This page describes 7 categories of required reporting (and sometimes withholding): Withholding when U.S. source FDAP is paid to Foreign Persons, called "chapter 3" or NRA Withholding - IRC 1441 to 1443 and 1461 to 1464 Withholding under FATCA or chapter 4 - IRC 1471-1474 Withholding when a Partnership allocates Effectively Connected Income to Foreign Partners - IRC 1446(a) Withholding on Dispositions of Partnership Interests - IRC 1446(f) Withholding on Dispositions of U.S. Real Property Interests – FIRPTA - IRC 1445 Form 1099 Reporting and Backup Withholding Wages Paid to Employees Withholding when U.S. Source FDAP is paid to Foreign Persons, called "chapter 3" or NRA Withholding – IRC 1441 to 1443 and 1461 to 1464 You are required to report payments subject to NRA withholding on Form 1042-S and to file a tax return on Form 1042. An exception from reporting may apply to individuals who are not required to withhold from a payment and who do not make the payment in the course of their trade or business. Withholding under FATCA or “chapter 4” – IRC 1471-1474 You are a withholding agent for purposes of chapter 4 if you are a U.S. or foreign person, in whatever capacity acting, that has control, receipt, custody, disposal, or payment of a withholdable payment. Similar rules for determining who is a withholding agent as those described in Chapter 3 Withholding Requirements (in Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities), also apply for chapter 4. For purposes of chapter 4, a withholding agent includes a participating foreign financial institution (FFI) (including a reporting Model 2 FFI) or registered deemed-compliant FFI to the extent such FFI makes a withholdable payment. Under chapter 4 of the Code, a withholding agent that makes a withholdable payment to a payee that is an FFI must withhold 30% on the payment unless the withholding agent is able to treat the FFI as a participating FFI, deemed-compliant FFI, or exempt beneficial owner. A withholding agent also must withhold 30% on a withholdable payment made to a payee that is a foreign entity other than an FFI (that is, a nonfinancial foreign entity, or NFFE) that fails to identify its substantial U.S. owners (or certify that it does not have any substantial U.S. owners) unless the payment is excepted from withholding under the regulations to section 1472. A participating FFI is a withholding agent under chapter 4 and is required to withhold on a withholdable payment to the extent required under the FFI agreement, including on a payment made to an account holder that the FFI is required to treat as a recalcitrant account holder. A reporting Model 1 FFI is required to withhold under chapter 4 to the extent required in the applicable Intergovernmental Agreement (IGA). A registered deemed-compliant FFI (other than a reporting Model 1 FFI) is required to withhold under chapter 4 to the extent required under the conditions applicable to its registered deemed-compliant FFI status. See Regulations section 1.1471-5(f)(1) for a description of the types of registered deemed-compliant FFIs that may have withholding requirements. Generally, a withholdable payment is a payment of U.S. source fixed or determinable annual or periodical (FDAP) income. Specific exceptions to withholdable payments apply instead of the exemptions from withholding or taxation provided under chapter 3. See the section “Income Subject to Withholding” within Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, for more information on payments of U.S. source FDAP income that are excepted from the definition of withholdable payment. If a withholding agent makes a payment subject to both chapter 4 withholding and chapter 3 withholding, the withholding agent must apply the withholding provisions of chapter 4 and need not withhold on the payment under chapter 3 to the extent that it has withheld under chapter 4. Similar rules for withholding agent liability for tax, determination of amount to withhold, and when to withhold as those described in Chapter 3 Withholding Requirements, also apply for chapter 4. Form 8966 reporting For chapter 4 purposes, you may be required to report on Form 8966, FATCA Report, if you make a withholdable payment to an entity you agree to treat as an owner-documented FFI or to a passive NFFE. See the section on “Returns Required” within Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities. Withholding when a Partnership allocates Effectively Connected Income to Foreign Partners - IRC 1446(a) 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. Refer to Partnership Withholding on Effectively Connected Income, for more information. Withholding on Dispositions of Partnership Interests - IRC 1446(f) IRC 1446(f), which was added to the IRC by section 13501 of the Tax Cuts and Jobs Act, Public Law 115-97 (2017) (the "Act"), provides rules for withholding on the transfer of a partnership interest described in section 864(c)(8). Section 1446(f)(1) provides that, except as otherwise provided in section 1446(f), if a portion of the gain (if any) on any disposition of an interest in a partnership would be treated under section 864(c)(8) as effectively connected with the conduct of a trade or business within the United States, the transferee is required to deduct and withhold a tax equal to 10 percent of the amount realized on the disposition. See the Final Regulations beginning at 1.1446(f)-1. Withholding of Tax on Dispositions of United States Real Property Interests – FIRPTA – IRC 1445 The disposition of a U.S. real property interest by a foreign person (the transferor) is subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) income tax withholding. In most cases, the transferee/buyer is the withholding agent. If you are the transferee/buyer, you must find out if the transferor is a foreign person. If the transferor is a foreign person and you fail to withhold, you may be held liable for the tax. For cases in which a U.S. business entity such as a corporation or partnership disposes of a U.S. real property interest, the business entity itself is the withholding agent. The rate of withholding generally is 15%. Refer to Withholding of Tax on Dispositions of United States Real Property Interests - FIRPTA. Form 1099 Reporting and Backup Withholding You may also be responsible as a payer for reporting on Form 1099 payments made to a U.S. person. You must backup withhold 24% (or the applicable rate established by legislation amending IRC section 3406) from a reportable payment made to a U.S. person that is subject to Form 1099 reporting if: The U.S. person has not provided its TIN in the manner required, The IRS notifies you that the TIN furnished by the payee is incorrect, There has been a notified payee under-reporting, or There has been a payee certification failure. Generally, a TIN must be provided by a U.S. non-exempt recipient on Form W-9. A payer files a tax return on Form 945 for backup withholding. You may be required to file Forms 1099 and 1096, and, if appropriate, backup withhold on Form 945, 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. Refer to Identifying the Payee, for more information. Foreign persons who provide Form W-8BEN, Form W-8BEN-E, Form W-8ECI, or Form W-8EXP or applicable documentary evidence are exempt from backup withholding and Form 1099 reporting. Wages Paid to Employees If you are the employer of a nonresident alien employee, you may have to withhold taxes at graduated rates. Refer to Pay for Personal Services Performed. References/Related Topics Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities General Instructions for Certain Information Returns (2021) (Forms 1096, 1097, 1098, 1099, 3921, 3922, 5498, and W-2G) 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 cases, orders or opinions issued after May 1, 1986, visit the Search page of the United States Tax Court.