Table of Contents
- Purpose of Forms
- Who Must File
- When To File
- Where To File
- Amended Form 8804
- Taxpayer Identifying Number
- Requirement To Make Withholding Tax Payments
- Withholding Agents
- Determining If a Partner Is a Foreign Person
- Effectively Connected Taxable Income (ECTI)
- Certification of Deductions and Losses
- Reductions for State and Local Taxes
- Amount of Withholding Tax
- Reporting to Partners
- Interest and Penalties
- Treatment of Partners
- Publicly Traded Partnerships (PTP)
- Tiered Partnerships
Use Forms 8804, 8805, and 8813 to pay and report section 1446 withholding tax based on effectively connected taxable income (ECTI) allocable to foreign partners (as defined in section 1446(e)).
Use Form 8804, Annual Return for Partnership Withholding Tax (Section 1446), to report the total liability under section 1446 for the partnership's tax year. Form 8804 is also a transmittal form for Form(s) 8805.
Use Form 8805, Foreign Partner's Information Statement of Section 1446 Withholding Tax, to show the amount of ECTI and the total tax credit allocable to the foreign partner for the partnership's tax year.
File a separate Form 8805 for each foreign partner. See Reporting to Partners, later, and the instructions for line 8b of Form 8805, later, to determine when Form 8805 is required even if no section 1446 withholding tax was paid. Attach Copy A of each Form 8805 to the Form 8804 filed with the IRS.
Foreign partners must attach Form 8805 to their U.S. income tax returns to claim a withholding credit for their shares of the section 1446 tax withheld by the partnership. Any U.S. person erroneously subjected to the withholding tax would also receive Form 8805 from a partnership, and the Form 8805 should be attached to the U.S. person's income tax return to claim a withholding credit. A partnership that receives a Form 8805 from a lower-tier partnership should see Tiered Partnerships, later.
Form 8805 may also be completed, in some cases, by a foreign trust or estate. A foreign partner that is a foreign trust or estate must complete Schedule T of Form 8805 to report to the trust or estate's beneficiaries the section 1446 withholding tax that may be claimed as a withholding tax credit on the beneficiaries' income tax returns. See Schedule T–Beneficiary Information, later.
Use Form 8813, Partnership Withholding Tax Payment Voucher (Section 1446), to pay the withholding tax under section 1446 to the United States Treasury. Form 8813 must accompany each payment of section 1446 tax made during the partnership's tax year.
Every partnership (other than a publicly traded partnership) that has effectively connected gross income allocable to a foreign partner must file a Form 8804, regardless of whether it had ECTI allocable to a foreign partner. The partnership must also file a Form 8805 for each partner on whose behalf it paid section 1446 tax, regardless of whether the partnership made any distributions during its tax year. The partnership may designate a person to file the forms. The partnership, or person it designates, must file these forms even if the partnership has no withholding tax liability under section 1446.
Generally, file these forms on or before the 15th day of the 4th month following the close of the partnership's tax year. For partnerships that keep their records and books of account outside the United States and Puerto Rico, the due date is the 15th day of the 6th month following the close of the partnership's tax year. If the partnership is permitted to file these forms on or before the 15th day of the 6th month, check the box at the top of Form 8804.
If a due date falls on a Saturday, Sunday, or legal holiday, file by the next business day.
File Forms 8804 and 8805 separately from Form 1065, U.S. Return of Partnership Income, or Form 1065-B, U.S. Return of Income for Electing Large Partnerships.
If you need more time, you can file Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns, to request an extension of time to file Form 8804. Form 7004 does not extend the time for payment of tax.
File Forms 8804, 8805, and 8813 with:
Internal Revenue Service Center
P.O. Box 409101
Ogden, UT 84409
A partnership may file an amended Form 8804 to correct a previously filed Form 8804. To do so, complete a new Form 8804 with the corrected information. Write “Amended” in the top margin of the form and write “Corrected” on any Forms 8805 attached to the Form 8804. File the amended form with the address shown under Where To File above.
For the requirements for and the limits on obtaining a refund of the 1446 tax based on an amended Form 8804, see Regulations section 1.1446-3(d)(2)(iv).
To ensure proper crediting of the withholding tax when reporting to the IRS, a partnership must provide a U.S. taxpayer identifying number (TIN) for each foreign partner. The partnership should notify any of its foreign partners without such a number of the necessity of obtaining a U.S. identifying number. An individual's identifying number is the individual's social security number (SSN) or individual taxpayer identification number (ITIN). Any other partner's identifying number is its U.S. employer identification number (EIN).
