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Irs Form 1040x

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Irs Form 1040x

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

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2013 Tax Stats Card


Summary of Collections Before Refunds by Type of Return, FY 2012 [1]

 


Type of Return


Number of Returns


Gross Collections
(Millions of $)

Individual income tax

146,243,886

1,371,402

Corporation income tax

2,262,961 [2]

280,965

Employment taxes

29,589,891

784,397

Excise taxes

1,196,789

56,175

Gift tax

249,451

2,110

Estate tax

26,859

12,341


Selected Information from Returns Filed


Corporate Returns (TY 2010) [3]
 

 Number filing with assets $250M or more

 14,584

 Percent of total corporate net income for firms with assets $250M or more

73.2%

 


S Corporation Returns (TY 2010) [3]
 

 Number of returns

 4,127,554

 


Partnership Returns  (TY 2011) [3]
 

 Number of returns

3,285,177

 


Individual Returns

Top 1-percent Adjusted Gross Income (AGI) break (TY 2011) [3]

 $388,799

Top 10-percent AGI break (TY 2011) [3]

  $120,077

Median AGI (TY 2011) [3] 

$34,794

 

Percent that claim standard deductions (TY 2011) [3]

  66.5%

Percent that claim itemized deductions (TY 2011) [3]

  31.8%

Percent e-filed (TY 2012) thru 4/25/2013 [4]  

90.1%

Percent using paid preparers (TY 2011) [3]

  56.0%

 

Number of returns with AGI $1M or more (TY 2011) [4] 

304,118

State with the highest number-California (TY 2011)

45,109

State with the least number- Vermont (TY 2011)  

340

 

Number of individual refunds (TY 2011) (millions) [3] 

  113.5

Individual refund amount (TY 2011) (billions of $) [3]

  $325.8

Average individual refund amount (TY 2011)

  $2,872

 

Earned Income Tax Credit (TY 2011) [3]:

Number of returns with credit (millions)  

27.9

Amount claimed (billions of $)

  $62.9

 

Nonprofit Organizations  (TY 2009) [3,5]

Number of returns (Forms 990 & 990-PF filers)  

413,415

Assets controlled by nonprofits (billions of $)  

$3.2

 

Taxpayer Assistance  (FY 2012) [1]

Number assisted by writing, calling, or by walk-in

96,867,755

 

 



Sources and footnotes:

[FY] Fiscal Year 
[TY] Tax Year
[1] Source: IRS Data Book, publication 55B
[2] Excludes S Corporations.
[3] Source—SOI data.
[4] Source— IRS Masterfile System
[5] Organizations tax-exempt under Section 501(c)(3)
 

Revised: August 2013


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Page Last Reviewed or Updated: 24-Jan-2014

