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Tax Forms For 2012

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Tax Forms For 2012

Tax forms for 2012 10. Tax forms for 2012   Business Bad Debts Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Definition of Business Bad DebtAccrual method. Tax forms for 2012 Cash method. Tax forms for 2012 Debt acquired from a decedent. Tax forms for 2012 Liquidation. Tax forms for 2012 Types of Business Bad Debts When a Debt Becomes Worthless How To Claim a Business Bad DebtSpecific Charge-Off Method Nonaccrual-Experience Method Recovery of a Bad DebtNet operating loss (NOL) carryover. Tax forms for 2012 Introduction You have a bad debt if you cannot collect money owed to you. Tax forms for 2012 A bad debt is either a business bad debt or a nonbusiness bad debt. Tax forms for 2012 This chapter discusses only business bad debts. Tax forms for 2012 Generally, a business bad debt is one that comes from operating your trade or business. Tax forms for 2012 You can deduct business bad debts on Schedule C (Form 1040) or your applicable business income tax return. Tax forms for 2012 All other bad debts are nonbusiness bad debts and are deductible only as short-term capital losses. Tax forms for 2012 For more information on nonbusiness bad debts, see Publication 550. Tax forms for 2012 Topics - This chapter discusses: Definition of business bad debt When a debt becomes worthless How to claim a business bad debt Recovery of a bad debt Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 536 Net Operating Losses (NOLs) for Individuals, Estates, and Trusts 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses 556 Examination of Returns, Appeal Rights, and Claims for Refund Form (and Instructions) Schedule C (Form 1040) Profit or Loss From Business 1040X Amended U. Tax forms for 2012 S. Tax forms for 2012 Individual Income Tax Return 1045 Application for Tentative Refund 1139 Corporation Application for Tentative Refund 3115 Application for Change in Accounting Method See chapter 12 for information about getting publications and forms. Tax forms for 2012 Definition of Business Bad Debt A business bad debt is a loss from the worthlessness of a debt that was either: Created or acquired in your trade or business, or Closely related to your trade or business when it became partly or totally worthless. Tax forms for 2012 A debt is closely related to your trade or business if your primary motive for incurring the debt is business related. Tax forms for 2012 Bad debts of a corporation (other than an S corporation) are always business bad debts. Tax forms for 2012 Credit sales. Tax forms for 2012   Business bad debts are mainly the result of credit sales to customers. Tax forms for 2012 Goods that have been sold, but not yet paid for, and services that have been performed, but not yet paid for, are recorded in your books as either accounts receivable or notes receivable. Tax forms for 2012 After a reasonable period of time, if you have tried to collect the amount due, but are unable to do so, the uncollectible part becomes a business bad debt. Tax forms for 2012   Accounts or notes receivable valued at fair market value (FMV) when received are deductible only at that value, even though the FMV may be less than the face value. Tax forms for 2012 If you purchased an account receivable for less than its face value, and the receivable subsequently becomes worthless, the most you are allowed to deduct is the amount you paid to acquire it. Tax forms for 2012    You can claim a business bad debt deduction only if the amount owed to you was previously included in gross income. Tax forms for 2012 This applies to amounts owed to you from all sources of taxable income, including sales, services, rents, and interest. Tax forms for 2012 Accrual method. Tax forms for 2012   If you use the accrual method of accounting, you generally report income as you earn it. Tax forms for 2012 You can only claim a bad debt deduction for an uncollectible receivable if you have previously included the uncollectible amount in income. Tax forms for 2012   If you qualify, you can use the nonaccrual-experience method of accounting discussed later. Tax forms for 2012 Under this method, you do not have to accrue income that, based on your experience, you do not expect to collect. Tax forms for 2012 Cash method. Tax forms for 2012   If you use the cash method of accounting, you generally report income when you receive payment. Tax forms for 2012 You cannot claim a bad debt deduction for amounts owed to you because you never included those amounts in income. Tax forms for 2012 For example, a cash basis architect cannot claim a bad debt deduction if a client fails to pay the bill because the architect's fee was never included in income. Tax forms for 2012 Debts from a former business. Tax forms for 2012   If you sell your business but retain its receivables, these debts are business debts because they arose out of your trade