Backup Withholding

Form W-9 : US Resident
Form W-8BEN: Non US Individual
Form W-8BEN-E: Non US Entity
Backup Withholding What is backup withholding? Persons making certain payments to you must
under certain conditions withhold and pay to the IRS 24% of such payments. This is called “backup
withholding.” Payments that may be subject to backup withholding include interest, tax-exempt
interest, dividends, broker and barter exchange transactions, rents, royalties, nonemployee pay,
payments made in settlement of payment card and third-party network transactions, and certain
payments from fishing boat operators. Real estate transactions are not subject to backup
withholding. You will not be subject to backup withholding on payments you receive if you give the
requester your correct TIN, make the proper certifications, and report all your taxable interest and
dividends on your tax return. Payments you receive will be
Payments you receive will be subject to backup withholding if:
FormW-9 : If the enity is US resident
You do not furnish your TIN to the requester, 2. You do not certify your TIN when required (see
the instructions for Part II for details), 3. The IRS tells the requester that you furnished an
incorrect TIN, 4. The IRS tells you that you are subject to backup withholding because you did
not report all your interest and dividends on your tax return (for reportable interest and
dividends only), or 5. You do not certify to the requester that you are not subject to backup
withholding under 4 above (for reportable interest and dividend accounts opened after 1983
only). Certain payees and payments are exempt from backup withholding. See Exempt payee
code, later, and the separate Instructions for the Requester of Form W-9 for more information.
Also see Special rules for partnerships, earlier.
What is FATCA Reporting?

The Foreign Account Tax Compliance Act (FATCA) requires a participating foreign financial
institution to report all United States account holders that are specified United States persons.
Certain payees are exempt from FATCA reporting. See Exemption from FATCA reporting code,
later, and the Instructions for the Requester of Form W-9 for more information
Form 1099:
KEY TAKEAWAYS
 Form 1099 is used to report certain types of non-employment

income to the Internal Revenue Service.
 Certain types of non-employment income for freelance and
independent contract work must be reported on a 1099–NEC.
 The deadline to mail 1099s to taxpayers is usually January 31.
 If a 1099 form is not received, you are still responsible for paying the
taxes owed on any income earned during the tax year.
 If you receive an incorrect 1099 form and the payer already sent it to
the IRS, ask the originator to send a corrected form.
Publication 515 Year:2020
Form 1042: Annual Withholding Tax Return for U.S. Source Income of Foreign Persons
Use Form 1042 to report the following:
 The tax withheld under chapter 3 on certain income of foreign persons,

including nonresident aliens, foreign partnerships, foreign corporations,
foreign estates, and foreign trusts.
 The tax withheld under chapter 4 on withholdable payments.
 The tax withheld pursuant to section 5000C on specified federal procurement
payments.
 Payments that are reported on Form 1042-S under chapters 3 or 4.
Use Form 1042-S to report:
 Amounts paid to foreign persons from U.S. sources that are reportable under chapter
3 or 4 (regardless of whether withholding was required or not);
 Amounts withheld under chapters 3 and 4;
 Specified federal procurement payments subject to withholding under section 5000C,
and certain payments subject to section 877A;
 Certain distributions by publicly traded trusts, qualified investment entities, and
publicly traded partnerships.
 Payments to foreign sellers of certain partnership interests subject to IRC 1446(f)
When Due
The Forms 1042, 1042-S and 1042-T must be filed by March 15 of the year following
the calendar year in which the income subject to reporting was paid. If March 15 falls
on a Saturday, Sunday, or legal holiday, the due date is the next business day.
Who Must File