The Irs Form 1040x

Irs form 1040x 6. Irs form 1040x   Retail Tax on Heavy Trucks, Trailers, and Tractors Table of Contents Highway vehicle. Irs form 1040x Vehicles not considered highway vehicles. Irs form 1040x Idling reduction device. Irs form 1040x Separate purchase. Irs form 1040x Leases. Irs form 1040x Exported vehicle. Irs form 1040x Tax on resale of tax-paid trailers and semitrailers. Irs form 1040x Use treated as sale. Irs form 1040x Sale. Irs form 1040x Long-term lease. Irs form 1040x Short-term lease. Irs form 1040x Related person. Irs form 1040x Exclusions from tax base. Irs form 1040x Sales not at arm's length. Irs form 1040x Installment sales. Irs form 1040x Repairs and modifications. Irs form 1040x Further manufacture. Irs form 1040x Rail trailers and rail vans. Irs form 1040x Parts and accessories. Irs form 1040x Trash containers. Irs form 1040x House trailers. Irs form 1040x Camper coaches or bodies for self-propelled mobile homes. Irs form 1040x Farm feed, seed, and fertilizer equipment. Irs form 1040x Ambulances and hearses. Irs form 1040x Truck-tractors. Irs form 1040x Concrete mixers. Irs form 1040x Registration requirement. Irs form 1040x Further manufacture. Irs form 1040x A tax of 12% of the sales price is imposed on the first retail sale of the following articles, including related parts and accessories sold on or in connection with, or with the sale of, the articles. Irs form 1040x Truck chassis and bodies. Irs form 1040x Truck trailer and semitrailer chassis and bodies. Irs form 1040x Tractors of the kind chiefly used for highway transportation in combination with a trailer or semitrailer. Irs form 1040x A truck is a highway vehicle primarily designed to transport its load on the same chassis as the engine, even if it is equipped to tow a vehicle, such as a trailer or semitrailer. Irs form 1040x A tractor is a highway vehicle designed to tow a vehicle, such as a trailer or semitrailer. Irs form 1040x A tractor may carry incidental items of cargo when towing or limited amounts of cargo when not towing. Irs form 1040x A sale of a truck, truck trailer, or semitrailer is considered a sale of a chassis and a body. Irs form 1040x The seller is liable for the tax. Irs form 1040x Chassis or body. Irs form 1040x   A chassis or body is taxable only if you sell it for use as a component part of a highway vehicle that is a truck, truck trailer or semitrailer, or a tractor of the kind chiefly used for highway transportation in combination with a trailer or semitrailer. Irs form 1040x Highway vehicle. Irs form 1040x   A highway vehicle is any self-propelled vehicle designed to carry a load over public highways, whether or not it is also designed to perform other functions. Irs form 1040x Examples of vehicles designed to carry a load over public highways are passenger automobiles, motorcycles, buses, and highway-type trucks and truck tractors. Irs form 1040x A vehicle is a highway vehicle even though the vehicle's design allows it to perform a highway transportation function for only one of the following. Irs form 1040x A particular type of load, such as passengers, furnishings, and personal effects (as in a house, office, or utility trailer). Irs form 1040x A special kind of cargo, goods, supplies, or materials. Irs form 1040x Some off-highway task unrelated to highway transportation, except as discussed next. Irs form 1040x Vehicles not considered highway vehicles. Irs form 1040x   Generally, the following kinds of vehicles are not considered highway vehicles for purposes of the retail tax. Irs form 1040x Specially designed mobile machinery for nontransportation functions. Irs form 1040x A self-propelled vehicle is not a highway vehicle if all the following apply. Irs form 1040x The chassis has permanently mounted to it machinery or equipment used to perform certain operations (construction, manufacturing, drilling, mining, timbering, processing, farming, or similar operations) if the operation of the machinery or equipment is unrelated to transportation on or off the public highways. Irs form 1040x The chassis has been specially designed to serve only as a mobile carriage and mount (and power source, if applicable) for the machinery or equipment, whether or not the machinery or equipment is in operation. Irs form 1040x The chassis could not, because of its special design and without substantial structural modification, be used as part of a vehicle designed to carry any other load. Irs form 1040x Vehicles specially designed for off-highway transportation. Irs form 1040x A vehicle is not treated as a highway vehicle if the vehicle is specially designed for the primary function of transporting a particular type of load other than over the public highway and because of this special design, the vehicles's capability to transport a load over a public highway is substantially limited or impaired. Irs form 1040x To make this determination, you can take into account the vehicle's size, whether the vehicle is subject to licensing, safety, or other requirements, and whether