity (discussed earlier). 2011 tax form 1040ez Collective refund procedures. 2011 tax form 1040ez   A QI may seek a refund on behalf of its direct account holders. 2011 tax form 1040ez 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. 2011 tax form 1040ez U. 2011 tax form 1040ez S. 2011 tax form 1040ez branches of foreign banks and foreign insurance companies. 2011 tax form 1040ez   Special rules apply to a U. 2011 tax form 1040ez S. 2011 tax form 1040ez branch of a foreign bank subject to Federal Reserve Board supervision or a foreign insurance company subject to state regulatory supervision. 2011 tax form 1040ez If you agree to treat the branch as a U. 2011 tax form 1040ez S. 2011 tax form 1040ez person, you may treat the branch as a U. 2011 tax form 1040ez S. 2011 tax form 1040ez payee for a payment subject to NRA withholding provided you receive a Form W-8IMY from the U. 2011 tax form 1040ez S. 2011 tax form 1040ez branch on which the agreement is evidenced. 2011 tax form 1040ez If you treat the branch as a U. 2011 tax form 1040ez S. 2011 tax form 1040ez payee, you are not required to withhold. 2011 tax form 1040ez Even though you agree to treat the branch as a U. 2011 tax form 1040ez S. 2011 tax form 1040ez person, you must report the payment on Form 1042-S. 2011 tax form 1040ez   A financial institution organized in a U. 2011 tax form 1040ez S. 2011 tax form 1040ez possession is treated as a U. 2011 tax form 1040ez S. 2011 tax form 1040ez branch. 2011 tax form 1040ez The special rules discussed in this section apply to a possessions financial institution. 2011 tax form 1040ez   If you are paying a U. 2011 tax form 1040ez S. 2011 tax form 1040ez 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. 2011 tax form 1040ez S. 2011 tax form 1040ez person for amounts subject to NRA withholding. 2011 tax form 1040ez Consequently, amounts not subject to NRA withholding that are paid to a U. 2011 tax form 1040ez S. 2011 tax form 1040ez branch are not subject to Form 1099 reporting or backup withholding. 2011 tax form 1040ez   Alternatively, a U. 2011 tax form 1040ez S. 2011 tax form 1040ez branch may provide you with a Form W-8IMY with which it associates the documentation of the persons on whose behalf it acts. 2011 tax form 1040ez 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. 2011 tax form 1040ez See Nonqualified Intermediaries under  Documentation, later. 2011 tax form 1040ez   If the U. 2011 tax form 1040ez S. 2011 tax form 1040ez 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. 2011 tax form 1040ez Withholding foreign partnership and foreign trust. 2011 tax form 1040ez   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. 2011 tax form 1040ez 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. 2011 tax form 1040ez   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. 2011 tax form 1040ez A WP or WT acting in that capacity must assume NRA withholding responsibility for these amounts. 2011 tax form 1040ez 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. 2011 tax form 1040ez WP and WT withholding agreements. 2011 tax form 1040ez   The WP and WT withholding agreements and the application procedures for the agreements are in Revenue Procedure 2003-64. 2011 tax form 1040ez Also see the following items. 2011 tax form 1040ez Revenue Procedure 2004-21. 2011 tax form 1040ez Revenue Procedure 2005-77. 2011 tax form 1040ez Employer identification number (EIN). 2011 tax form 1040ez   A completed Form SS-4 must be submitted with the application for being a WP or WT. 2011 tax form 1040ez The WP or WT will be assigned a WP-EIN or WT-EIN to be used only when acting in that capacity. 2011 tax form 1040ez Documentation. 2011 tax form 1040ez   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. 2011 tax form 1040ez 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. 2011 tax form 1040ez The Form W-8IMY must contain the WP-EIN or WT-EIN. 2011 tax form 1040ez Foreign Persons A payee is subject to NRA withholding only if it is a foreign person. 2011 tax form 1040ez 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. 2011 tax form 1040ez S. 2011 tax form 1040ez person. 2011 tax form 1040ez It also includes a foreign branch of a U. 2011 tax form 1040ez S. 2011 tax form 1040ez financial institution if the foreign branch is a qualified intermediary. 2011 tax form 1040ez In most cases, the U. 2011 tax form 1040ez S. 2011 tax form 1040ez branch of a foreign corporation or partnership is treated as a foreign person. 2011 tax form 1040ez Nonresident alien. 2011 tax form 1040ez   A nonresident alien is an individual who is not a U. 2011 tax form 1040ez S. 2011 tax form 1040ez citizen or a resident alien. 2011 tax form 1040ez A resident of a foreign country under the residence article of an income tax treaty is a nonresident alien individual for purposes of withholding. 2011 tax form 1040ez Married to U. 2011 tax form 1040ez S. 2011 tax form 1040ez citizen or resident alien. 