Every withholding agent.
Reporting Agent Authorization

You must use Form 8655, Reporting Agent Authorization to inform the IRS if a
different entity is acting as your reporting or paying agent for Forms 1042 or 1042-S.
See Reporting Agents File.
TIN Requirement
Generally, a recipient Taxpayer Identification Number (TIN) is required on Form
1042-S, to reduce the tax rate of withholding that a withholding agent must apply tax
to less than 30%. Exceptions include certain code-based reductions (such as
portfolio interest) and treaty rates on marketable securities (such as on most stocks
and bonds paid through a brokerage). A foreign person’s TIN is the Individual
Taxpayer Identification Number (ITIN) issued by the IRS or the Employer
Identification Number (EIN) issued by the IRS. If the sole purpose of supplying a TIN
is to request treaty benefits, the recipient’s Foreign TIN (FTIN) can now be used to
identify the recipient that is a resident of a treaty country. In any case, if the
withholding agent has the TIN, FTIN or GIIN (Global Intermediary Identification
Number) of the recipient, these are required to be entered on the Form 1042-S.
TINs on Withholding Certificates

Unless there is an exception, any withholding agent who receives a Form 8233 or,
generally, a W-8BEN without a payee TIN for the purpose of claiming a tax treaty
benefit is not allowed to grant that benefit until a proper Form 8233, W-8BEN or W-
8BEN-E that does report the payee's TIN is received. In short, this means that, in the
case of payments to nonresident aliens, if an NRA does not report his/her TIN to the
withholding agent or does not meet an exception, the withholding agent is required to
withhold 30% federal income tax on the payment(s) and the NRA is not entitled to
any tax treaty benefit until a TIN is provided. There is an exception for payments of
FDAP income that are paid on marketable securities if the withholding agent has the
facts necessary to make this determination. There is also an exception to the TIN
requirement for "portfolio interest" payments. See Publication 515, Withholding of
Tax on Nonresident Aliens and Foreign Entities.
1042 S v/S 1099
1042 is for tax deducted (Form W-8/ Form -8 BEN)

1099 is for all payments made for non-employment (usually include Form -9)
Effectively Connected Income: Office, business in US And hence withholding not applicable if
you furnish Form W-8 ECI
Not ECI:
FDAP
Amounts Subject to Chapter 3 Withholding:
A payment is subject to chapter 3 withholding if it is from sources within the United States, and
it is fixed or determinable annual or periodical (FDAP) income. Generally, excluding gains but
including certain gains from the disposal of timber, coal, and iron ore, or from the sale or
exchange of patents, copyrights, and similar intangible property. In addition, a p
Form W-8 BEN or Form W-8 BEN- E
 Non US resident
 Beneficial Owner of US income
 Claiming tax exemption or reduced tax rate as per tax treaty
Amounts Subject to Chapter 4 Withholding U.S. source FDAP income for purposes of chapter 4 is
similar to U.S. source FDAP income for purposes of chapter 3, subject to certain modifications
such as the exclusion of certain types of non-financial payments and the inclusion (as U.S. source
interest) of deposit interest paid by a foreign branch of a U. S. corporation or partnership. Also,
see Fixed or Determinable Annual or Periodical Income (FDAP), later. A withholding agent must
withhold on a payment of U.S. source FDAP income that is a withholdable payment to which an
exception does not apply under chapter 4. Amounts not subject to withholding under chapter 4.
The following amounts are not subject to withholding under chapter 4. • Interest or original
issue discount from a short-term obligation.
Payments made under a grandfathered obligation (for example, oblig
1. MG Payments to Qimao/ COL

Backup Withholding

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Backup Withholding

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Form W-9 : US Resident

Form W-8BEN: Non US Individual

Form W-8BEN-E: Non US Entity

Payments you receive will be subject to backup withholding if:

FormW-9 : If the enity is US resident

What is FATCA Reporting?

 Form 1099 is used to report certain types of non-employment

Publication 515 Year:2020

Use Form 1042 to report the following:

 The tax withheld under chapter 3 on certain income of foreign persons,

Use Form 1042-S to report:

Who Must File

Reporting Agent Authorization

TINs on Withholding Certificates

1042 S v/S 1099

1042 is for tax deducted (Form W-8/ Form -8 BEN)

Amounts Subject to Chapter 3 Withholding:

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