the vehicle can transport a load at a sustained speed of at least 25 miles per hour. Irs form 1040x It does not matter that the vehicle can carry heavier loads off highway than it is allowed to carry over the highway. Irs form 1040x Nontransportation trailers and semitrailers. Irs form 1040x A trailer or semitrailer is not treated as a highway vehicle if it is specially designed to function only as an enclosed stationary shelter for carrying on a nontransportation function at an off-highway site. Irs form 1040x For example, a trailer that is capable only of functioning as an office for an off-highway construction operation is not a highway vehicle. Irs form 1040x Gross vehicle weight. Irs form 1040x   The tax does not apply to truck chassis and bodies suitable for use with a vehicle that has a gross vehicle weight (defined below) of 33,000 pounds or less. Irs form 1040x It also does not apply to truck trailer and semitrailer chassis and bodies suitable for use with a trailer or semitrailer that has a gross vehicle weight of 26,000 pounds or less. Irs form 1040x Tractors that have a gross vehicle weight of 19,500 pounds or less and a gross combined weight of 33,000 pounds or less are excluded from the 12% retail tax. Irs form 1040x   The following four classifications of truck body types meet the suitable for use standard and will be excluded from the retail excise tax. Irs form 1040x Platform truck bodies 21 feet or less in length. Irs form 1040x Dry freight and refrigerated truck van bodies 24 feet or less in length. Irs form 1040x Dump truck bodies with load capacities of 8 cubic yards or less. Irs form 1040x Refuse packer truck bodies with load capacities of 20 cubic yards or less. Irs form 1040x For more information on these classifications, see Revenue Procedure 2005-19, which is on page 832 of I. Irs form 1040x R. Irs form 1040x B. Irs form 1040x 2005-14 at www. Irs form 1040x irs. Irs form 1040x gov/pub/irs-irbs/irb05-14. Irs form 1040x pdf. Irs form 1040x   The gross vehicle weight means the maximum total weight of a loaded vehicle. Irs form 1040x Generally, this maximum total weight is the gross vehicle weight rating provided by the manufacturer or determined by the seller of the completed article. Irs form 1040x The seller's gross vehicle weight rating is determined solely on the basis of the strength of the chassis frame and the axle capacity and placement. Irs form 1040x The seller may not take into account any readily attachable components (such as tires or rim assemblies) in determining the gross vehicle weight. Irs form 1040x See Regulations section 145. Irs form 1040x 4051-1(e)(3) for more information. Irs form 1040x Parts or accessories. Irs form 1040x   The tax applies to parts or accessories sold on or in connection with, or with the sale of, a taxable article. Irs form 1040x For example, if at the time of the sale by the retailer, the part or accessory has been ordered from the retailer, the part or accessory will be considered as sold in connection with the sale of the vehicle. Irs form 1040x The tax applies in this case whether or not the retailer bills the parts or accessories separately. Irs form 1040x   If the retailer sells a taxable chassis, body, or tractor without parts or accessories considered essential for the operation or appearance of the taxable article, the sale of the parts or accessories by the retailer to the purchaser is considered made in connection with the sale of the taxable article even though they are shipped separately, at the same time, or on a different date. Irs form 1040x The tax applies unless there is evidence to the contrary. Irs form 1040x For example, if a retailer sells to any person a chassis and the bumpers for the chassis, or sells a taxable tractor and the fifth wheel and attachments, the tax applies to the parts or accessories regardless of the method of billing or the time at which the shipments were made. Irs form 1040x The tax does not apply to parts and accessories that are spares or replacements. Irs form 1040x   The tax imposed on parts and accessories sold on or in connection with the taxable articles listed earlier and the tax imposed on the separate purchase of parts and accessories (discussed next) for the taxable articles listed earlier do not apply to an idling reduction device or insulation that has an R value of at least R35 per inch. Irs form 1040x Idling reduction device. Irs form 1040x   An idling reduction device is any device or system of devices that provide the tractor with services, such as heat, air conditioning, and electricity, without the use of the main drive engine while the tractor is temporarily parked or stationary. Irs form 1040x The device must be affixed to the tractor and determined by the Administrator of the EPA, in consultation with the Secretary of Energy and Secretary of Transportation, to reduce idling while parked or stationary. Irs form 1040x The EPA discusses idling reduction technologies on its website at www. Irs form 1040x epa. Irs form 1040x gov/smartway/technology/idling. Irs