Employees in the Accounts Management (AM) organization respond to taxpayer correspondence and phone calls as well as process claims, certain applications and other internal adjustment requests.

The IRS is committed to a customer service program that encourages taxpayers to comply voluntarily with the tax laws and assists them in meeting their obligations.

The BMF International Program is committed to achieving excellence in the service it provides to its customers. We provide our customers with assistance in a manner that warrants the highest degree of public confidence. Customer Service Representatives (CSRs) practice courtesy and proper communication techniques while ensuring that responses are technically and procedurally accurate and complete.

CSRs assigned to the BMF International Program provide help to taxpayers on a wide range of topics relating to BMF International Issues.

IRM 21.8.2 includes information and instructions to resolve BMF International correspondence and amended returns and answer BMF International calls and attempts to address the situations most frequently encountered by the CSRs.

The procedures in this IRM are an attempt to translate a variety of legal and administrative authorities into practical guidance assistors can use. Refer to IRM 1.2.1, Servicewide Policies and Authorities - Servicewide Policy Statements, for information.

These authorities take many forms: Treasury Regulations, the Internal Revenue Code (IRC), legislation, revenue rulings and revenue procedures, Taxpayer Bill of Rights, and advice from Counsel to name only some. These authorities are cited in this IRM as they apply to the topic being discussed.

The principal Internal Revenue Codes are cited in this IRM as they apply to the topic being discussed.

The Taxpayer Services Commissioner has overall responsibility for the policy related to this IRM which is published on a yearly basis.

The Director of Accounts Management is responsible for policy related to this IRM.

The Chief of this team is responsible for ensuring this IRM is timely submitted to publishing each year.

Additional information is found in IRM 1.1.13.7.3, Accounts Management (AM), and IRM 21.1.1, Accounts Management and Compliance Services Overview.

The Taxpayer Bill of Rights (TBOR) lists rights that already existed in the tax code, putting them in simple language and grouping them into 10 fundamental rights. Employees are responsible for being familiar with and acting in accord with taxpayer rights. See IRC 7803(a)(3), Execution of Duties in Accord with Taxpayer Rights. For additional information about the TBOR, see Taxpayer Bill of Rights. Under these rights, taxpayers have the right to expect the tax system to consider facts and circumstances that might affect their underlying liabilities, ability to pay, or ability to provide information timely. Taxpayers have the right to receive assistance from the Taxpayer Advocate Service if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through its normal channels.

Program Reports: For information about the various diagnostics and reports used to assess the health of the program, refer to IRM 1.4.16.2.4, Measures and Diagnostic Goals, and to IRM 21.10.1, Embedded Quality (EQ) Program for Accounts Management, Campus Compliance, Field Assistance, Tax Exempt/Government Entities, Return Integrity and Compliance Services (RICS), and Electronic Products and Services Support. See IRM 1.4.16, Accounts Management Guide for Managers, for information regarding program management and review.

Program Effectiveness: Program Effectiveness is determined by Accounts Management’s employees successfully using IRM guidance to perform necessary actions and duties.

Goals, measures, and operating guidelines are listed in the yearly Program Letter.

Quality data and guidelines for measurement are referenced in IRM 21.10.1, Embedded Quality (EQ) Program for Accounts Management, Campus Compliance, Field Assistance, Tax Exempt/Government Entities, Return Integrity and Compliance Services (RICS), and Electronic Products and Services Support.

Terms used in this IRM generally have the standard English definition. Where the term has a special meaning in the context of a BMF International matter, the term is defined or clarified in the subsection in which it is used.

All but the most common acronyms found in this IRM are spelled out when they are used for the first time in a subsection. The ReferenceNet Legal and Tax Research Services page provides an Acronym Database to research acronyms found within this IRM.

The basic BMF account resolution/adjustment procedures are found in IRM 21.7, Business Tax Returns and Non-Master File Accounts. Non-Master File (NMF) International Adjustments procedures can be found in IRM 21.7.12, Non-Master File (NMF) Adjustments. Individual Master File (IMF) International Adjustments are found in IRM 21.8.1, IMF International Adjustments. Integrated Automation Technologies (IAT) are tools that assist employees with IDRS research. The screens access numerous IDRS control codes multiple times to improve quality by simplifying and standardizing research paths and consolidating IDRS Command Code (CC) responses on one screen. IAT procedures can be found in IRM 21.2.2-2, ACCOUNTS MANAGEMENT MANDATED IAT TOOLS. Use the general processing procedures outlined in this IRM in conjunction with the following IRMs:

The following publications are used for International issues. They can be used as technical reference material or provided to taxpayers when necessary. These publications are available for reference on SERP and on the internet at http://www.irs.gov.

In addition to these publications, some general information publications are also printed in Spanish for the convenience of taxpayers. On SERP, they are located under IRM Supplements, then Language Resources (Formerly Spanish Tax Products), then Spanish Forms, Publications, and Notices. The letters "SP" follow the publication number.

As a result of the ramp-down of the Philadelphia Submission Processing Campus (PSPC), International Business Master File (BMF) return processing moved in its entirety to the Ogden Submission Processing Campus (OSPC) on January 1, 2007. However, Philadelphia Accounts Management Campus (PAMC) continued to process BMF International Accounts Management work until the work was moved to the Cincinnati and Ogden Accounts Management Campus in February 2013.

Correspondence and/or amended returns involving the following issues are considered "BMF International Issues" and are worked at CAMC and OAMC:

Non-Master File (NMF) processing ceased at the Cincinnati Submission Processing Campus (CSPC) as of October 31, 2018. NMF processing is now centralized at the Kansas City Submission Processing Campus (KCSPC).

BMF International Corporate Income Tax Returns:

BMF International Employment Tax Returns:

BMF Foreign Partnership Returns:

BMF Foreign Information Returns:

BMF Foreign Withholding Tax Returns:

Foreign Trust and Estate Tax Returns:

BMF Foreign Exempt Organization Returns:

BMF Foreign Information Statements:

NMF International Income Tax Returns:

Forms Associated with Foreign Withholding Tax Returns:

The following websites are helpful when researching international issues:

Assistors staffing the International line DO NOT use the Telephone Transfer Guide (TTG) to transfer calls. International assistors transfer calls, as necessary, within the International line using local procedures to the International EIN, International IMF Accounts, International BMF Accounts, International Tax Law, International U.S. Certification, and International Automated Collection System (ACS) applications. They can use "The Source for Telephone Numbers" at: SERP - Telephone Numbers - The Source (irs.gov) to provide the correct toll-free number to the caller or to provide hours of operation. If the caller is calling outside the United States, the assistor should perform the needed resolution. If the assistor is not trained or the caller does not want to call back, complete Form 4442, Inquiry Referral. Taxpayer inquiries are completed by the site receiving the call unless the site is not trained, e.g., Ogden Accounts Management Center (OAMC) is the only site trained to work Visa claims. If the international issue is only worked by OAMC route the inquiry to BMF International at the Ogden campus via fax at ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ (number is for internal use only).