Certain aliens who do not have and are not eligible to get an SSN may apply for an ITIN on Form W-7, Application for IRS Individual Taxpayer Identification Number. The application is also available in Spanish.
A foreign or domestic partnership that has ECTI allocable to a foreign partner must pay a withholding tax equal to the applicable percentage of the ECTI that is allocable to its foreign partners. However, this requirement does not apply to a partnership treated as a corporation under the general rule of section 7704(a). ECTI is defined later. Applicable percentage is defined later.
For ease of reference, these instructions refer to various requirements applicable to withholding agents as requirements applicable to partnerships themselves.
A partnership must determine if any partner is a foreign partner subject to section 1446. A foreign partner (as defined in section 1446(e)) is any partner who is not a U.S. person, which is defined in section 7701(a)(30). As such, a foreign person includes a nonresident alien individual, foreign corporation, foreign partnership, foreign trust or estate, or a foreign organization described in section 501(c).
A partnership may determine a partner's foreign or nonforeign status by relying on a W-8 form (for example, Form W-8BEN), Form W-9, an acceptable substitute form, or by other means. See Form of certification and Use of Means Other Than Certification below. Also, see Regulations section 1.1446-1(c) for additional information.
In general, a partnership may determine that a partner is not a foreign person by obtaining a Form W-9 from the partner. A partnership that has obtained this certification may rely on it to establish the nonforeign status of a partner. See Effect of certification below.
Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals).
W-8BEN-E, Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities).
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.
W-8EXP, Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding and Reporting.
W-8IMY, Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding and Reporting.
Form W-9, Request for Taxpayer Identification Number and Certification.
An acceptable substitute form (as described in Regulations section 1.1446-1(c)(5)).
A statement required from a domestic grantor trust (as described in Regulations section 1.1446-1(c)(2)(ii)(E)) with the necessary documentation required for the trust and the grantor.
Its validity period has not expired,
The partner submitting the form has signed it under penalties of perjury, and
It contains all the required information.
A partnership is not required to obtain a Form W-9. It may rely on other means to learn the nonforeign status of the partner. But if the partnership relies on other means and erroneously determines that the partner was not a foreign person, the partnership will be held liable for payment of the tax, any applicable penalties, and interest. A partnership is not required to rely on other means to determine the nonforeign status of a partner and may demand a Form W-9. If a certification is not provided, the partnership may presume the partner is foreign and will be considered for purposes of sections 1461 through 1463 to have been required to withhold section 1446 tax.
ECTI is the excess of the gross income of the partnership that is effectively connected under section 864(c), or treated as effectively connected with the conduct of a U.S. trade or business, over the allowable deductions that are connected to such income. See Pub. 519, U.S. Tax Guide for Aliens, for detailed instructions regarding the computation of ECTI. For purposes of these instructions, figure this income with the following statutory adjustments.
Section 703(a)(1) does not apply.
The partnership is allowed a deduction for depletion of oil and gas wells, but the amount of the deduction must be determined without regard to sections 613 and 613A.
The partnership may not take into account items of income, gain, loss, or deduction allocable to any partner that is not a foreign partner.
See Regulations section 1.1446-2 for additional adjustments that may be required.
A partnership's ECTI includes partnership income subject to a partner's election under section 871(d) or 882(d) (election to treat real property income as income connected with a U.S. business). It also includes any partnership income treated as effectively connected with the conduct of a U.S. trade or business under section 897 (disposition of investment in U.S. real property), and other items of partnership income treated as effectively connected under other provisions of the Internal Revenue Code, regardless of whether those amounts are taxable to the partner.
See Regulations section 1.1446-2 for additional information for computing ECTI.
The amount of a partnership's ECTI for the partnership's tax year allocable to a foreign partner under section 704 equals (a) the foreign partner's distributive share of effectively connected gross income of the partnership for the partnership's tax year that is properly allocable to the partner under section 704, minus (b) the foreign partner's distributive share of deductions of the partnership for that year that are connected with that income under section 873 or section 882(c)(1) and that are properly allocable to the partner under section 704. This income must be computed by taking into account any adjustments to the basis of the partnership property described in section 743 according to the partnership's election under section 754. Also, a partnership's ECTI is not allocable to a foreign partner to the extent the amounts are exempt from U.S. tax for that partner by a treaty or reciprocal agreement, or a provision of the Code.
A foreign partner, in certain circumstances, may certify to the partnership that it has deductions and losses it reasonably expects to be available to reduce the partner's U.S. income tax liability on the partner's allocable share of effectively connected income or gain from the partnership. In certain circumstances, the partnership may consider and rely on these deductions and losses to reduce the partnership's section 1446 tax.