form 1040x htm. Irs form 1040x Separate purchase. Irs form 1040x   The tax generally applies to the price of a part or accessory and its installation if the following conditions are met. Irs form 1040x The owner, lessee, or operator of any vehicle that contains a taxable article installs any part or accessory on the vehicle. Irs form 1040x The installation occurs within 6 months after the vehicle is first placed in service. Irs form 1040x   The owners of the trade or business installing the parts or accessories are secondarily liable for the tax. Irs form 1040x   A vehicle is placed in service on the date the owner takes actual possession of the vehicle. Irs form 1040x This date is established by a signed delivery ticket or other comparable document indicating delivery to and acceptance by the owner. Irs form 1040x   The tax does not apply if the installed part or accessory is a replacement part or accessory. Irs form 1040x The tax also does not apply if the total price of the parts and accessories, including installation charges, during the 6-month period is $1,000 or less. Irs form 1040x However, if the total price is more than $1,000, the tax applies to the cost of all parts and accessories (and installation charges) during that period. Irs form 1040x Example. Irs form 1040x You bought a taxable vehicle and placed it in service on April 8. Irs form 1040x On May 3, you bought and installed parts and accessories at a cost of $850. Irs form 1040x On July 15, you bought and installed parts and accessories for $300. Irs form 1040x Tax of $138 (12% of $1,150) applies on July 15. Irs form 1040x Also, tax will apply to any costs of additional parts and accessories installed on the vehicle before October 8. Irs form 1040x First retail sale defined. Irs form 1040x   The sale of an article is treated as the first retail sale, and the seller will be liable for the tax imposed on the sale unless one of the following exceptions applies. Irs form 1040x There has been a prior taxable sale, lease, or use of the article (however, see Tax on resale of tax-paid trailers and semitrailers, later). Irs form 1040x The sale qualifies as a tax-free sale under section 4221 (see Sales exempt from tax, later). Irs form 1040x The seller in good faith accepts from the purchaser a statement signed under penalties of perjury and executed in good faith that the purchaser intends to resell the article or lease it on a long-term basis. Irs form 1040x There is no registration requirement. Irs form 1040x Leases. Irs form 1040x   A long-term lease (a lease with a term of 1 year or more, taking into account options to renew) before a first retail sale is treated as a taxable sale. Irs form 1040x The tax is imposed on the lessor at the time of the lease. Irs form 1040x   A short-term lease (a lease with a term of less than 1 year, taking into account options to renew) before a first retail sale is treated as a taxable use. Irs form 1040x The tax is imposed on the lessor at the time of the lease. Irs form 1040x Exported vehicle. Irs form 1040x   A vehicle exported before its first retail sale, used in a foreign country, and then returned to the United States is subject to the retail tax on its first domestic use or retail sale after importation. Irs form 1040x Tax on resale of tax-paid trailers and semitrailers. Irs form 1040x   The tax applies to a trailer or semitrailer resold within 6 months after having been sold in a taxable sale. Irs form 1040x The seller liable for the tax on the resale can claim a credit equal to the tax paid on the prior taxable sale. Irs form 1040x The credit cannot exceed the tax on the resale. Irs form 1040x See Regulations section 145. Irs form 1040x 4052-1(a)(4) for information on the conditions to allowance for the credit. Irs form 1040x Use treated as sale. Irs form 1040x   If any person uses a taxable article before the first retail sale of the article, that person is liable for the tax as if the article had been sold at retail by that person. Irs form 1040x Figure the tax on the price at which similar articles are sold in the ordinary course of trade by retailers. Irs form 1040x The tax attaches when the use begins. Irs form 1040x   If the seller of an article regularly sells the articles at retail in arm's-length transactions, figure the tax on its use on the lowest established retail price for the articles in effect at the time of the taxable use. Irs form 1040x   If the seller of an article does not regularly sell the articles at retail in arm's-length transactions, a constructive price on which the tax is figured will be determined by the IRS after considering the selling practices and price structures of sellers of similar articles. Irs form 1040x   If a seller of an article incurs liability for tax on the use of the article and later sells or leases the article in a transaction that otherwise would be taxable, liability for tax is not incurred on the later sale or lease. Irs form 1040x Presumptive retail sales price. Irs form 1040x   There are rules to ensure that the