or business. Tax forms for 2012 If any of these receivables subsequently become worthless, the loss is still a business bad debt. Tax forms for 2012 Debt acquired from a decedent. Tax forms for 2012   The character of a loss from debts of a business acquired from a decedent is determined in the same way as debts acquired on the purchase of a business. Tax forms for 2012 The executor of the decedent's estate treats any loss from the debts as a business bad debt if the debts were closely related to the decedent's trade or business when they became worthless. Tax forms for 2012 Otherwise, a loss from these debts becomes a nonbusiness bad debt for the decedent's estate. Tax forms for 2012 Liquidation. Tax forms for 2012   If you liquidate your business and some of the accounts receivable that you retain become worthless, they become business bad debts. Tax forms for 2012 Types of Business Bad Debts Business bad debts may result from the following. Tax forms for 2012 Loans to clients and suppliers. Tax forms for 2012   If you loan money to a client, supplier, employee, or distributor for a business reason and you are unable to collect the loan after attempting to do so, you have a business bad debt. Tax forms for 2012 Debts owed by political parties. Tax forms for 2012   If a political party (or other organization that accepts contributions or spends money to influence elections) owes you money and the debt becomes worthless, you can claim a bad debt deduction only if all of the following requirements are met. Tax forms for 2012 You use the accrual method of accounting. Tax forms for 2012 The debt arose from the sale of goods or services in the ordinary course of your trade or business. Tax forms for 2012 More than 30% of your receivables accrued in the year of the sale were from sales to political parties. Tax forms for 2012 You made substantial and continuing efforts to collect on the debt. Tax forms for 2012 Loan or capital contribution. Tax forms for 2012   You cannot claim a bad debt deduction for a loan you made to a corporation if, based on the facts and circumstances, the loan is actually a contribution to capital. Tax forms for 2012 Debts of an insolvent partner. Tax forms for 2012   If your business partnership breaks up and one of your former partners becomes insolvent, you may have to pay more than your pro rata share of the partnership's debts. Tax forms for 2012 If you pay any part of the insolvent partner's share of the debts, you can claim a bad debt deduction for the amount you paid that is attributable to the insolvent partner's share. Tax forms for 2012 Business loan guarantee. Tax forms for 2012   If you guarantee a debt that subsequently becomes worthless, the debt can qualify as a business bad debt if all the following requirements are met. Tax forms for 2012 You made the guarantee in the course of your trade or business. Tax forms for 2012 You have a legal duty to pay the debt. Tax forms for 2012 You made the guarantee before the debt became worthless. Tax forms for 2012 You meet this requirement if you reasonably expected you would not have to pay the debt without full reimbursement from the borrower. Tax forms for 2012 You received reasonable consideration for making the guarantee. Tax forms for 2012 You meet this requirement if you made the guarantee in accord with normal business practice or for a good faith business purpose. Tax forms for 2012 Example. Tax forms for 2012 Jane Zayne owns the Zayne Dress Company. Tax forms for 2012 She guaranteed payment of a $20,000 note for Elegant Fashions, a dress outlet. Tax forms for 2012 Elegant Fashions is one of Zayne's largest clients. Tax forms for 2012 Elegant Fashions later defaulted on the loan. Tax forms for 2012 As a result, Ms. Tax forms for 2012 Zayne paid the remaining balance of the loan in full to the bank. Tax forms for 2012 She can claim a business bad debt deduction only for the amount she paid, since her guarantee was made in the course of her trade or business for a good faith business purpose. Tax forms for 2012 She was motivated by the desire to retain one of her better clients and keep a sales outlet. Tax forms for 2012 Deductible in the year paid. Tax forms for 2012   If you make a payment on a loan you guaranteed, you can deduct it in the year paid, unless you have rights against the borrower. Tax forms for 2012 Rights against a borrower. Tax forms for 2012   When you make payment on a loan you guaranteed, you may have the right to take the place of the lender. Tax forms for 2012 The debt is then owed to you. Tax forms for 2012 If you have this right, or some other right to demand payment from the borrower, you cannot claim a bad debt deduction until these rights become partly or totally worthless. Tax forms for 2012 Joint debtor. Tax forms for 2012   If two or more debtors jointly owe you money, your inability to collect from one does not enable you to deduct a proportionate amount as a bad debt. Tax forms for 2012 Sale of mortgaged