2011 tax form 1040ez   Nonresident alien individuals married to U. 2011 tax form 1040ez S. 2011 tax form 1040ez citizens or resident aliens may choose to be treated as resident aliens for certain income tax purposes. 2011 tax form 1040ez However, these individuals are still subject to the NRA withholding rules that apply to nonresident aliens for all income except wages. 2011 tax form 1040ez Wages paid to these individuals are subject to graduated withholding. 2011 tax form 1040ez See Wages Paid to Employees—Graduated Withholding . 2011 tax form 1040ez Resident alien. 2011 tax form 1040ez   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. 2011 tax form 1040ez Green card test. 2011 tax form 1040ez 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. 2011 tax form 1040ez This is known as the green card test because these aliens hold immigrant visas (also known as green cards). 2011 tax form 1040ez Substantial presence test. 2011 tax form 1040ez An alien is considered a resident alien if the individual meets the substantial presence test for the calendar year. 2011 tax form 1040ez 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. 2011 tax form 1040ez   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. 2011 tax form 1040ez This exception is for a limited period of time. 2011 tax form 1040ez   For more information on resident and nonresident status, the tests for residence, and the exceptions to them, see Publication 519. 2011 tax form 1040ez Note. 2011 tax form 1040ez   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. 2011 tax form 1040ez For more information on making adjustments, see chapter 13 of Publication 15 (Circular E). 2011 tax form 1040ez Resident of a U. 2011 tax form 1040ez S. 2011 tax form 1040ez possession. 2011 tax form 1040ez   A bona fide resident of Puerto Rico, the U. 2011 tax form 1040ez S. 2011 tax form 1040ez Virgin Islands, Guam, the Commonwealth of the Northern Mariana Islands (CNMI), or American Samoa who is not a U. 2011 tax form 1040ez S. 2011 tax form 1040ez citizen or a U. 2011 tax form 1040ez S. 2011 tax form 1040ez national is treated as a nonresident alien for the withholding rules explained here. 2011 tax form 1040ez 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. 2011 tax form 1040ez   For more information, see Publication 570, Tax Guide for Individuals With Income From U. 2011 tax form 1040ez S. 2011 tax form 1040ez Possessions. 2011 tax form 1040ez Foreign corporations. 2011 tax form 1040ez   A foreign corporation is one that does not fit the definition of a domestic corporation. 2011 tax form 1040ez 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. 2011 tax form 1040ez Guam or Northern Mariana Islands corporations. 2011 tax form 1040ez   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). 2011 tax form 1040ez Note. 2011 tax form 1040ez   The provisions discussed below under U. 2011 tax form 1040ez S. 2011 tax form 1040ez 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. 2011 tax form 1040ez U. 2011 tax form 1040ez S. 2011 tax form 1040ez Virgin Islands and American Samoa corporations. 2011 tax form 1040ez   A corporation created or organized in, or under the laws of, the U. 2011 tax form 1040ez S. 2011 tax form 1040ez 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. 2011 tax form 1040ez S. 2011 tax form 1040ez 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. 2011 tax form 1040ez S. 2011 tax form 1040ez Virgin Islands, American Samoa, Guam, the CNMI, or the United States. 2011 tax form 1040ez Foreign private foundations. 2011 tax form 1040ez   A private foundation that was created or organized under the laws of a foreign country is a foreign private foundation. 2011 tax form 1040ez 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. 2011 tax form 1040ez Other foreign organizations, associations, and charitable institutions. 2011 tax form 1040ez   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. 2011 tax form 1040ez 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. 2011 tax form 1040ez   Payments to these organizations, however, must be reported on Form 1042-S, even though no tax is withheld. 2011 tax form 1040ez   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. 2011 tax form 1040ez U. 2011 tax form 1040ez S. 2011 tax form 1040ez branches of foreign persons. 2011 tax form 1040ez   In most cases, a payment to a U. 2011 tax form 1040ez S. 2011 tax form 1040ez branch of a foreign person is a payment made to the foreign person. 2011 tax form 1040ez However, you may treat payments to U. 2011 tax form 1040ez S. 2011 tax form 1040ez branches of foreign banks and foreign insurance companies (discussed earlier) that are subject to U. 2011 tax form 1040ez S. 2011 tax form 1040ez regulatory supervision as payments made to a U. 2011 tax form 1040ez S. 2011 tax form 1040ez person, if you and the U. 2011 tax form 1040ez S. 2011 tax form 1040ez branch have agreed to do so, and if their agreement is evidenced by a withholding certificate, Form W-8IMY. 2011 tax form 1040ez For this purpose, a financial institution organized under the laws of a U. 2011 tax form 1040ez S. 2011 tax form 1040ez possession is treated as a U. 2011 tax form 1040ez S. 2011 tax form 1040ez branch. 