tax base of transactions considered to be taxable sales includes either an actual or presumed markup percentage. Irs form 1040x If the person liable for tax is the vehicle's manufacturer, producer, or importer, the following discussions show how you figure the presumptive retail sales price depending on the type of transaction and the persons involved in the transaction. Irs form 1040x Table 6-1 outlines the appropriate tax base calculation for various transactions. Irs form 1040x   The presumed markup percentage to be used for trucks and truck-tractors is 4%. Irs form 1040x But for truck trailers and semitrailers and remanufactured trucks and tractors, the presumed markup percentage is zero. Irs form 1040x Sale. Irs form 1040x   For a taxable sale by a manufacturer, producer, importer, or related person, you generally figure the tax on a tax base of the sales price plus an amount equal to the presumed markup percentage times that sales price. Irs form 1040x Long-term lease. Irs form 1040x   In the case of a long-term lease by a manufacturer, producer, importer, or related person, figure the tax on a tax base of the constructive sales price plus an amount equal to the presumed markup percentage times the constructive sales price. Irs form 1040x Short-term lease. Irs form 1040x   When a manufacturer, producer, importer, or related person leases an article in a short-term lease considered a taxable use, figure the tax on a constructive sales price at which those or similar articles generally are sold in the ordinary course of trade by retailers. Irs form 1040x   But if the lessor in this situation regularly sells articles at retail in arm's-length transactions, figure the tax on the lowest established retail price in effect at the time of the taxable use. Irs form 1040x   If a person other than the manufacturer, producer, importer, or related person leases an article in a short-term lease considered a taxable use, figure the tax on a tax base of the price for which the article was sold to the lessor plus the cost of parts and accessories installed by the lessor and a presumed markup percentage. Irs form 1040x Related person. Irs form 1040x   A related person is any member of the same controlled group as the manufacturer, producer, or importer. Irs form 1040x Do not treat as a related person a person that sells the articles through a permanent retail establishment in the normal course of being a retailer if that person has records to prove the article was sold for a price that included a markup equal to or greater than the presumed markup percentage. Irs form 1040x Table 6-1. Irs form 1040x Tax Base IF the transaction is a. Irs form 1040x . Irs form 1040x . Irs form 1040x THEN figuring the base by using the. Irs form 1040x . Irs form 1040x . Irs form 1040x Sale by the manufacturer, producer, importer, or related person Sales price plus (presumed markup percentage × sales price) Sale by the dealer Total consideration paid for the item including any charges incident to placing it in a condition ready for use Long-term lease by the manufacturer, producer, importer, or related person Constructive sales price plus (presumed markup percentage × constructive sales price) Short-term lease by the manufacturer, producer, importer, or related person Constructive sales price at which such or similar articles are sold Short-term lease by a lessor other than the manufacturer, producer, importer, or related person Price for which the article was sold to the lessor plus the cost of parts and accessories installed by the lessor plus a presumed markup percentage Short-term lease where the articles are regularly sold at arm's length Lowest established retail price in effect at the time of the taxable use General rule for sales by dealers to the consumer. Irs form 1040x   For a taxable sale, other than a long-term lease, by a person other than a manufacturer, producer, importer, or related person, your tax base is the retail sales price as discussed next under Determination of tax base. Irs form 1040x   When you sell an article to the consumer, generally you do not add a presumed markup to the tax base. Irs form 1040x However, you do add a markup if all the following apply. Irs form 1040x You do not perform any significant activities relating to the processing of the sale of a taxable article. Irs form 1040x The main reason for processing the sale through you is to avoid or evade the presumed markup. Irs form 1040x You do not have records proving that the article was sold for a price that included a markup equal to or greater than the presumed markup percentage. Irs form 1040x In these situations, your tax base is the sales price plus an amount equal to the presumed markup percentage times that selling price. Irs form 1040x Determination of tax base. Irs form 1040x   These rules apply to both normal retail sales price and presumptive retail sales price computations. Irs form 1040x To arrive at the tax base, the price is the total consideration paid (including trade-in allowance) for the item and includes