property. Tax forms for 2012   If mortgaged or pledged property is sold for less than the debt, the unpaid, uncollectible balance of the debt is a bad debt. Tax forms for 2012 When a Debt Becomes Worthless A debt becomes worthless when there is no longer any chance the amount owed will be paid. Tax forms for 2012 This may occur when the debt is due or prior to that date. Tax forms for 2012 To demonstrate worthlessness, you must only show that you have taken reasonable steps to collect the debt but were unable to do so. Tax forms for 2012 It is not necessary to go to court if you can show that a judgment from the court would be uncollectible. Tax forms for 2012 Bankruptcy of your debtor is generally good evidence of the worthlessness of at least a part of an unsecured and unpreferred debt. Tax forms for 2012 Property received for debt. Tax forms for 2012   If you receive property in partial settlement of a debt, reduce the debt by the property's FMV, which becomes the property's basis. Tax forms for 2012 You can deduct the remaining debt as a bad debt if and when it becomes worthless. Tax forms for 2012   If you later sell the property for more than its basis, any gain on the sale is due to the appreciation of the property. Tax forms for 2012 It is not a recovery of a bad debt. Tax forms for 2012 For information on the sale of an asset, see Publication 544. Tax forms for 2012 How To Claim a Business Bad Debt There are two methods to claim a business bad debt. Tax forms for 2012 The specific charge-off method. Tax forms for 2012 The nonaccrual-experience method. Tax forms for 2012 Generally, you must use the specific charge-off method. Tax forms for 2012 However, you may use the nonaccrual-experience method if you meet the requirements discussed later under Nonaccrual-Experience Method . Tax forms for 2012 Specific Charge-Off Method If you use the specific charge-off method, you can deduct specific business bad debts that become either partly or totally worthless during the tax year. Tax forms for 2012 However, with respect to partly worthless bad debts, your deduction is limited to the amount you charged off on your books during the year. Tax forms for 2012 Partly worthless debts. Tax forms for 2012   You can deduct specific bad debts that become partly uncollectible during the tax year. Tax forms for 2012 Your tax deduction is limited to the amount you charge off on your books during the year. Tax forms for 2012 You do not have to charge off and deduct your partly worthless debts annually. Tax forms for 2012 You can delay the charge off until a later year. Tax forms for 2012 However, you cannot deduct any part of a debt after the year it becomes totally worthless. Tax forms for 2012 Significantly modified debt. Tax forms for 2012   An exception to the charge-off rule exists for debt which has been significantly modified and on which the holder recognized gain. Tax forms for 2012 For more information, see Regulations section 1. Tax forms for 2012 166-3(a)(3). Tax forms for 2012 Deduction disallowed. Tax forms for 2012   Generally, you can claim a partial bad debt deduction only in the year you make the charge-off on your books. Tax forms for 2012 If, under audit, the IRS does not allow your deduction and the debt becomes partly worthless in a later tax year, you can deduct the amount you charged off in that year plus the disallowed amount charged off in the earlier year. Tax forms for 2012 The charge-off in the earlier year, unless reversed on your books, fulfills the charge-off requirement for the later year. Tax forms for 2012 Totally worthless debts. Tax forms for 2012   If a debt becomes totally worthless in the current tax year, you can deduct the entire amount, less any amount deducted in an earlier tax year when the debt was only partly worthless. Tax forms for 2012   You do not have to make an actual charge-off on your books to claim a bad debt deduction for a totally worthless debt. Tax forms for 2012 However, you may want to do so. Tax forms for 2012 If you do not and the IRS later rules the debt is only partly worthless, you will not be allowed a deduction for the debt in that tax year because a deduction of a partly worthless bad debt is limited to the amount actually charged off. Tax forms for 2012 See Partly worthless debts, earlier. Tax forms for 2012 Filing a claim for refund. Tax forms for 2012   If you did not deduct a bad debt on your original return for the year it became worthless, you can file a claim for a credit or refund. Tax forms for 2012 If the bad debt was totally worthless, you must file the claim by the later of the following dates. Tax forms for 2012 7 years from the date your original return was due (not including extensions). Tax forms for 2012 2 years from the date you paid the tax. Tax forms for 2012   If the claim is for a partly worthless bad debt, you must file the claim by the later of the following dates. Tax forms for 2012 3 years from the date you filed your original return. Tax