Foreign partners must submit all certificates (including updated certificates) using Form 8804-C, Certificate of Partner-Level Items to Reduce Section 1446 Withholding.
See Form 8804-C and its instructions, and Regulations section 1.1446-6 for additional information.
In addition to any deductions and losses certified by a foreign partner to the partnership (see Certification of Deductions and Losses above), the partnership may consider as a deduction of such partner 90% of any state and local income taxes withheld and remitted by the partnership on behalf of such partner with respect to the partner's allocable share of partnership ECTI. The partnership may consider the amount of state and local taxes of the foreign partner regardless of whether the foreign partner submits a certificate to the partnership.
Do not deduct state and local taxes paid on behalf of the partnership. The partnership may only consider as a deduction of a partner the partner's own state and local income taxes the partnership withholds and remits on the partner's behalf with respect to the partner's allocable share of partnership ECTI.
Under section 1446, a partnership must make four installment payments of withholding tax during the tax year.
Fixed or determinable, annual or periodical income subject to tax under section 871(a) or 881 is not included in the partnership's ECTI under section 1446. However, these amounts are independently subject to withholding under the requirements of sections 1441 and 1442 and their regulations.
When making an installment payment of withholding tax to the IRS under section 1446, a partnership must notify all foreign partners of their allocable shares of any section 1446 tax paid to the IRS by the partnership. The partners use this information to adjust the amount of estimated tax that they must otherwise pay to the IRS. The notification to the foreign partners must be provided within 10 days of the installment due date, or, if paid later, the date the installment payment is made. See Regulations section 1.1446-3(d)(1)(i) for information that must be included in the notification and for exceptions to the notification requirement.
If a partnership has gross effectively connected income, it must file a separate Form 8805 for each partner for whom it paid section 1446 tax. In addition, if the partnership reduces ECTI for state and local income tax deductions permitted under Regulations section 1.1446-6(c)(1)(iii) or relies on a Form 8804-C it receives from a partner to reduce its section 1446 tax, it must complete a Form 8805 for the partner even if no tax is paid on behalf of the partner. The foreign partner must also receive a copy of its Form 8805 by the due date of the partnership return (including extensions).
A foreign partner that is a foreign trust or estate must provide to each of its beneficiaries a Form 8805 completed as described under Schedule T–Beneficiary Information, later.
Interest is charged on taxes not paid by the due date, even if an extension of time to file is granted. Interest is also charged on penalties imposed for failure to file, negligence, fraud, and substantial understatements of tax from the due date (including extensions) to the date of payment. The interest charge is figured at a rate determined under section 6621.
A partnership that fails to file Form 8804 when due (including extensions of time to file) generally may be subject to a penalty of 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax. The penalty will not apply if the partnership can show reasonable cause for filing late.
If you receive a notice about penalty and interest after you file Form 8804, send us an explanation and we will determine if you meet reasonable-cause criteria. Do not attach an explanation when you file Form 8804.
A penalty may be imposed for failure to file each Form 8805 when due (including extensions). The penalty may also be imposed for failure to include all required information on Form 8805 or for furnishing incorrect information. The penalty is based on when a correct Form 8805 is filed as follows.
$30 per Form 8805 if the partnership correctly files within 30 days; maximum penalty of $250,000 per year ($75,000 for a small business). A “small business” has average annual gross receipts of $5 million or less for the most recent 3 tax years (or for the period of time the business has existed, if shorter) ending before the calendar year in which the Forms 8805 were due.
$100 per Form 8805 if the partnership files more than 30 days after the due date or does not file a correct Form 8805; maximum penalty of $1,500,000 per year ($500,000 for a small business).
If the partnership intentionally disregards the requirement to report correct information, the penalty per Form 8805 is increased to $250 or, if greater, 10% of the aggregate amount of items required to be reported, with no maximum penalty. For more information, see sections 6721 and 6724.
A penalty may be imposed for each failure to furnish Form 8805 to the recipient when due. The penalty may also be imposed for each failure to give the recipient all required information on each Form 8805 or for furnishing incorrect information. The penalty is:
$30 per Form 8805 if the partnership correctly furnishes within 30 days; maximum penalty of $250,000 per year ($75,000 for a small business). A “small business” has average annual gross receipts of $5 million or less for the most recent 3 tax years (or for the period of time the business has existed, if shorter) ending before the calendar year in which the Forms 8805 were due; or
$100 per Form 8805 if the partnership furnishes more than 30 days after the due date or does not furnish a correct Form 8805; maximum penalty of $1,500,000 per year ($500,000 for a small business).
If the partnership intentionally disregards the requirement to report correct information, the penalty is increased to $250 or, if greater, 10% of the aggregate amount of items required to be reported, with no maximum penalty. For more information, see sections 6722 and 6724.