any charge incident to placing the article in a condition ready for use. Irs form 1040x However, see Presumptive retail sales price, earlier. Irs form 1040x Exclusions from tax base. Irs form 1040x   Exclude from the tax base the retail excise tax imposed on the sale. Irs form 1040x Exclude any state or local retail sales tax if stated as a separate charge from the price whether the sales tax is imposed on the seller or purchaser. Irs form 1040x Also exclude the value of any used component of the article furnished by the first user of the article. Irs form 1040x   Exclude charges for transportation, delivery, insurance, and installation (other than installation charges for parts and accessories, discussed earlier) and other expenses incurred in connection with the delivery of an article to a purchaser. Irs form 1040x These expenses are those incurred in delivery from the retail dealer to the customer. Irs form 1040x In the case of delivery directly from the manufacturer to the dealer's customer, include the transportation and delivery charges to the extent the charges do not exceed what it would have cost to ship the article to the dealer. Irs form 1040x   Exclude amounts charged for machinery or equipment that does not contribute to the highway transportation function of the vehicle, provided those charges are supported by adequate records. Irs form 1040x For example, for an industrial vacuum loader vehicle, exclude amounts charged for the vacuum pump and hose, filter system, material separator, silencer or muffler, control cabinet, and ladder. Irs form 1040x Similarly, for a sewer cleaning vehicle, exclude amounts charged for the high pressure water pump, hose components, and the vacuum pipe. Irs form 1040x Sales not at arm's length. Irs form 1040x   For any taxable article sold (not at arm's length) at less than the fair market price, figure the excise tax on the price for which similar articles are sold at retail in the ordinary course of trade. Irs form 1040x   A sale is not at arm's length if either of the following apply. Irs form 1040x One of the parties is controlled (in law or in fact) by the other or there is common control, whether or not the control is actually exercised to influence the sales price. Irs form 1040x The sale is made under special arrangements between a seller and a purchaser. Irs form 1040x Installment sales. Irs form 1040x   If the first retail sale is an installment sale, or other form of sale in which the sales price is paid in installments, tax liability arises at the time of the sale. Irs form 1040x The tax is figured on the entire sales price. Irs form 1040x No part of the tax is deferred because the sales price is paid in installments. Irs form 1040x Repairs and modifications. Irs form 1040x   The tax does not apply to the sale or use of an article that has been repaired or modified unless the cost of the repairs and modifications is more than 75% of the retail price of a comparable new article. Irs form 1040x This includes modifications that change the transportation function of an article or restore a wrecked article to a functional condition. Irs form 1040x However, this exception generally does not apply to an article that was not subject to the tax when it was new. Irs form 1040x Further manufacture. Irs form 1040x   The tax does not apply to the use by a person of a taxable article as material in the manufacture or production of, or as a component part of, another article to be manufactured or produced by that person. Irs form 1040x Do not treat a person as engaged in the manufacture of any article merely because that person combines the article with a: Coupling device (including any fifth wheel); Wrecker crane; Loading and unloading equipment (including any crane, hoist, winch, or power liftgate); Aerial ladder or tower; Ice and snow control equipment; Earth moving, excavation, and construction equipment; Spreader; Sleeper cab; Cab shield; or Wood or metal floor. Irs form 1040x Combining an article with an item in this list does not give rise to taxability. Irs form 1040x However, see Parts or accessories discussed earlier. Irs form 1040x Articles exempt from tax. Irs form 1040x   The tax on heavy trucks, trailers, and tractors does not apply to sales of the articles described in the following discussions. Irs form 1040x Rail trailers and rail vans. Irs form 1040x   This is any chassis or body of a trailer or semitrailer designed for use both as a highway vehicle and a railroad car (including any parts and accessories designed primarily for use on and in connection with it). Irs form 1040x Do not treat a piggyback trailer or semitrailer as designed for use as a railroad car. Irs form 1040x Parts and accessories. Irs form 1040x   This is any part or accessory sold separately from the truck or trailer, except as described earlier under Parts or accessories and Separate purchase. Irs form 1040x Trash containers. Irs form 1040x   This is any box, container, receptacle, bin, or similar article that meets all the following conditions. Irs