forms for 2012 2 years from the date you paid the tax. Tax forms for 2012 You may have longer to file the claim if you were unable to manage your financial affairs due to a physical or mental impairment. Tax forms for 2012 Such an impairment requires proof of existence. Tax forms for 2012   For details and more information about filing a claim, see Publication 556. Tax forms for 2012 Use one of the following forms to file a claim. Tax forms for 2012 For more information, see the instructions for the applicable form. Tax forms for 2012 Table 10-1. Tax forms for 2012 Forms Used To File a Claim IF you filed as a. Tax forms for 2012 . Tax forms for 2012 . Tax forms for 2012 THEN file. Tax forms for 2012 . Tax forms for 2012 . Tax forms for 2012 Sole proprietor or farmer Form 1040X Corporation Form 1120X S corporation Form 1120S and check box H(4) Partnership Form 1065X if filing on paper or  Form 1065 and check box G(5) if filing electronically Nonaccrual-Experience Method If you use an accrual method of accounting and qualify under the rules explained in this section, you can use the nonaccrual-experience method for bad debts. Tax forms for 2012 Under this method, you do not accrue service related income you expect to be uncollectible. Tax forms for 2012 Because the expected uncollectible amounts are not included in income, these amounts are not later deducted from income. Tax forms for 2012 Generally, you can use the nonaccrual-experience method for accounts receivable for services you performed only if: The services are provided in the fields of accounting, actuarial science, architecture, consulting, engineering, health, law, or the performing arts, or You meet the $5 million gross receipts test for all prior years. Tax forms for 2012 Service related income. Tax forms for 2012   You can use the nonaccrual-experience method only for amounts earned by performing services. Tax forms for 2012 You cannot use this method for amounts owed to you from activities such as lending money, selling goods, or acquiring receivables or other rights to receive payment. Tax forms for 2012 Gross receipts test. Tax forms for 2012   To find out if you meet the $5 million gross receipts test for all prior years, you must figure the average annual gross receipts for each prior year. Tax forms for 2012 If your average annual gross receipts for any year exceeds $5 million, you cannot use the non-accural experience method. Tax forms for 2012   The average annual gross receipts for any year is the average of gross receipts from the year in question and the 2 previous years. Tax forms for 2012 For example, if you were figuring the average annual gross receipts for 2013, you would average your gross receipts for 2011, 2012, and 2013. Tax forms for 2012 Interest or penalty charged. Tax forms for 2012   Generally, you cannot use the nonaccrual-experience method for amounts due on which you charge interest or a late payment penalty. Tax forms for 2012 However, do not treat a discount offered for early payment as the charging of interest or a penalty if both the following apply. Tax forms for 2012 You otherwise accrue the full amount due as gross income at the time you provide the services. Tax forms for 2012 You treat the discount allowed for early payment as an adjustment to gross income in the year of payment. Tax forms for 2012 Change in accounting method. Tax forms for 2012   Generally, you must obtain consent to change to a nonaccrual-experience method (other than one of the safe harbor methods) or to change from one method to another. Tax forms for 2012 See Form 3115 and the Instructions for Form 3115 for more information. Tax forms for 2012 Recovery of a Bad Debt If you claim a deduction for a bad debt on your income tax return and later recover (collect) all or part of it, you may have to include all or part of the recovery in gross income. Tax forms for 2012 The amount you include is limited to the amount you actually deducted. Tax forms for 2012 However, you can exclude the amount deducted that did not reduce your tax. Tax forms for 2012 Report the recovery as “Other income” on the appropriate business form or schedule. Tax forms for 2012 See Recoveries in Publication 525 for more information. Tax forms for 2012 Net operating loss (NOL) carryover. Tax forms for 2012   If a bad debt deduction increases an NOL carryover that has not expired before the beginning of the tax year in which the recovery takes place, you treat the deduction as having reduced your tax. Tax forms for 2012 A bad debt deduction that contributes to a NOL helps lower taxes in the year to which you carry the NOL. Tax forms for 2012 For more information about NOLs, see Publication 536. Tax forms for 2012 Also, see the Instructions for Form 1045, and the Instructions for Form 1139. Tax forms for 2012 Prev  Up  Next   Home   More Online Publications
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The Tax Forms For 2012

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