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Notification of Possible Filing Requirement

This reminder is being issued to alert partnerships that they may have an additional filing requirement with the Internal Revenue Service related to a foreign partner(s) on their partnership return. This notification may apply to you if you answer "YES" to Question 6, Schedule B of Form 1065, U.S. Return of Partnership Income; or Question 4, Schedule B of Form 1065-B, U.S. Return of Income for Electing Large Partnerships.

If the partnership had taxable income effectively connected with the conduct of a trade or business within the United States that is allocable to a foreign partner, Internal Revenue Code (IRC) Section 1446 requires the partnership to report and pay a withholding tax to the IRS. The partnership must pay the Section 1446 withholding tax regardless of the amount of the foreign partner's ultimate U.S. tax liability and regardless of whether the partnership makes any distributions during its tax year. If the partnership is liable for the Section 1446 Withholding Tax, you may download the forms from the IRS website or call 1-800-829-3676 to request forms and publications. Should you use the online method, select "Forms and Publications", and click. The response window will display several choices, select the link for "Forms and Publications by Number", and click. Now you can search for your form. If the partnership is not liable, no further action is required.

For information on reporting and paying the Section 1446 withholding tax, as well as the general reporting obligations, see Form 8804, Annual Return for Partnership Withholding Tax, Form 8805, Foreign Partner's Information Statement of Withholding Tax, and Form 8813, Partnership Withholding Tax Payment Voucher. A partnership that does not comply with Section 1446 reporting and withholding tax requirements may be subject to penalties and/or interest.

Special rules apply to publicly traded partnerships. Publicly traded partnerships must file Forms 8804, 8805, and 8813 only if they elected to pay Section 1446 withholding tax, based on effectively connected taxable income allocable to its foreign partners.

In addition to the requirement to withhold tax under Section 1446, U.S. source income that is not effectively connected with the partnership's U.S. trade or business may be subject to withholding tax under IRC Sections 1441, 1442, and 1443. Report this type of withholding tax on Form 1042 and Form(s) 1042-S. For more information, see Publication 515, Withholding of Tax on Nonresident Aliens, and Foreign Corporations.

If you want more detailed information about the time and manner to pay the Section 1446 withholding tax, you should refer to the IRC and to Revenue Procedure 89-31, 1989-1 C.B. 895.

Notice CP-282 (12-01)

Page Last Reviewed or Updated: 05-Nov-2014