Assistors staffing any toll-free line should not transfer calls to the International line (267-941-1000). They can provide the International non-toll-free number or any of the numbers below to a caller for help with international issues. Ensure the callers are informed these are not toll-free numbers. If the caller does not want to call back, offer to prepare Form 4442, Inquiry Referral. Route to BMF International at the Ogden campus mailbox at ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . For a list of BMF international issues see IRM 21.8.2.2.1, Campus Consolidation and Program Centralization. For more information on the referral process see IRM 21.3.5.4, Referral Procedures.

Linguistic Policy, Tools and Services (LPTS) will translate documents written in several languages to English.

To have a document translated, follow the procedures in IRM 25.23.4.19, Requesting Translations of Certain Languages.

Over the Phone Interpreter Service (OPI) offers interpreter services for Limited English Proficient (LEP) callers. See IRM 21.8.1.2.3.2, Over the Phone Interpreter Service (OPI) For International Non-Toll Free calls, for procedures.

Based on Rev. Rul. 2002-23, treat a document mailed from a foreign country, with a timely official postmark of the foreign country, as timely filed.

This rule applies to all documents required or permitted to be filed with the Service, including returns, payments made with returns, claims, or requests for filing extensions.

If the last day for filing falls on a Saturday, Sunday or a legal holiday, then a document with an official postmark of the foreign country dated on or before the next succeeding day that is not a Saturday, Sunday, or legal holiday is treated as timely filed under IRC 7503. The term "legal holiday" is defined under Rev. Rul. 2002-23 and IRC 7503 as a legal holiday in the District of Columbia in the United States, or a statewide legal holiday in the state where the federal tax return, claim for refund or other document is required to be filed or sent. The term does not include legal holidays in foreign countries, unless such holidays are also legal holidays in the District of Columbia or applicable state, as described above. See Rev. Rul. 2002–23 for additional requirements when foreign mail is received later than such mail is ordinarily received.

The postmark determination for documents sent from a foreign country also applies to designated international Private Delivery Services (PDS). The list of PDS's, both international and domestic, are only updated if a new delivery service is added to the current list.

The current types of delivery services through designated PDS's are found in Notice 2016-30.

For information on General Disclosure Guidelines, refer to IRM 21.1.3.2, General Disclosure Guidelines.

Refer taxpayers to the Taxpayer Advocate Service (TAS) (see IRM Part 13, Taxpayer Advocate Service) when the contact meets TAS criteria (see IRM 13.1.7, Taxpayer Advocate Service (TAS) Case Criteria) and you can't resolve the taxpayer's issue the same day. The definition of "same day" is within 24 hours. "Same day" cases include cases you can completely resolve in 24 hours, as well as cases in which you have taken steps within 24 hours to begin resolving the taxpayer's issue. Do not refer these cases to TAS, unless they meet TAS criteria and the taxpayer asks to be transferred to TAS. Refer to IRM 13.1.7.4, Same-Day Resolution by Operations. When referring cases to TAS, use Form 911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order), and forward to TAS in accordance with your local procedures. Preparation instructions for the Form 911 are available on the Form and in IRM 21.1.3.18, Taxpayer Advocate Service (TAS) Guidelines.

The National Taxpayer Advocate has reached agreements with the Commissioners of the Taxpayer Services (TS) Division, Small Business & Self-Employed Division (SB/SE), Tax Exempt & Government Entities (TEGE) Division, Criminal Investigation (CI), Appeals, and Large Business and International (LB&I) Division that outline procedures and responsibilities for the processing of TAS casework when either the statutory or delegated authority to complete case transactions rests outside of TAS. These agreements are known as Service Level Agreements (SLA's). The SLA's are located on the Intranet at https://tas.web.irs.gov.

When referring cases to TAS, keep in mind that although TAS employees can address certain issues for international taxpayers (e.g., request copy of a tax return or a payment tracer), TAS employees do not have the delegated authority to make international adjustments. For more information about TAS's delegated authorities, see IRM 13.1.4, Taxpayer Advocate Case Procedures - TAS Authorities.

For taxpayers who prefer to contact TAS directly, provide the toll-free number 877-777-4778. International callers who cannot dial toll-free may call 787-522-8601 (English assistance) and 787-522-8600 (Spanish assistance). Publication 1546, Taxpayer Advocate Service - Your Voice at the IRS, contains addresses and phone contact information for each Taxpayer Advocate office.

Refer all technical issues to campus management that cannot be resolved using the IRMs and publications referenced in this IRM. See IRM 21.8.2.2 and IRM 21.8.2.1.7. If management is unable to make a determination, use local assistance procedures that involve coordinating the resolution through the Planning & Analysis staff.

Follow procedures in IRM 21.5.3.4.7.2.1, Examination Technical Assistance Request, if the claim requires a legal interpretation but does not meet CAT-A criteria, see IRM 21.8.2.2.12, or is not on AIMS.

When necessary, the analyst from the Planning & Analysis staff reviews and forwards any international adjustment problems requiring the attention of the Headquarters International Analyst.

Rev. Proc. 2015-40, 2015-35IRB 236 or its (or theirs) successor(s) contains the procedures for a U.S. taxpayer to request assistance from the U.S. Competent Authority on issues arising under a tax treaty between the United States and a foreign country. For procedures for requesting assistance from the U.S. Competent Authority under the provisions of a tax coordination agreement between the United States and a U.S. Territory, refer to Rev. Proc. 2006-23, 2006-20IRB 900, and the subsection titled "Double Taxation" in this IRM. See IRM 21.8.2.3.1.

The Commissioner, LB&I is the U.S. Competent Authority charged with administering the provisions of tax treaties, interpreting and applying the treaties, and reaching mutual agreement in specific cases. The U.S. competent authority conducts the competent authority process through the office the Advance Pricing and Mutual Agreement Program (APMA). APMA’s transfer pricing teams have primary responsibility for cases arising under the business profits and associated enterprises articles of U.S. tax treaties. The Treaty Assistance and Interpretation Team (TAIT) is the group in APMA that has primary responsibility for cases arising under all other articles of U.S. tax treaties. TAIT also has primary responsibility for cases arising under U.S. tax treaties with respect to estate and gift taxes. TAIT and APMA’s transfer pricing teams each can consider cases arising under the permanent establishment articles of U.S. tax treaties, and coordinate and collaborate on such cases and on any other cases as appropriate. APMA also has sole responsibility for requests involving unilateral, bilateral, or multilateral advance pricing agreements (APAs).

Written requests for, or any inquiries regarding competent authority assistance, are sent to:

Direct any questions regarding competent authority requests to the attention of APMA or TAIT, as appropriate, at the above address.

In general, nonresident aliens and foreign corporations seeking competent authority assistance should make their request with the competent authority of the country in which they are a resident. However, some treaties allow nonresident aliens and foreign corporations to make their requests with the competent authority of either Contracting State.

When adjusting Business Master File (BMF) international tax accounts, or transferring credits input a File Location Code (FLC) as follows:

The IRS is involved in a significant number of taxpayer contacts to perfect returns during the filing process, to resolve issues identified in post-filing, and to secure delinquent returns.

Based on requests from practitioners and other stakeholders, the Service developed guidance on the acceptance of faxes and signature stamps that was approved for Servicewide adoption.

Refer to IRM 21.3.4.3.7, Use of FAX for Taxpayer Submissions, for current procedures for the acceptance of fax and signature stamps.

The Domestic Examination Criteria are divided into two groups, Category A and Category B. For Domestic claims, refer to criteria contained in Exhibit 21.5.3-2, Examination Criteria (CAT-A) – General.

