Withholding Tax on Foreign Partners - Form 8804, 8805, 8813, and 8288

Form 8804, Form 8805 and Form 8813 are filed by non-publicly traded partnerships to report and pay Section 1446 withholding tax based on effectively connected taxable income allocated to foreign partners without regard to distribution. See IRM 3.14.2.9.7, Form 1042 / Form 1042-S Withholding on U.S. Source Income, for forms filed for withholding under section 1446(a) by publicly traded partnerships.

Form 8804, Annual Return for Partnership Withholding Tax (Section 1446), shows the total withholding of tax liability of the partnership. For more information concerning Form 8804, please refer to IRM 3.21.15, Withholding on Foreign Partners.

Form 8805, Foreign Partner's Information Statement of Section 1446 Withholding Tax, shows amount of effectively connected taxable income and withholding tax allocated to each foreign partner.

Form 8805 must be attached to the foreign partners tax return for proper credit.

Review for the credit as a TC 766 allowance and if needed make the necessary adjustment.

Any U.S. person erroneously made subject to the withholding tax would also receive Form 8805 from a partnership and should attach to Form 1040 or Form 1120 for credit substantiation.

Form 8813, Partnership Withholding Tax Payment Voucher (Section 1446), is used to transmit withholding tax payments from partnerships.

Forms 8288 and 8288-A are filed to report and pay withholding tax due to the disposition by foreign persons of U.S. real property interests and interests in partnerships engaged in a U.S. trade or business.

Form 8288, U.S. Withholding Tax Return for Certain Dispositions by Foreign Persons, shows the amount subject to withholding and the total amount withheld by the transferee.

Form 8288-A, Statement of Withholding on Certain Dispositions by Foreign Persons, shows the amount of withholding tax. A copy of Form 8288- A, stamped by the IRS, must be attached to the transferor (seller’s) return for proper credit.

Form 8288, U.S. Withholding Tax Return for Disposition by Foreign Persons of U.S. Real Property Interests is also used to report withholding under IRC 1446(f) due to acquisition of partnership interests held by foreign partners, to the extent subject to tax under IRC864(c)(8).

When a partnership determines a foreign partner sold their interest, without the buyer withholding 10% of the amount realized, the partnership is required to file Form 8288 (Part IV) and Form 8288-C, Statement of Withholding Under Section 1446(f)(4) on Dispositions by Foreign Persons of Partnership Interests Under Section 1446(f)(4). The partnership must withhold on "all distributions paid" to the buyer (new partner) until the partnership receives the certification from the buyer described in Treas. Reg. 1.1446(f)-2(d)(2) and then "until the 10%" of the amount realized on the transfer reduced by the amount withheld by the buyer (plus interest) is satisfied. This may result in multiple forms being filed for the same sell of partnership shares.

The presence of a Transaction Code (TC) 971 with Action Code (AC) 741 with a total amount withheld in the memo field will post to the partnership’s MFT 17 account. A new TC 971 AC 741 will post each time a new Form 8288 (Part IV) is processed. A TC 972 indicates a reversal of a TC 971. The payments associated with the TC 971 AC 741 will post to the buyers MFT 17 as TC 610. The TC 150 must be posted on the partner’s (buyer) account before any overpayments are released. See IRM 3.21.25.17, Credit Verifying Form 8288-A (FIRPTA) and section 1446(f)(1) Credits, for additional information.

In addition, credits claimed on Form 8288-C, Copy B, must be verified with the FIRPTA database prior to allowance. FIRPTA Credit verification is requested using Form 13698, International Credit(s) Verification Slip.