form 1040x It is designed to be used as a trash container. Irs form 1040x It is not designed to carry freight other than trash. Irs form 1040x It is not designed to be permanently mounted on or affixed to a truck chassis or body. Irs form 1040x House trailers. Irs form 1040x   This is any house trailer (regardless of size) suitable for use in connection with either passenger automobiles or trucks. Irs form 1040x Camper coaches or bodies for self-propelled mobile homes. Irs form 1040x   This is any article designed to be mounted or placed on trucks, truck chassis, or automobile chassis and to be used primarily as living quarters or camping accommodations. Irs form 1040x Further, the tax does not apply to chassis specifically designed and constructed to accommodate and transport self-propelled mobile home bodies. Irs form 1040x Farm feed, seed, and fertilizer equipment. Irs form 1040x   This is any body primarily designed to process or prepare, haul, spread, load, or unload feed, seed, or fertilizer to or on farms. Irs form 1040x This exemption applies only to the farm equipment body (and parts and accessories) and not to the chassis upon which the farm equipment is mounted. Irs form 1040x Ambulances and hearses. Irs form 1040x   This is any ambulance, hearse, or combination ambulance-hearse. Irs form 1040x Truck-tractors. Irs form 1040x   This is any truck-tractor specifically designed for use in shifting semitrailers in and around freight yards and freight terminals. Irs form 1040x Concrete mixers. Irs form 1040x   This is any article designed to be placed or mounted on a truck, truck trailer, or semitrailer chassis to be used to process or prepare concrete. Irs form 1040x This exemption does not apply to the chassis on which the article is mounted. Irs form 1040x Sales exempt from tax. Irs form 1040x   The following sales are ordinarily exempt from tax. Irs form 1040x Sales to a state or local government for its exclusive use. Irs form 1040x Sales to Indian tribal governments, but only if the transaction involves the exercise of an essential tribal government function. Irs form 1040x Sales to a nonprofit educational organization for its exclusive use. Irs form 1040x Sales to a qualified blood collector organization (as defined under Communications Tax in chapter 4) for its exclusive use in the collection, storage, or transportation of blood. Irs form 1040x Sales for use by the purchaser for further manufacture of other taxable articles (see below). Irs form 1040x Sales for export or for resale by the purchaser to a second purchaser for export. Irs form 1040x Sales to the United Nations for official use. Irs form 1040x Registration requirement. Irs form 1040x   In general, the seller and buyer must be registered for a sale to be tax free. Irs form 1040x See the Form 637 instructions for more information. Irs form 1040x Certain registration exceptions apply in the case of sales to state and local governments, sales to foreign purchasers for export, and sales for resale or long term leasing. Irs form 1040x Further manufacture. Irs form 1040x   If you buy articles tax free and resell or use them other than in the manufacture of another article, you are liable for the tax on their resale or use just as if you had manufactured and made the first retail sale of them. Irs form 1040x Credits or refunds. Irs form 1040x   A credit or refund (without interest) of the retail tax on the taxable articles described earlier may be allowable if the tax has been paid with respect to an article and, before any other use, such article is used by any person as a component part of another taxable article manufactured or produced. Irs form 1040x The person using the article as a component part is eligible for the credit or refund. Irs form 1040x   A credit or refund is allowable if, before any other use, an article is, by any person: Exported, Used or sold for use as supplies for vessels, Sold to a state or local government for its exclusive use, Sold to a nonprofit educational organization for its exclusive use, or Sold to a qualified blood collector organization (as defined under Communications Tax in chapter 4) for its exclusive use in the collection, storage, or transportation of blood. Irs form 1040x A credit or refund is also allowable if there is a price readjustment by reason of the return or repossession of an article or by reason of a bona fide discount, rebate, or allowance. Irs form 1040x   See also Conditions to allowance in chapter 5. Irs form 1040x Tire credit. Irs form 1040x   A credit is allowed against the retail tax on the taxable articles described earlier if taxable tires are sold on or in connection with the sale of the article. Irs form 1040x The credit is equal to the manufacturers excise tax imposed on the taxable tires (discussed earlier). Irs form 1040x This is the section 4051(d) taxable tire credit and is claimed on Schedule C (Form 720) for the same quarter for which the tax on the heavy vehicle is reported. Irs form 1040x Prev  Up  Next   Home   More Online Publications