Category A criteria are issues that have highest examination potential and must be routed to Examination Classification prior to resolution of the taxpayer's issue. Some tax decrease cases with an open TC 420 ("-L" freeze) are CAT-A criteria. Refer to IRM 21.5.3-1, Claim Processing with Examination Involvement.

Refer to IRM 21.5.3.4.12, Category B Criteria (BMF Only), for Category B criteria.

International Examination criteria are generally CAT-A only.

Only send case(s) meeting CAT-A criteria or technical inquiries to Exam Classification. Criteria used for international claims referral to Examination is found in the list below.

Forward the following types of international claims and issues to Examination for classification:

When a claim is sent to Examination Classification, procedures consistent with IRM 4.19.11, Examination Classification of Work, must be followed. The sender must ensure pages 1 and 2 of Form 1120X are complete, including verification of all needed schedules and forms required for making a determination, before referring to Exam Classification. If the classifier determines that an additional schedule(s) is necessary, the case file will be returned to the sender to secure the necessary information (e.g., Form 1116 or Form 1118 is required to verify a foreign tax credit).

Normal research required when routing paper cases to Exam Classification. For CII cases refer to IRM 21.5.1.5, Correspondence Imaging System (CIS) Procedures:

If the case contains CAT-A criteria send to Exam Classification.

Make sure that the classification sheet contains complete and accurate information (including Building and Drop Points).

Category A claims involving multiple tax periods must be worked by the same Customer Service Representative (CSR). Send these claims to classification as one package. Do not send them as separate claims.

When the case is returned from Exam Classification, follow the steps in the table below.

If a copy of the disallowance letter is returned for association, attach the copy to the original return.

The Internal Revenue Code (IRC) states that the Internal Revenue Service (IRS) will assess, and collect taxes, and that a taxpayer must file a claim for a credit or refund, within specific time limits. These limits are known as the Period of Limitations. When they expire, we cannot assess additional tax or take collection action, and a taxpayer cannot file a claim for credit or refund. The determination of period of limitations expiration dates differs for Assessment, Refund, and Collection.

The Statute function reviews amended returns that reflect an increase in tax and documents that unpost or are rejected for "statute imminent cases" (explained below) or because the relevant period of limitations has expired "(statute expired)."

Statute imminent cases are those cases requiring either an original assessment or a subsequent assessment and for which the Assessment Statute Expiration Date (ASED)-the period of limitations on assessment-is within 90 days, or expired.

The following are categories that meet the criteria for statute imminent cases:

Unpostables are transactions which cannot post to the Master File. A transaction that fails to post to an account at the Enterprise Computing Center at Martinsburg (ECC-MTB) is returned to the campus (SC) for corrective action.

There are two types of unpostables:

The Customer Service Representative:

To resolve an unpostable, analyze each case, perform research and decide the proper corrective action. The unpostable condition shows on IDRS just below the transactions with an indicator before the transaction code such as: DU, NU, Unnn, CU, DN, DJ, RJ or DC. See Document 6209 for explanations of these codes.

Knowledge of the following information contained in Document 6209 is necessary to analyze and correct the unpostable:

Use Command Codes UPTIN, UPDIS, UPRES, and UPCASZ to research/resolve unpostable conditions per IRM 21.5.5.3.2, Researching Unpostables on IDRS. There is also useful information in IRM 3.14.1.6.3.3, Preventing Unpostable Transactions.

IRC 3402(a) requires employers to withhold taxes from wages as they are earned. However, if certain conditions are met, employers may discontinue the withholding of income tax from the wages of employees who are U. S. citizens residing and working abroad.

IRC 3401(a)(8)(A) exempts certain compensation from the definition of wages, and allows employees to provide a written statement signed under penalties of perjury. The employee should attach the statement to a current Form W-4, Employee’s Withholding Certificate, declaring that they meet or will meet the requirements of IRC 911(d) for the taxable year. The employer will consider whether the employee’s foreign earned income is more than the limit on either the foreign earned income exclusion or the foreign housing exclusion. The foreign earned income exclusion is adjusted annually for inflation. See Publication 54 , Tax Guide for U.S. Citizens and Resident Aliens Abroad, for the specific tax year and limit.

In addition to providing the statement, employees must specify on the Form W-4 either:

The Internal Revenue Service provides Form 673, Statement for Claiming Exemption from Withholding on Foreign Earned Income Eligible for the Exclusions Provided by § 911. A statement can be accepted in lieu of Form 673 if the taxpayer indicates to their employer that they will meet either the bona fide residence test or the physical presence test; provides their estimated housing cost exclusion; and their statement is signed under penalties of perjury. (See Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, for bona fide residence and physical presence requirements).

Employers are required to withhold income tax from any wages the employee earns in the United States. In foreign countries, U.S. employers are required to withhold income tax from U.S. citizens and resident aliens on any income exceeding the IRC 911 limitations.

For questions involving the Form W-4 penalty program, contact the Campus Collection Branch.

Form 673 can only be used by U.S. citizens.

Procedures to settle cases of inconsistent tax treatment by the United States and a U.S. territory are provided in tax coordination or implementation agreements between the United States and the following U.S. territories:

Refer written requests for the assistance provided under the mutual agreement procedures to:

Requests for assistance must contain the necessary information outlined in Rev. Proc. 2006-23 and Publication 570, under the heading "Double Taxation." Taxpayers may be referred to the following offices for special information regarding each U.S. Territory:

Bona fide residency rules - IRC 937(a) generally provides that the term bona fide resident of a territory means an individual who:

Source rules - In general, IRC 937(b)(1) and the regulations provide that the principles for determining whether income is U.S. sourced are generally applicable for determining whether income is territory sourced. The principles for determining whether income is effectively connected with the conduct of a U.S. trade or business are generally applicable for purposes of determining whether income is effectively connected to a territory trade or business. In addition, the "U.S. Income Rule" of IRC 937(b)(2) provides that:

The regulations provide special source rules for certain items of income, including:

Puerto Rico is a self-governing commonwealth in association with the United States. The major tax differences between Puerto Rico and the 50 states are its local taxation system and the exemption from U.S. income tax provided in IRC 933 for Puerto Rico source income for bona fide residents of Puerto Rico.

Bona fide residents of Puerto Rico are only required to file a U.S. income tax return to report non-Puerto Rico source income. See Pub 570, Tax Guide for Individuals With Income from U.S. Possessions, for additional information.

Puerto Rico's tax system is patterned after the U.S. tax system, but there are variations in law and tax rates.

Employers in Puerto Rico are liable to the United States for social security and Medicare taxes (collectively Federal Insurance Contributions Act (FICA) taxes). They must file Form 941-PR with the IRS. They are also required to file Form 940-PR with the IRS to report unemployment taxes (FUTA tax).

Employers with both domestic and territory employees can file one Form 941 or Form 944 to include all wages.

This subsection provides specific tax information as it relates to the following U.S. Territories: U.S. Virgin Islands (USVI), Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands (CNMI).

Each territory has its own separate and independent tax system and they have income tax laws and rates that are substantially the same as or are a "mirror" of the Internal Revenue Code (USVI, Guam and CNMI), or are generally similar to provisions of the Internal Revenue Code (American Samoa).

