Use Forms 8804, 8805, and 8813 to pay and report section 1446 withholding tax based on effectively connected taxable income allocable to foreign partners.

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 effectively connected taxable income 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, 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 should attach it to his or her income tax return to claim a withholding credit. A partnership that receives a Form 8805 from a lower-tier partnership should see Tiered Partnerships, on page 4.

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 return. See Schedule T-Beneficiary Information, on page 5 for details.

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.

All partnerships with effectively connected gross income allocable to a foreign partner in any tax year must file Forms 8804 and 8805 whether or not distributions were made during the partnership's 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.

File Forms 8804, 8805, and 8813 with:

To insure 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 effectively connected taxable income allocable to a foreign partner must pay a withholding tax equal to the applicable percentage of the effectively connected taxable income 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). Effectively connected taxable income is defined on page 2. Applicable percentage is defined on page 3.

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 person subject to section 1446. A foreign person is any person that is not a U.S. person within the meaning of 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.

When making a 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 ECTI, it must file a Form 8804 and it must file a separate Form 8805 for each partner for whom it paid tax. In addition, if the partnership relies on a certificate it receives from a partner under Regulations section 1.1446-6T, 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).

If the foreign partner is a foreign trust or estate, the foreign trust or estate must provide to each of its beneficiaries a Form 8805 completed as described under Schedule T-Beneficiary Information on page 5.

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:

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 “publicly traded partnership” 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 publicly traded partnership treated as a corporation under the general rule of section 7704(a).

A publicly traded partnership that has effectively connected income, gain, or loss, must withhold tax on distributions of that income made to its foreign partners. The rate is 35%. The publicly traded partnership 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 will occur 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. 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.

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 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 on page 3. 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.