2011 tax form 1040ez 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. 2011 tax form 1040ez The payee is a U. 2011 tax form 1040ez S. 2011 tax form 1040ez person. 2011 tax form 1040ez The payee is a foreign person that is the beneficial owner of the income and is entitled to a reduced rate of withholding. 2011 tax form 1040ez In most cases, you must get the documentation before you make the payment. 2011 tax form 1040ez The documentation is not valid if you know, or have reason to know, that it is unreliable or incorrect. 2011 tax form 1040ez See Standards of Knowledge , later. 2011 tax form 1040ez If you cannot reliably associate a payment with valid documentation, you must use the presumption rules discussed later. 2011 tax form 1040ez 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. 2011 tax form 1040ez The specific types of documentation are discussed in this section. 2011 tax form 1040ez However, see Withholding on Specific Income , later, as well as the instructions to the particular forms. 2011 tax form 1040ez 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. 2011 tax form 1040ez Section 1446 withholding. 2011 tax form 1040ez   Under section 1446 of the Code, a partnership must withhold tax on its effectively connected income allocable to a foreign partner. 2011 tax form 1040ez 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. 2011 tax form 1040ez 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. 2011 tax form 1040ez Joint owners. 2011 tax form 1040ez    If you make a payment to joint owners, you need to get documentation from each owner. 2011 tax form 1040ez Form W-9. 2011 tax form 1040ez   In most cases, you can treat the payee as a U. 2011 tax form 1040ez S. 2011 tax form 1040ez person if the payee gives you a Form W-9. 2011 tax form 1040ez The Form W-9 can be used only by a U. 2011 tax form 1040ez S. 2011 tax form 1040ez person and must contain the payee's taxpayer identification number (TIN). 2011 tax form 1040ez If there is more than one owner, you may treat the total amount as paid to a U. 2011 tax form 1040ez S. 2011 tax form 1040ez person if any one of the owners gives you a Form W-9. 2011 tax form 1040ez See U. 2011 tax form 1040ez S. 2011 tax form 1040ez Taxpayer Identification Numbers , later. 2011 tax form 1040ez U. 2011 tax form 1040ez S. 2011 tax form 1040ez persons are not subject to NRA withholding, but may be subject to Form 1099 reporting and backup withholding. 2011 tax form 1040ez Form W-8. 2011 tax form 1040ez   In most cases, a foreign payee of the income should give you a form in the Form W-8 series. 2011 tax form 1040ez Until further notice, you can rely upon Forms W-8 that contain a P. 2011 tax form 1040ez O. 2011 tax form 1040ez 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. 2011 tax form 1040ez S. 2011 tax form 1040ez person and that a street address is available. 2011 tax form 1040ez You may rely on Forms W-8 for which there is a U. 2011 tax form 1040ez S. 2011 tax form 1040ez mailing address provided you received the form prior to December 31, 2001. 2011 tax form 1040ez   If certain requirements are met, the foreign person can give you documentary evidence, rather than a Form W-8. 2011 tax form 1040ez You can rely on documentary evidence in lieu of a Form W-8 for a payment made in a U. 2011 tax form 1040ez S. 2011 tax form 1040ez possession. 2011 tax form 1040ez Other documentation. 2011 tax form 1040ez   Other documentation may be required to claim an exemption from, or a reduced rate of, withholding on pay for personal services. 2011 tax form 1040ez 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. 2011 tax form 1040ez These forms are discussed in Pay for Personal Services Performed under Withholding on Specific Income. 2011 tax form 1040ez 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. 2011 tax form 1040ez Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding. 2011 tax form 1040ez   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. 2011 tax form 1040ez   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. 2011 tax form 1040ez 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. 2011 tax form 1040ez Claiming treaty benefits. 2011 tax form 1040ez   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. 2011 tax form 1040ez S. 2011 tax form 1040ez 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. 2011 tax form 1040ez   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. 2011 tax form 1040ez   An entity derives income for which it is claiming treaty benefits only if the entity is not treated as fiscally transparent for that income. 2011 tax form 1040ez See Fiscally transparent entity discussed earlier under Flow-Through Entities. 