Employers who have resident employees in the above specified territories must file Form 941-SS with the IRS to report FICA taxes on wages earned by their employees.

As with Puerto Rico, employers are liable to the United States for social security and Medicare taxes (collectively Federal Insurance Contributions Act (FICA) taxes). They must file Form 941-SS with the IRS. Employers in the USVI are also required to file Form 940 with the IRS to report unemployment taxes (FUTA tax).

As with Puerto Rico, employers with both domestic and territory employees can file one Form 941 or 944 to include all wages.

Penalty and interest charged to a CNMI employer on Form 941-SS must be computed according to tax regulations as applicable to the states and D.C.

Form 941-SS is due by the last day of the month following the quarter for which wages were earned.

When a return posts to the incorrect tax period, follow the procedures in IRM 21.7.9.4.1, Resolving TRNS 193s and Amended/Corrected/Supplemental Returns.

General procedures for processing penalty and interest cases are outlined in IRM 20.1, Penalty Handbook, and IRM 20.2, Interest.

Information on Employment tax may be found in the following publications:

Employers filing Form 941-PR, Form 941-SS, Schedule H/H-PR, and Form 943-PR generally also file the following forms with the corresponding U.S. Territory (see the "Note" in IRM 21.8.2.2.1):

The wage bases for the two parts of the tax (Social Security and Medicare) are different, there is no ceiling on Medicare tax wages.

The employers are also required to file with the Social Security Administration a copy of the appropriate Form W-2 for each of their employees along with Forms:

When there is a centralized payroll with U.S. residents and territory residents working for the employer, the Form 941-PR, and Form 941-SS are not filed.

If taxpayers inquire about this process, refer them to:

If an employer has an employee who changes residence between territories, or between a territory and the United States during the year, a separate Form W-2 must be prepared for each jurisdiction of the employee's residency.

If an employer inquires about FICA tax reporting, tell them to keep a record of the combined wages and stop withholding the social security tax when total wages equal the maximum taxable wage figure for the employee for the year in question (there is no ceiling on Medicare tax wages).

Form 940-PR, Planilla para la Declaración Federal Anual del Patrono de la Contribución Federal para el Desempleo (FUTA), is an annual return filed by employers in Puerto Rico to report unemployment taxes.

Form 941-PR, Planilla Para La Declaración Trimestral Del Patrono -La Contribución Federal Al Seguro Social Y Al Seguro Medicare, is a quarterly tax return filed by employers to report FICA taxes expected. The return is filed by employers whose principal place of business is in Puerto Rico.

Form 941-SS, Employers Quarterly Federal Tax Return - American Samoa, Guam, The Commonwealth of the Northern Marianna Islands, and the U.S. Virgin Islands, is a quarterly tax return filed by employers in the U.S. Virgin Islands, Guam, American Samoa and the Commonwealth of the Northern Mariana Islands to report social security and medicare taxes for their workers.

ANEXO H-PR, Form 1040 Schedule H (PR), Contribuciones sobre el Empleo de Empleados Domésticos, is an annual return used by employers in Puerto Rico to report Federal employment taxes on wages paid to household employees. This form replaced Form 942 after 1994. Schedule H-PR is also filed by individuals as an attachment to Form 1040 or Form 1040-PR using their Social Security Number (SSN) to report wages paid to their household employees. It can also be filed as a "stand-alone" document.

Form 943-PR, Planilla para la Declaración Anual de la Contribución Federal del Patrono de Empleados Agrícolas, is an annual return filed by agricultural employers in Puerto Rico to report income tax withheld and FICA taxes paid to farm workers, including household employees working in a private home on a for-profit farm.

See IRM 21.7.2.3.3, FICA Taxes (including Additional Medicare Tax), for information on:

See IRM 21.7.2.7.5.2, Form 7200 - Letter 6312 and Letter 6313 Replies, for guidance on handling phone and correspondence replies to these letters.

See IRM 20.1, Penalty Handbook, and IRM 20.2, Interest, for normal procedures to adjust penalties and interest.

Form 945 is used to report federal income tax withheld or backup withholding. All non-payroll items, namely pensions, annuities, Individual Retirement Annuities (IRAs), military retirement, gambling winnings, Back-up Withholding (BUWH), and Indian Gaming Profits, are reported on Form 945. As a general rule, all income tax and BUWH reported on Form 1099 or Form W-2G must be reported on Form 945.

Some taxpayers file Form 945 when a Form 1042 should have been filed. However, a Form 1042-S is provided to the recipient instead of a Form 1099.

Form 945 is subject to Federal Tax Deposit requirements. The periodic liabilities are reported on Form 945A. Form 945 tax deposit requirements are separate from Form 941-PR or Form 941-SS; they cannot be combined. Taxpayers follow either semi-weekly or monthly deposit schedules. For additional information see IRM 20.1.4.8, Deposit Rules for Forms 941, 943, 944, 945, and CT-1, and see Publication 15, Circular E, for Federal Tax Deposit Requirements.

The threshold for making deposits is currently $2,500, see IRM 20.1.4.6, De Minimis Exception to Deposit Requirements.

The return is filed annually with tax period ending on December 31 and the return is due on January 31, following the close of the calendar year.

The MFT for Form 945 is 16.

The taxpayer is required to file only for a calendar year in which withholding tax must be reported on Form 945.

Blocking Series 00 is used with an original return; 15 without the original return.

Item reference numbers are:

Schedule H/H–PR has four parts:

Schedule H/H-PR may be filed by a Trust or Church etc., either by itself or with Form 1041.

Use the following Item Adjustment Code list to determine the appropriate reference numbers to use to adjust Part I, social security, Medicare, and Federal income taxes:

FUTA State Codes currently valid with MFT 10 must be input for adjusting the primary taxpayer information. The FUTA State Code is a three-character code made up of T or W, followed by a two-character state code. See a list of state abbreviations in Exhibit 3.11.3-10, State Codes and Zip Codes Perfection Chart (State Order).

The three-character State Code is input systemically and converted to the applicable reference number.

FUTA taxes are due on wages paid to domestic employees if the employer paid total cash wages of $1,000 or more (for all household employees) in any quarter in the current or preceding calendar year.

For adjustments involving Form 1041 with Schedule H, refer to IRM 21.7.4.4.1.10, Form 1041 Claims and Requests for Adjustments.

When processing a loose Schedule H/H-PR, use the procedures in this IRM in conjunction with the procedures outlined in IRM 21 listed below. See IRM 21.8.2.4, Household Employment Taxes - BMF Procedures.

The interest-free provisions for adjustments on employment taxes are in effect for errors discovered on the Schedule H/H-PR. The provisions were revised and apply to errors discovered on or after January 1, 2009. See Treas. Reg. § 31.6205-1, § 31.6413(a)-1, and § 31.6413(a)-2. Additional information can also be found in TD 9405, Publication 926, and IRM 20.2.10.5, Employment Taxes.

For Schedule H/H-PR, the due date of the period the error is ascertained is the due date of the income tax return for the period the taxpayer discovered the error.

Interest-free adjustments provisions.

Taxpayers who file Form 941-PR, Form 943-PR, or Form 945 are required to pay the tax on these returns by making Federal Tax Deposit (FTD) payments if the liability equals or exceeds a designated threshold amount during the tax period for which the return is filed. The table below lists the applicable thresholds.