The penalty for not paying tax when due is usually ½ of 1% of the unpaid tax for each month or part of a month the tax is unpaid. The penalty cannot exceed 25% of the unpaid tax. The penalty will not apply if the partnership can show reasonable cause for paying late.
If you receive a notice about penalty and interest after you file Form 8804, send us an explanation and we will determine if you meet reasonable-cause criteria. Do not attach an explanation when you file Form 8804.
Any person required to withhold, account for, and pay over the withholding tax under section 1446, but who fails to do so, may be subject to a civil penalty under section 6672. The civil penalty is equal to the amount that should have been withheld and paid over.
Penalties may also be imposed, absent reasonable cause and good faith, for failing to accurately report the amount of tax required to be shown on a return, if any portion of the resulting underpayment is attributable to negligence, substantial understatement of income tax, valuation misstatement, or fraud. See sections 6662 and 6663.
A partnership's payment of section 1446 withholding tax on ECTI allocable to a foreign partner generally relates to the partner's U.S. income tax liability for the partner's tax year in which the partner is subject to U.S. tax on that income.
Amounts paid by the partnership under section 1446 on ECTI allocable to a partner are allowed to the partner as a credit under section 33. The partner may not claim an early refund of withholding tax paid under section 1446.
Amounts paid by a partnership under section 1446 for a partner are to be treated as distributions made to that partner on the earliest of the following.
The day on which this tax was paid by the partnership.
The last day of the partnership's tax year for which the amount was paid.
The last day on which the partner owned an interest in the partnership during that year.
However, the amount of section 1446 withholding paid during a tax year by the partnership is generally treated as an advance or draw under Regulations section 1.731-1(a)(1)(ii) to the extent of the partner's share of income for the partnership year. See Regulations section 1.1446-3(d)(2)(v) for more details.
A partner that wishes to claim a credit against its U.S. income tax liability for amounts withheld and paid under section 1446 must attach Copy C of Form 8805 to its U.S. income tax return for the tax year in which it claims the credit.
See Regulations section 1.1446-3(d)(2) for additional information.
A PTP is any partnership whose interests are regularly traded on an established securities market (regardless of the number of its partners). However, it does not include a PTP treated as a corporation under the general rule of section 7704(a).
A PTP that has effectively connected income, gain, or loss must withhold tax on distributions of that income made to its foreign partners. The rate is 39.6% for non-corporate foreign partners, and 35% for corporate partners. The PTP may not consider preferential rates when computing the section 1446 tax for a partner. The partnership uses Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons; Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding; and Form 1042-T, Annual Summary and Transmittal of Forms 1042-S, to report withholding from distributions instead of following these instructions. It also must comply with the regulations under section 1461 and Regulations section 1.6302-2.
The term “tiered partnership” describes the situation in which a partnership owns an interest in another partnership. The former is an “upper-tier partnership” and the latter is a “lower-tier partnership.” An upper-tier partnership that owns a partnership interest in a lower-tier partnership is allowed a credit against its own section 1446 liability for any section 1446 tax paid by the lower-tier partnership for that partnership interest.
If an upper-tier partnership provides appropriate documentation to a lower-tier partnership, the lower-tier partnership may look through the partnership to the partners of such upper-tier partnership in determining its section 1446 tax due. The look-through may apply only with respect to the portion of the upper-tier partnership's allocation that is allocable to partners of such partnership for which appropriate documentation has been received by the lower-tier partnership. For more information, see Regulations section 1.1446-5(c) for upper-tier foreign partnerships and Regulations section 1.1446-5(e) for upper-tier domestic partnerships. See Regulations section 1.1446-5(b) for reporting requirements.
The look-through rules referred to above apply only for purposes of the lower-tier partnership's computation of its section 1446 tax liability. It does not affect the upper-tier partnership's reporting requirements with respect to Forms 8804 and 8805 as set forth in the next paragraph and elsewhere in these instructions.
An upper-tier partnership that has had section 1446 tax payments made on its behalf by a lower-tier partnership will receive a copy of Form 1042-S or Form 8805 from the lower-tier partnership. The upper-tier partnership must in turn file these forms with its Form 8804 and treat the amount withheld by the lower-tier partnership as a credit against its own liability to withhold under section 1446. This credit is allowed on line 6b or line 6c of the Form 8804 filed by the upper-tier partnership. The upper-tier partnership must also provide to its partners the information described in Reporting to Partners, earlier. These statements and forms will enable those partners to obtain appropriate credit for tax withheld under section 1446.
See Regulations section 1.1446-5 for additional information.
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