2011 tax form 1040ez   Limitations on benefits provisions generally prohibit third country residents from obtaining treaty benefits. 2011 tax form 1040ez 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. 2011 tax form 1040ez   The exemptions from, or reduced rates of, U. 2011 tax form 1040ez S. 2011 tax form 1040ez tax vary under each treaty. 2011 tax form 1040ez You must check the provisions of the tax treaty that apply. 2011 tax form 1040ez 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. 2011 tax form 1040ez   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. 2011 tax form 1040ez 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. 2011 tax form 1040ez Exceptions to TIN requirement. 2011 tax form 1040ez   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. 2011 tax form 1040ez Income from marketable securities (discussed next). 2011 tax form 1040ez Unexpected payments to an individual (discussed under U. 2011 tax form 1040ez S. 2011 tax form 1040ez Taxpayer Identification Numbers ). 2011 tax form 1040ez Marketable securities. 2011 tax form 1040ez   A Form W-8BEN provided to claim treaty benefits does not need a U. 2011 tax form 1040ez S. 2011 tax form 1040ez TIN if the foreign beneficial owner is claiming the benefits on income from marketable securities. 2011 tax form 1040ez For this purpose, income from a marketable security consists of the following items. 2011 tax form 1040ez Dividends and interest from stocks and debt obligations that are actively traded. 2011 tax form 1040ez Dividends from any redeemable security issued by an investment company registered under the Investment Company Act of 1940 (mutual fund). 2011 tax form 1040ez 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. 2011 tax form 1040ez Income related to loans of any of the above securities. 2011 tax form 1040ez Offshore accounts. 2011 tax form 1040ez   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. 2011 tax form 1040ez   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. 2011 tax form 1040ez 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. 2011 tax form 1040ez An offshore account is an account maintained at an office or branch of a U. 2011 tax form 1040ez S. 2011 tax form 1040ez or foreign bank or other financial institution at any location outside the United States. 2011 tax form 1040ez   You may rely on documentary evidence given to you by a nonqualified intermediary or a flow-through entity with its Form W-8IMY. 2011 tax form 1040ez This rule applies even though you make the payment to a nonqualified intermediary or flow-through entity in the United States. 2011 tax form 1040ez 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. 2011 tax form 1040ez Documentary evidence. 2011 tax form 1040ez   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. 2011 tax form 1040ez 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. 2011 tax form 1040ez 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. 2011 tax form 1040ez 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. 2011 tax form 1040ez 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. 2011 tax form 1040ez 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. 2011 tax form 1040ez   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. 2011 tax form 1040ez (See Effectively Connected Income , later. 2011 tax form 1040ez )   Effectively connected income for which a valid Form W-8ECI has been provided is generally not subject to NRA withholding. 2011 tax form 1040ez   If a partner submits this form to a partnership, the income claimed to be effectively connected with the conduct of a U. 2011 tax form 1040ez S. 2011 tax form 1040ez trade or business is subject to withholding under section 1446. 2011 tax form 1040ez 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. 2011 tax form 1040ez    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. 2011 tax form 1040ez Form W-8EXP, Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding. 2011 tax form 1040ez   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. 2011 tax form 1040ez S. 2011 tax form 1040ez 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. 2011 tax form 1040ez   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. 2011 tax form 1040ez   See Foreign Governments and Certain Other Foreign Organizations , later. 2011 tax form 1040ez 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. 2011 tax form 1040ez 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. 2011 tax form 1040ez The additional information required depends on the type of intermediary or flow-through entity and the extent of the withholding responsibilities it assumes. 2011 tax form 1040ez Form W-8IMY, Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U. 2011 tax form 1040ez S. 2011 tax form 1040ez Branches for United States Tax Withholding. 2011 tax form 1040ez   This form is used by foreign intermediaries and foreign flow-through entities, as well as certain U. 2011 tax form 1040ez S. 2011 tax form 1040ez 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. 