These deposits are paid using one of the electronic payment options.

Beginning January 1, 2011 taxpayers must use an electronic payment option for all Federal Tax Deposits. See Treas. Reg § 1.6302–2(c) referencing Treas. Reg § 31.6302-1(h)(2) (iii) which addresses the electronic payment requirement; correspondingly, Treas. Reg § 31.6302-1(h)(3) addresses the deposits covered by that requirement and references Treas. Reg § 1.6302–2. Any exception to the electronic payment requirement would be published in the IRB per Treas. Reg § 31.6302-1(h)(5).

When a taxpayer makes a deposit the bank transmits the deposit to the Treasury Financial Agent (TFA). If the TFA delays transmitting the deposit to the Treasury, the employers account may be charged an FTD penalty for a late deposit. Do not initiate a credit transfer to change the date of the deposit. See IRM 20.1.4.24.1, Treasury Financial Agent Mishandling, for case resolution instructions.

Penalties are imposed if deposits are:

The FTD penalty must be considered anytime there is an adjustment to tax whether an increase or decrease. See IRM 20.1.4.23, Manual Adjustments, for complete instructions.

Research IDRS to determine if a CP 194 or CP 207 was previously generated, whenever tax or periodic liability information is being adjusted. See IRM 20.1.4.14.6, Schedule Indicator Codes (SIC).

The taxpayer may create a duplicate filing condition by filing a separate return with each FTD. Resolve these "A" freeze conditions using TRNS 193 procedures in IRM 21.7.9, BMF Duplicate Filing Conditions. Notify taxpayers to make deposits electronically when necessary.

For more information on deposits and FTD penalties, see:

Electronic Federal Tax Payment System (EFTPS) is a tax payment system offered free by the U.S. Department of the Treasury. EFTPS enables taxpayers to pay their federal taxes electronically using the internet or telephone. Both business and individual taxpayers can use EFTPS. See IRM 21.7.1.4.8.1, Electronic Federal Tax Payment System (EFTPS), for more information.

The use of paper federal tax deposit (FTD) coupons was eliminated for deposits made after December 31, 2010. See Treas. Reg § 31.6302-1(h)(2)(iii). Therefore, beginning January 1, 2011, businesses not already required to use Electronic Funds Transfer (EFT) that have a deposit requirement (such as employment tax, excise tax, and corporate income tax) are required to make their federal tax deposits via an EFT system. For further information see IRM 20.1.4.2.2, Authorized Deposit Methods, and IRM 20.1.4.2.2.1, Electronic Funds Transfer (EFT).

Taxpayers are required to make electronic deposits and are subject to FTD penalties, including a 10% penalty for avoiding the required deposit method. (See IRM 20.1.4.2.2, Authorized Deposit Methods, and IRM 20.1.4.7.1, Time Sensitive Four Tier Penalty System.)

Reasonable cause penalty relief is available to taxpayers who have been assessed deposit penalties. See IRM 20.1.1, Introduction and Penalty Relief, and IRM 20.1.4, Failure to Deposit Penalty, for information on penalty relief.

Per IRC 3121(b)(19), certain nonresident alien individuals temporarily present in the United States are exempt from FICA tax for services performed as specified in § 101(a)(15)(F), (J), (M), and (Q) of the Immigration and Nationality Act.

The following documentation substantiates the exemption from FICA tax for the individual holding an F, J, M or Q visa:

In addition to (2) above:

Per IRC 3121(b)(10) certain services performed by students are exempt from FICA. Regulations interpreting the elements of the student FICA exception are applicable for services performed on or after April 1, 2005. Under the new regulations, the employer qualifies as a "school, college or university" if:

Under the regulations, to be considered a "student," an employee must be:

Foreign agricultural workers temporarily admitted to the United States on H-2A visas are always exempt from U.S. social security and Medicare taxes, whether they are resident aliens or nonresident aliens. Allow claims from H-2A visa holders requesting refunds of erroneously withheld FICA tax provided they submit the information listed below. Process claim using procedures in Processing Employee Claims. See IRM 21.8.2.7.3.

When a claim is received for a refund of erroneously withheld FICA tax, verify the claim is valid, i.e.:

Follow the table below to determine if the claim can be processed:

All adjustments are done on the employer's Form 941 or Form 944 (Form 943 for H-2A claims) account and the resulting credit is transferred to the employee's individual account for refunding to the employee.

Follow the table below to determine if the required forms and substantiation required to process a F-1, J-1, M-1, and Q visa claim is complete:

Follow the table below to determine if the required forms and substantiation required to process a H-2A visa claim is complete:

For A, G, or other visa status claims, contact your lead to verify qualification for exemption and required claim documentation.

If the employee has filed the appropriate tax return (Form 1040-NR) and submitted the proper documentation, do the following:

If an incomplete claim for FICA tax is received:

Refer to IRM 21.5.3, General Claims Procedures, for information on claim processing.

Employer claims must be filed on the appropriate Form 94XX when requesting a refund for erroneously withheld FICA. See IRM 21.7.2.5.10.2, Employer Claims Involving Foreign Students, for processing these claims.

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In order for an individual or for the individual's employer to substantiate the individual's exemption from FICA under the terms of a Bilateral Social Security Agreement, the individual or the employer must secure an Exemption Statement (a certificate of coverage) from either the country in which the individual is employed or the individual's country of residence.

Some of the countries with which the U.S. has agreements do not issue certificates of coverage. In those cases, the employee or the employer must request a statement from the following address:

For the employee or the employer to establish that the employee's income is subject to only U.S. social security tax, the U.S. employer can obtain more information or get a determination by:

Correspondence for exemption statements must include:

The Exemption Statement must be maintained by the employer as it establishes that the employee's pay is exempt from taxation in the foreign country.

The following charts summarizes social security tax obligation of U.S. citizens and resident aliens who are working in a foreign country:

Use the following charts to determine the taxpayer's (foreign persons, including resident aliens for income tax purposes) social security tax obligation when working in the United States:

Claims of erroneously withheld FICA tax must include:

The signed statement included in the claim must state that unsuccessful attempts have been made to secure refund of the erroneously withheld FICA tax from the employer. A Form 8316 may be used for this purpose.

The claim is only valid when it involves one of the countries with which the U.S. has a Bilateral Social Security (Totalization) Agreement. The following is a list of those countries:

All bilateral agreement claim adjustments are input on the employer's Form 941 and the resulting credit is transferred to the employee's account for refunding. See IRM 21.5.3, General Claims Procedures.

If the employee has filed the appropriate tax return and submitted the proper documentation, process as follows:

Form 1120-F is used to report a foreign corporation's U.S. income, gains, losses, deductions, and credits, to figure its income tax liability, and to claim any refunds due. A foreign eligible entity that has elected to be treated as a corporation generally will be treated as a foreign corporation. The income, gains, losses, deductions, and credits of a U.S. limited liability company will be treated as income, gains, losses, deductions, and credits of the foreign corporation owner, provided that the limited liability company has not elected to be treated as a corporation and is wholly owned by one foreign corporation.

A foreign corporation engaged in a USTB during the taxable year will be taxed on its income which is effectively connected (ECI) with the conduct of such USTB.

