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Notice 2001-4 - Foreign Source Income, for Services Performed Outside the United States Is Paid By a U.S. Payor

Notice 2001-4
Clarifications of Qualified Intermediary Agreement Provisions and Procedures.
2001-2 I.R.B. 267
January 8, 2001
I. Purpose.
 

"Certain issues have arisen regarding the implementation of the new withholding and reporting regulations (TD 8734, I.R.B. 5, and TD 8881, 2000-23 I.R.B. 1158) and the qualified intermediary agreement contained in Rev. Proc. 2000-12 (2000-4 I.R.B. 387). This notice provides guidance regarding certain transitional and other issues for qualified intermediaries (QIs) and U.S. withholding agents. In addition, this notice provides a clarification regarding the use of the term "know your customer" in the context of the new withholding and reporting regulations. The Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) will continue to monitor the implementation of the new regulations and the qualified intermediary agreement and will provide, as appropriate, other guidance designed to ensure that the implementation process occurs as smoothly as possible."

Notice 2001-4
Clarifications of Qualified Intermediary Agreement Provisions and Procedures.
2001-2 I.R.B. 267
January 8, 2001
V. Transition Relief for U.S. Withholding Agents, E. Foreign Source Services Income

"Under section 6041, a U.S. payor must report payments of foreign source income paid for services performed outside the United States unless the U.S. payor has a Form W-8 from the payee stating that the payee is not a U.S. person.

Under the presumption rules of §§ 1.6049-5(d)(2) and 1.14441-1(b)(3)(iii), a U.S. payor must presume that the payee of income for services is a U.S. payee and subject to Form 1099 reporting, and potentially backup withholding, if the payee is an individual. U.S. payors, which include controlled foreign corporations, contend that the rule contained in the regulations is overly burdensome in that it requires them to ask all persons to whom they make payments for services performed outside the United States to represent that they are not U.S. persons."

"Until further notice, the IRS will not require a U.S. payor to report, under section 6041, income paid for services if:

  1. the payee of the income is an individual,
  2. the U.S. payor does not know that the payee is a U.S. citizen or resident,
  3. the payor does not know, and has no reason to know, that the income is (or may be) effectively connected with the conduct of a U.S. trade or business, and
  4. all of the services for which payment is made were performed by the payee outside the United States."

References/Related Topics

  • Notice 2001-43
  • Notice 2002-41
  • Notice 2002-66
  • Notice 2006-35
  • Revenue Procedure 2003-64
  • Revenue Procedure 2004-21
  • Revenue Procedure 2004-59
  • Revenue Procedure 2005-71

Note: This page contains one or more references to the Internal Revenue Code (IRC), Treasury Regulations, court cases, or other official tax guidance. References to these legal authorities are included for the convenience of those who would like to read the technical reference material. To access the applicable IRC sections, Treasury Regulations, or other official tax guidance, visit the Tax Code, Regulations, and Official Guidance page. To access any Tax Court case opinions issued after September 24, 1995, visit the Opinions Search page of the United States Tax Court.

Page Last Reviewed or Updated: 16-Dec-2014