2011 tax form 1040ez S. 2011 tax form 1040ez branch of a foreign bank or insurance company and either is agreeing to be treated as a U. 2011 tax form 1040ez S. 2011 tax form 1040ez 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. 2011 tax form 1040ez For information on qualifying as an upper-tier foreign partnership, see Regulations section 1. 2011 tax form 1040ez 1446-5. 2011 tax form 1040ez Qualified Intermediaries In most cases, a QI is any foreign intermediary that has entered into a QI withholding agreement (discussed earlier) with the IRS. 2011 tax form 1040ez 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. 2011 tax form 1040ez The intermediary can claim that it is a QI until the IRS revokes its QI-EIN. 2011 tax form 1040ez 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. 2011 tax form 1040ez Responsibilities. 2011 tax form 1040ez   Payments made to a QI that does not assume NRA withholding responsibility are treated as paid to its account holders and customers. 2011 tax form 1040ez However, a QI is not required to provide you with documentation it obtains from its foreign account holders and customers. 2011 tax form 1040ez Instead, it provides you with a withholding statement that contains withholding rate pool information. 2011 tax form 1040ez 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. 2011 tax form 1040ez A qualified intermediary is required to provide you with information regarding U. 2011 tax form 1040ez S. 2011 tax form 1040ez persons subject to Form 1099 reporting and to provide you withholding rate pool information separately for each such U. 2011 tax form 1040ez S. 2011 tax form 1040ez person unless it has assumed Form 1099 reporting and backup withholding responsibility. 2011 tax form 1040ez For the alternative procedure for providing rate pool information for U. 2011 tax form 1040ez S. 2011 tax form 1040ez non-exempt persons, see the Form W-8IMY instructions. 2011 tax form 1040ez   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. 2011 tax form 1040ez   The extent to which you must have withholding rate pool information depends on the withholding and reporting obligations assumed by the QI. 2011 tax form 1040ez Primary responsibility not assumed. 2011 tax form 1040ez   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. 2011 tax form 1040ez Unless the alternative procedure applies, the qualified intermediary must provide you with a separate withholding rate pool for each U. 2011 tax form 1040ez S. 2011 tax form 1040ez person subject to Form 1099 reporting and/or backup withholding. 2011 tax form 1040ez 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. 2011 tax form 1040ez Primary NRA withholding responsibility assumed. 2011 tax form 1040ez   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. 2011 tax form 1040ez S. 2011 tax form 1040ez person, unless the alternative procedure applies, subject to Form 1099 reporting and/or backup withholding. 2011 tax form 1040ez 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. 2011 tax form 1040ez Primary NRA and Form 1099 responsibility assumed. 2011 tax form 1040ez   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. 2011 tax form 1040ez It is not necessary to associate the payment with withholding rate pools. 2011 tax form 1040ez Example. 2011 tax form 1040ez You make a payment of dividends to a QI. 2011 tax form 1040ez 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. 2011 tax form 1040ez S. 2011 tax form 1040ez individual who provides it with a Form W-9. 2011 tax form 1040ez Each customer is entitled to 20% of the dividend payment. 2011 tax form 1040ez The QI does not assume any primary withholding responsibility. 2011 tax form 1040ez 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. 2011 tax form 1040ez S. 2011 tax form 1040ez individual. 2011 tax form 1040ez 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. 2011 tax form 1040ez The part of the payment allocable to the U. 2011 tax form 1040ez S. 2011 tax form 1040ez individual (20%) is reportable on Form 1099-DIV. 2011 tax form 1040ez Smaller partnerships and trusts. 2011 tax form 1040ez   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. 2011 tax form 1040ez It is a foreign partnership or foreign simple or grantor trust. 2011 tax form 1040ez It is a direct account holder of the QI. 2011 tax form 1040ez It does not have any partner, beneficiary, or owner that is a U. 2011 tax form 1040ez S. 2011 tax form 1040ez person or a pass- through partner, beneficiary, or owner. 2011 tax form 1040ez   For information on these rules, see section 4A. 2011 tax form 1040ez 01 of the QI agreement. 2011 tax form 1040ez This is found in Appendix 3 of Revenue Procedure 2003-64. 2011 tax form 1040ez Also see Revenue Procedure 2004-21. 2011 tax form 1040ez Related partnerships and trusts. 2011 tax form 1040ez    A QI may apply special rules to a related partnership or trust only if the partnership or trust meets the following conditions. 