A foreign corporation, regardless of its country of residence, which receives fixed, determinable, annual or periodic (FDAP) income from U.S. sources that is not ECI generally must file a Form 1120-F and pay the tax owed if its tax liability with respect to such income is not fully satisfied by withholding at source. In this respect, the Forms 1042-S it has received generally would reflect the amount of income and tax that have been withheld.

A foreign corporation's due date to file depends on whether it has an office or place of business in the United States.

For a foreign corporation that does not maintain an office or place of business in the United States, the Form 1120-F return is due the 15th day of the 6th month after the end of its tax year, unless an extension is filed. See IRM 21.8.2.2.5, Timeliness Determinations.

For tax periods beginning after December 31, 2015, a foreign corporation that maintains an office or place of business in the United States must either file Form 1120-F by the 15th day of the 4th month after the end of its tax year (but by Sept. 15 if the tax year ends on June 30) or get an extension of time to file by the same return due date. To get an extension, the corporation may either:

Extensions do not extend the time for payment of the tax. Tax must be paid by the due date of the return, without extensions.

A foreign corporation's requirement for payment of estimated tax depends on whether it expects its total tax for the year to be $500 or more.

Treas. Reg. 1.6302-1 and Treas. Reg. 31-6302-1(h)(3) sets forth that corporations must make all Federal Tax Deposits electronically.

Branch profits tax assessed under IRC 884 is not includible in total tax when determining the required annual payment of estimated tax. See IRM 20.1.3.4.1.1.4, Foreign Corporations. If an estimated tax penalty was assessed, re-compute the penalty by using the sum of Section I, Line 11, Schedule J, line 9, to compute the required annual payment. Use the Statutory Exception - Penalty Reason Code (PRC) 044.

All deposits posted to the Master File are used to verify the taxpayer's Form 2220 computations. Use the TC 660 amounts and dates when verifying the estimated tax liabilities. The taxpayer receives a notice if the amount of credits claimed on the return is more than the credits posted to Master File.

Form 1120-F filers that have effectively connected income:

Form 1120-F filers that have non effectively connected income (FDAP):

When adjusting BMF international tax accounts using CC REQ54, or transferring credits using CC ADD24/ADD34/ADD48, see IRM 21.8.2.2.10.

All tax decrease adjustments in excess of ≡ ≡ ≡ ≡ ≡ ≡ ≡ on Form 1120-F and Form 1120-FSC must be sent to Examination for classification.

Refundable credits are not automatically audit criteria.

Refer to IRM 21.7.4, Income Taxes/Information Returns, for general procedures for processing.

A foreign corporation with an office or place of business in the U.S. gets an automatic extension of time to file to June 15th, while a foreign corporation without an office or place of business in the U.S. the original return due date is June 15th. If Form 1120-F return is misclassified as either with or without an office in the U.S., the return due date can be corrected in the module by posting TC 971 with Action Code 358 with the correct return due date (not extended due date) as the transaction date. See IRM 21.7.4.4.4.2.1.2, Correcting the Form 1120 Return Due Date. This should eliminate the need to manually change penalties. Once the due date is corrected, any extension can be corrected.

An amended Form 1120-F filed under Notice 2015-73, Listing Notice - Basket Option Contracts, or Notice 2015-74, Transaction of Interest - Basket Contracts, must comply with the notice requirements. See IRM 21.7.9.3.2, Amended Returns Filed Under Notice 2015-73 and Notice 2015-74, for notice requirements.

ALL amended tax returns notated in this manner will be reviewed by the Large Business and International (LB&I) Office of Tax Shelter Analysis (OTSA). If you receive an amended return that has been filed under Notice 2015-73 or Notice 2015-74, follow the instructions in IRM 21.7.9.3.2, Amended Return Filed Under Notice 2015-73 and Notice 2015-74.

A corporation must have elected to be treated as a Foreign Sales Corporation (FSC), or small FSC, by filing Form 8279 prior to October 1, 2000, and the election must still be in effect.

Form 1120-FSC is used to report income, gains, losses, deductions, and credits of an FSC. It is also used to figure the FSC's income tax liability.

The FSC may be organized under the laws of certain qualifying foreign countries or territories of the United States, excluding Puerto Rico.

Foreign corporations that elected FSC status may not claim the benefits of any U.S. tax treaty.

An FSC that is a member of a controlled group must check the box on line 1 of Schedule J of the 1120-FSC and attach Schedule O of Form 1120.

The FSC Repeal and Extraterritorial Income Exclusion Act of 2000 effected the following changes:

In general, the extraterritorial income exclusion applies to taxpayers with respect to transactions entered into after September 30, 2000, and before January 1, 2005. However, the exclusion does not apply, but the FSC provision does apply to any transaction in the ordinary course of trade or business involving a FSC that occurs:

Taxpayers may elect to apply the extraterritorial income (ETI) exclusion rules instead of the FSC rules for transactions entered into during the transition period stated in (2) above. The election is:

If an FSC has no foreign trade income for any 5 consecutive tax years beginning after December 31, 2001, the FSC is no longer treated as an FSC for any tax year beginning after that 5 year period.

Form 1120-FSC is processed at the Ogden IRS Campus. However, a corporation that makes an election to be treated as a domestic corporation under IRC 943(e)(1) must file Form 1120 or Form 1120-A at the campus address listed in the Form 1120 instruction booklet under the "Where to File" section.

An FSC must pay the tax due in full no later than the return due date. See IRM 21.7.4.4.4.11.9, Form 1120-FSC, U.S. Income Tax Return of a Foreign Sales Corporation, for more information on Form 1120-FSC.

Treasury Decision (TD) 9507 stipulates that beginning January 1, 2011, taxpayers must use an electronic payment option for all Federal Tax Deposits.

An FSC with a tax liability of at least $500 that fails to make estimated tax payments when due may be subject to an estimated tax penalty, see IRM 20.1.3, Estimated Tax Penalties, for the period of underpayment. To avoid the estimated tax penalty, the FSC must make estimated tax payments totaling the smaller of its current tax liability or its prior year tax.

Form 2220, Underpayment of Estimated Tax by Corporations, is used to determine whether the FSC owes the penalty and to compute the amount of the penalty.

Generally, an FSC does not have to file the Form 2220 since the IRS can figure the amount of any penalty and bill the FSC for it. However, the FSC must complete and attach Form 2220 even if the FSC does not owe the penalty, if:

When the Form 2220 is attached to the Form 1120-FSC, the taxpayer must check the box on line 3 in the Tax and Payments section on page 1 of Form 1120-FSC and enter the amount of any penalty on that line.

If a foreign corporation had income tax withheld from any payments (e.g., interest, dividends) it received because it was presumed to be a U.S. non-exempt entity that failed to give the payer its correct EIN:

The amount withheld is shown in the right-hand column on Form 1120-F between lines 4 and 5j, and included in the total for line 5j, and on Form 1120-FSC between lines 1 and 2h, and included in the total for line 2h. The amount should be labeled "backup withholding."

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Follow the instructions for Processing Claims with Missing Schedules in IRM 21.5.3, General Claims Procedures, when the form cannot be verified.

