Withholding and Reporting Obligations

NRA Withholding

You are required to report payments subject to NRA withholding on Form 1042-S (PDF) and to file a tax return on Form 1042 (PDF). 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.

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 39.6% (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 (PDF) for backup withholding.

You may be required to file Form 1099, and, if appropriate, backup withhold, 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 (PDF), Form W-8ECI (PDF), or Form W-8EXP (PDF) 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.

Partnership Withholding on Effectively Connected Income

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 of Tax on Dispositions of United States Real Property Interests - FIRPTA

A withholding agent may also be responsible for withholding if a foreign person disposes of a U.S. real property interest to the withholding agent. If a corporation, partnership, trust or estate that distributes a U.S. real property interest to a shareholder, partner, or beneficiary that is a foreign person, that entity is responsible for withholding and reporting.  Refer to Withholding of Tax on Dispositions of United States Real Property Interests - FIRPTA.

References/Related Topics

  • Withholding of Tax

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.