2011 tax form 1040ez It is a foreign partnership or foreign simple or grantor trust. 2011 tax form 1040ez 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. 2011 tax form 1040ez For information on these rules, see section 4A. 2011 tax form 1040ez 02 of the QI agreement. 2011 tax form 1040ez This is found in Appendix 3 of Revenue Procedure 2003-64. 2011 tax form 1040ez Also see Revenue Procedure 2005-77. 2011 tax form 1040ez Nonqualified Intermediaries If you are making a payment to an NQI, foreign flow-through entity, or U. 2011 tax form 1040ez S. 2011 tax form 1040ez 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. 2011 tax form 1040ez S. 2011 tax form 1040ez branch), and You have sufficient information to report the payment on Form 1042-S or Form 1099, if reporting is required. 2011 tax form 1040ez The NQI, flow-through entity, or U. 2011 tax form 1040ez S. 2011 tax form 1040ez branch must give you certain information on a withholding statement that is associated with the Form W-8IMY. 2011 tax form 1040ez A withholding statement must be updated to keep the information accurate prior to each payment. 2011 tax form 1040ez Withholding statement. 2011 tax form 1040ez   In most cases, a withholding statement must contain the following information. 2011 tax form 1040ez The name, address, and TIN (if any, or if required) of each person for whom documentation is provided. 2011 tax form 1040ez The type of documentation (documentary evidence, Form W-8, or Form W-9) for every person for whom documentation has been provided. 2011 tax form 1040ez The status of the person for whom the documentation has been provided, such as whether the person is a U. 2011 tax form 1040ez S. 2011 tax form 1040ez exempt recipient (U. 2011 tax form 1040ez S. 2011 tax form 1040ez person exempt from Form 1099 reporting), U. 2011 tax form 1040ez S. 2011 tax form 1040ez non-exempt recipient (U. 2011 tax form 1040ez S. 2011 tax form 1040ez person subject to Form 1099 reporting), or a foreign person. 2011 tax form 1040ez 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. 2011 tax form 1040ez S. 2011 tax form 1040ez branch. 2011 tax form 1040ez The type of recipient the person is, based on the recipient codes used on Form 1042-S. 2011 tax form 1040ez Information allocating each payment, by income type, to each payee (including U. 2011 tax form 1040ez S. 2011 tax form 1040ez exempt and U. 2011 tax form 1040ez S. 2011 tax form 1040ez non-exempt recipients) for whom documentation has been provided. 2011 tax form 1040ez The rate of withholding that applies to each foreign person to whom a payment is allocated. 2011 tax form 1040ez A foreign payee's country of residence. 2011 tax form 1040ez If a reduced rate of withholding is claimed, the basis for a reduced rate of withholding (for example, portfolio interest, treaty benefit, etc. 2011 tax form 1040ez ). 2011 tax form 1040ez 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. 2011 tax form 1040ez The name, address, and TIN (if any) of any other NQI, flow-through entity, or U. 2011 tax form 1040ez S. 2011 tax form 1040ez branch from which the payee will directly receive a payment. 2011 tax form 1040ez Any other information a withholding agent requests to fulfill its reporting and withholding obligations. 2011 tax form 1040ez Alternative procedure. 2011 tax form 1040ez   Under this alternative procedure the NQI can give you the information that allocates each payment to each foreign and U. 2011 tax form 1040ez S. 2011 tax form 1040ez exempt recipient by January 31 following the calendar year of payment, rather than prior to the payment being made as otherwise required. 2011 tax form 1040ez 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. 2011 tax form 1040ez You must receive the withholding statement with all the required information (other than item 5) prior to making the payment. 2011 tax form 1040ez    This alternative procedure cannot be used for payments to U. 2011 tax form 1040ez S. 2011 tax form 1040ez non-exempt recipients. 2011 tax form 1040ez Therefore, an NQI must always provide you with allocation information for all U. 2011 tax form 1040ez S. 2011 tax form 1040ez non-exempt recipients prior to a payment being made. 2011 tax form 1040ez Pooled withholding information. 2011 tax form 1040ez   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. 2011 tax form 1040ez 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. 2011 tax form 1040ez 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). 2011 tax form 1040ez 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. 2011 tax form 1040ez Failure to provide allocation information. 2011 tax form 1040ez   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. 2011 tax form 1040ez You must treat the payees as undocumented and apply the presumption rules, discussed later in Presumption Rules . 2011 tax form 1040ez An NQI is deemed to have f