When allowing a claim:

Initiators must carefully review the account. You must ensure that there are no prior, duplicate, manual, or generated refunds issued at any other campuses or call sites. Review the taxpayer accounts to make sure that the prepaid credits the taxpayer is claiming for refund are available and were not used as an offset against any outstanding balances before you include them as part of the Manual Refund.

When the Service issues a refund to a nonresident alien taxpayer that includes interest, the Service is required to withhold tax on the interest with the following exceptions:

When processing an adjustment that results in a refund including interest, the interest must be manually computed. Use the following table when computing credit interest:

Determine the correct tax rate and amount of tax to be withheld from the interest per IRC 1441 and IRC 1442 . If the tax treaty withholding rate is 0%, no withholding is required on interest. Treaty rates are found on the Tax Treaty Tables located at: Tax Treaty Tables.

Prepare four-part Form 5205.

Prepare Form 1042-S.

Prepare Form 3809 when transferring tax withheld on interest to 4610 account.

Prepare the manual refund document, Form 5792 (for refunds over 10 million dollars use Form 3753). Additional information on preparing manual refunds can be found in IRM 21.4.4.5.1, Preparation of Form 5792, IDRS Generated Refund.

Input the adjustment to IDRS and use CC RFUNDR to issue the manual refund.

Submit the refund document and related forms, along with the case itself, to the manager for review.

Forward Form 5205, Form 1042-S, the refund document, Form 3809, and a print of COMPAC or COMPAD (interest computation) to Accounting. Attach screen prints of TXMODA and RFUNDR.

In general, U.S. citizens, domestic corporations, certain resident aliens in the United States or Puerto Rico, and certain estates and trusts may choose to claim a foreign tax credit.

A nonresident alien individual or a foreign corporation engaged in a U.S. trade or business during the tax year may take a credit for foreign income taxes paid or accrued (or deemed paid in case of a foreign corporation) to any foreign country or U.S. possession with respect to income effectively connected with the conduct of a trade or business in the United States.

To claim a foreign tax credit, an individual, estate, or trust must complete and attach Form 1116 to its income tax return. However, Form 1116 is not required if there is a minimal amount of foreign tax credit claimed for taxes on passive income reported on a qualified payee statement. If the foreign tax credit is claimed for a tax year without filing Form 1116, any foreign taxes paid or accrued in that tax year cannot be carried over to or from any other year. Additional information can be found in the Form 1116 Instructions.

To claim a foreign tax credit, a corporation must complete and attach Form 1118 to its income tax return. An individual (or estate or trust) who has made an election under section 962 must also complete and attach Form 1118 to their income tax return. Additional information can be found in the Form 1118 Instructions.

Eligible taxpayers may claim a foreign tax credit for foreign income taxes "paid or accrued" or deemed paid or accrued during the tax year to any:

Important: When a foreign income tax is taken as a credit in a year:

Taxpayers excluding income from the U.S. possessions cannot take the foreign tax credit for taxes paid on excluded income. Credit for taxes paid to the U.S. Virgin Islands are figured on Form 8689, not Form 1116.

The credit for foreign income taxes is allowed using TC 291.

The annual election to take the amount of any foreign income taxes, as defined under Treas. Reg. § 1.901-2, paid or accrued as a foreign tax credit against U.S. income tax is evidenced by filing Form 1116 or Form 1118.

Under IRC 901(a) and Treas. Reg. § 1.901-1(d), which cross references IRC 6511(d)(3), an election to claim a credit, or to change from claiming a deduction to claiming a credit, for foreign income taxes paid or accrued in a particular year must be made before the expiration of the 10-year period prescribed by IRC 6511(d)(3)(A). Under IRC 6511(c), the period can be longer than 10 years if extended by an agreement.

A cash basis taxpayer may elect to take the foreign tax credit on an accrual basis. An election must be made on a timely-filed original return, by checking the appropriate box on Form 1116 or Form 1118 indicating the cash method taxpayer’s choice to claim the foreign tax credit in the year the foreign income taxes accrue. Once made, the election is irrevocable and must be followed for purposes of claiming a foreign tax credit for all subsequent years.

A credit may not be claimed in the taxable year for the following foreign taxes summarized below. For details and additional examples of foreign taxes for which a credit may not be claimed, see the instructions for Form 1116/1118 and Pub 514, Foreign Tax Credit for Individuals:

There is a ten-year period of limitation for filing a claim for credit or refund of U.S. tax attributable to a credit for foreign income taxes paid or accrued. There is a three-year period of limitation allowed for filing a claim for credit or refund of U.S. tax attributable to a deduction for foreign income taxes paid or accrued.

The ten-year limitation period applies to:

The 10 years are counted from the due date of the return (ignoring any extension for filing the return) for the year in which the foreign income tax is paid or accrued.

With respect to corporations, the foreign tax credit is calculated on separate Forms 1118 for the following six categories of income to determine the total credit allowed against U.S. tax. With respect to individuals, the foreign tax credit is calculated on separate Forms 1116 for certain lump-sum distributions from a retirement plan as well as for the six categories of income below:

A separate Form 1118, for corporate filers, and Form 1116, for estates, trusts, and individuals, is used for each category of income.

If an individual, estate or trust paid or accrued foreign income taxes to more than three foreign countries or U.S. possessions with the same category of income, then additional Forms 1116 must be used. If a corporation or individual (or estate or trust) who made a section 962 election paid or accrued (or deemed paid or accrued) foreign income taxes to more than three foreign countries or U.S. possessions with the same category of income, then additional Forms 1118 must be used. In the alternative, a taxpayer may submit a computer-generated Form 1118 and schedules if they conform to the IRS version.

The credit on each category of income cannot exceed the proportionate amount of U.S. tax paid on that type of income. This is called the foreign tax credit limitation. Therefore, the foreign tax credit is limited to the lower of the foreign tax credit limitation or the foreign tax paid or accrued.

For each category of income, the taxpayer totals all the foreign income taxes paid on that category of foreign source taxable income and compares it to the total U.S. income tax liability multiplied by the fraction equal to the amount of that type of foreign source taxable income over worldwide taxable income. See Instructions for Form 1118, Schedule B, Part II.

Also there is the "reduction" or "scale down" of foreign tax due to excluded or exempt income. When income is excludable or exempt from tax (e.g., IRC 911(a), IRC 931(a) for income from sources within Guam, American Samoa, and Northern Mariana Islands derived by a bona fide resident, and IRC 933 for income from sources in Puerto Rico derived by a bona fide resident), the amount of foreign income taxes that may be claimed as a credit (or deduction) must also be reduced or "scaled down" to account for the income on which no U.S. tax is going to be paid. See Form 1116, Part III, line 12, "Reduction of Taxes," and Form 1118, Schedule G.

The amount of foreign income taxes allocable to excludable income under IRC 911(a) is determined by multiplying the foreign tax paid or accrued on foreign earned income by a fraction of the excluded foreign earned income (minus allocated and apportioned deductible expenses) divided by the total foreign earned income (minus allocated and apportioned deductible expenses). Similar rules apply to determine foreign income taxes allocable to excludable income under IRC 931(a) and IRC 933. Below is the formula for computing the Allocable Excludable Income Determination:

If income other than foreign earned income (for example, earned income from U.S. sources or a type of income not subject to U.S. tax) is taxed by the foreign jurisdiction, and the taxes on such income can’t be separated, the denominator is the total amount of income subject to foreign tax less allocated deductible expenses.

