Documentation is key under new IRS guidelines for foreign customers

In 1997, the IRS released final regulations under Internal Revenue Code Section 1441 for reporting and withholding for nonresident aliens (NRA). These rules, effective, January 1, 2000, apply to financial institutions that make certain types of payments to an NRA customer of US source income, such a...

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Bibliographic Details
Published in:ABA bank compliance 1999-03, Vol.20 (3), p.19
Main Author: Riedlinger, Cheryl S
Format: Magazinearticle
Language:English
Subjects:
Banking industry
Compliance
Documentation
Financial institutions
Financial reporting
Fines & penalties
Foreign partnerships
Information returns
Internal Revenue Code
International organizations
Noncitizens
Nonresidents
Section 1441
Withholding
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Summary:In 1997, the IRS released final regulations under Internal Revenue Code Section 1441 for reporting and withholding for nonresident aliens (NRA). These rules, effective, January 1, 2000, apply to financial institutions that make certain types of payments to an NRA customer of US source income, such as interest or dividends. One of the purposes of the new regulations was to unify and streamline the documentation requirements for foreign persons. Generally, under the NRA rules, a withholding agent such as a bank must withhold 30% of a payment and/or report on Form 1042-S Foreign Person's US Source Income Subject to Withholding. The agent must withhold and/or report unless it has documentation upon which it can rely to treat the owner either as a US person or as a foreign person entitled to a reduced rate of withholding.
ISSN:0887-0187
1930-3963