Withholding and Reporting Obligations

Form 1099 reporting and backup withholding. You may also be responsible as a payer for reporting payments to a U.S. person, generally on Form 1099. You must withhold 24% (backup withholding rate) from certain reportable payments made to a U.S. person that is subject to Form 1099 reporting if any of the following apply.

The U.S. person has not provided its taxpayer identification number (TIN) in the manner required.
The IRS notifies you that the TIN furnished by the payee is incorrect.
There has been a notified payee underreporting.
There has been a payee certification failure.

In most cases, a TIN must be provided by a U.S. nonexempt recipient (a U.S. person subject to Form 1099 reporting) on Form W-9.

A payer files a tax return on Form 945 to report backup withholding.

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.S. person. For example, you are required to report income paid to a foreign intermediary or flow-through entity that collects for a U.S. person subject to Form 1099 reporting. However, you may not be required to report on Form 1099 if you make a payment to a participating FFI or registered deemed-compliant FFI that provides a withholding statement allocating the payment to a chapter 4 withholding rate pool of U.S. payees. See Identi- fying the Payee, later, for more information. Also, see Section S. Special Rules for Reporting Payments Made Through Foreign Intermediaries and Foreign Flow-Through Entities on Form 1099 in Pub. 1099, General Instructions for Certain Information Returns .

Tip: Foreign persons who provide a valid Form W-8 (or applicable documentary evidence when permitted in lieu of a Form W-8) are exempt from backup withholding and Form 1099 reporting.

Form 8966 reporting. For chapter 4 purposes, you may be required to report on Form 8966 if you make a withholdable payment to an entity you agree to treat as an owner-documented FFI or to a passive NFFE. See Re- turns Required , later.

Wages paid to employees. If you are the employer of a nonresident alien, you must generally withhold taxes at graduated rates. See Pay for Personal Services Per- formed , later.

Effectively connected income by partnerships. A withholding agent that is a partnership (whether U.S. or foreign) is also responsible for withholding on its income effectively connected with a U.S. trade or business that is allocable to foreign partners. In the case of a publicly

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traded partnership (PTP), however, either the partnership or a nominee may be responsible for this withholding, as applied to distributions by the partnership (PTP distributions). See Partnership Withholding on ECTI , later, for more information.

Transfers of interests in partnerships engaged in the conduct of a U.S. trade or business. A withholding agent is also responsible for withholding on the amount realized on the transfer by a foreign partner of an interest in a partnership (domestic or foreign) engaged in the conduct of a U.S. trade or business. See Section 1446(f) Withholding, later, for more information, including withholding requirements applicable to brokers effecting trans- fers of PTP interests.

USRPI. A withholding agent may also be responsible for withholding if a foreign person transfers a USRPI to the agent, or if it is a corporation, partnership, trust, or estate that distributes a USRPI to a shareholder, partner, or beneficiary that is a foreign person. See U.S. Real Property In- terest , later.