U.S. citizens residing in certain treaty countries may claim an additional credit by reason of special re-sourcing rules. The amount of re-sourced income is figured in accordance with the applicable treaty provision. For taxable years beginning on or before August 10, 2010, and taxable years beginning after the 2017 taxable year, the additional amount of credit may be calculated instead by using the worksheet contained in Publication 514. The additional credit by reason of re-sourced income is provided by the treaties of the following countries:

IRC 901(j) denies the foreign tax credit for taxes paid to certain countries due to non-recognition of the foreign government (in most instances), the severance or lack of diplomatic relations, or the classification of the foreign country as one supporting terrorism.

The foreign tax credit is not currently available for taxes paid to the following countries (a deduction for taxes paid to these countries is permitted):

The foreign tax credit is not available for foreign income taxes resulting from boycott activities of the taxpayer and paid to the following countries (and any other country which the taxpayer knows participates in the boycott):

If, due to a limitation, a taxpayer could not claim the credit for the full amount of foreign income taxes paid or accrued, or deemed paid or accrued, in the tax year in a separate category; IRC 904(c) allows a one-year foreign tax credit carryback and then a ten-year carryover of the remaining excess foreign income taxes:

There are special restrictions which apply to carrybacks and carryovers.

Excess foreign taxes that are being carried back to the preceding tax year may be claimed by filing an amended tax return, either Form 1040X or Form 1120X, with a revised Form 1116 or Form 1118, respectively. See IRM 21.5.9, Carrybacks which further explains processing carryback/carryover claims and IRM 21.5.9.5.12.7, Carryback of Excess Foreign Tax Credit (FTC), for specific instructions and restrictions.

Form 1139 and Form 1045 CANNOT be used to carryback foreign tax credits.

Some title companies, transferees, escrow companies, Certified Public Accountants (CPAs), attorneys, and realtors may send FIRPTA payments to deposit activity areas without a Form 8288. The payments are received in the following ways and any associated correspondence is sent to Accounts Management:

Return the correspondence to the taxpayer requesting that they file a Form 8288 and 8288-A using a Letter 3104C. Advise the taxpayer that these forms must be completed by the transferee and returned to the Ogden Submission Processing Campus for processing. Include the following open paragraph with the 3104C Letter:

When taxpayers claim FIRPTA credits or credits for 1446(f)(1) withholding on their income tax return, they must submit Form 8288-A, Copy B (similar to domestic withholding claims being accompanied by a Form 1099), or a statement from the withholding agent in support of the amount actually withheld.

In addition, credits claimed on Form 8288-A, Copy B, must be verified with the FIRPTA database prior to allowance. FIRPTA Credit verification is requested using Form 13698, International Credit(s) Verification Slip.

The presence of a TC 971 with Action Code 650 on a tax module indicates that a refund of the FIRPTA credit was issued from the BMF MFT 17 account for the amount indicated. A TC 972 indicates a reversal of a TC 971.

When a Form 8804 or Form 1120-F posts to Master File and a TC 971 Action Code 650 is present, the account is frozen from refunding and a Master File transcript titled PRIOR-REFD generates. Research to determine if the FIRPTA credit claimed on the return was previously refunded as indicated by the TC 971 Action Code 650.

If correspondence or an amended return is received requesting credit for withheld FIRPTA tax, it must be accompanied by a Form 8288-A, Copy B, so the credit can be verified, or a statement from the withholding agent in support of the amount actually withheld. See IRM 3.21.25.17, Credit Verifying Form 8288-A (FIRPTA) and section 1446(f)(1) Credits, for additional information.

Once credit availability is verified, allow withholding credit using CRN 332.

When a partnership determines a foreign partner sells their shares, without the buyer withholding 10% of the amount realized, the partnership is required to file Form 8288 (Part IV) and Form 8288-C, Statement of Withholding Under Section 1446(f)(4) on Dispositions by Foreign Persons of Partnership Interests Under Section 1446(f)(4). The partnership must withhold "all distributions paid" to the buyer (new partner) "until the 10%" (plus interest) is satisfied. This may result in multiple forms being filed for the same sell of partnership shares. See IRM 3.21.261.1.1.3, Form 8288-C Background, for additional information on Form 8288-C.

The presence of a Transaction Code (TC) 971 with Action Code (AC) 741 with a total amount withheld in the memo field will post to the partnership’s BMF MFT 17 account. A new TC 971 AC 741 will post each time a new Form 8288 (Part IV) is processed. A TC 972 indicates a reversal of a TC 971.

In addition, credits claimed on Form 8288-C, Copy B, must be verified with the FIRPTA database prior to allowance. FIRPTA Credit verification is requested using Form 13698, International Credit(s) Verification Slip.

If correspondence or an amended return is received requesting credit, it must be accompanied by a Form 8288-C, Copy B, so the credit can be verified, or a statement from the withholding agent in support of the amount actually withheld. See IRM 3.21.25.17(1), Credit Verifying Form 8288-A (FIRPTA) and section 1446(f)(1) Credits, for additional information.

The TC 150 must be posted on the partner’s (buyer) account before any overpayments are released.

The partner (buyer) can claim a refund for all of this withholding and reverse a TC 150 IF the seller files a return to report the gains from the sale of the stake in the partnership.

A withholding agent is any person that has custody or control of an item of income of a foreign person subject to withholding. A withholding agent may be an individual, a trust, an estate, partnership, corporation, government agency, association, or tax-exempt foundation, whether domestic or foreign.

Withholding agents generally must withhold tax at a rate of 30% on items of fixed determinable annual or periodical income from sources within the United States paid to nonresident alien recipients and may also have withholding requirements under IRC 1471 and IRC 1472 on withholdable payments made to foreign entities and account holders of foreign financial institutions. See Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities.

The withholding agent may withhold at a lower treaty rate if the nonresident alien recipient is a resident of a country that has a tax treaty in effect with the United States. In order to be eligible for the reduced withholding, the nonresident alien must prove they are a resident of the treaty country, for income tax purposes.

Form 1042 is the annual taxable return used by withholding agents to report tax withheld on U.S. source income paid to certain nonresident alien individuals, and corporations, etc.

Form 1042-T, Annual Summary and Transmittal of Forms 1042-S, serves as a transmittal for Form 1042-S returns, which are information returns filed with the IRS and furnished to the recipient that are used to report income paid to the foreign person. The Form 1042-T is Tax Class 5 and Document Code 01.

A withholding agent must file a Form 1042 by March 15th in order to pay and report taxes withheld. Form 1042 is a Master File annual tax return (NMF for 1984 and prior), filed only for the calendar year and cannot be filed as a fiscal year return.

Form 1042 is equivalent to the Form 945, Annual Return of Withheld Federal Income Tax, which is a withholding tax return only.

Form 1042 is processed using a Tax Class of 1, a Doc Code of 25, and one of the following File Locations Codes (FLC):

The Form 1042 is filed by all persons having the control, receipt, custody, disposal, or payment of interest, dividends, rent, salaries, etc., to the extent that any such items constitute gross income from sources within the United States, of nonresident alien individuals, or foreign corporations. Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Corporations, can be used as a reference.

Form 1042 is due on or before March 15 of each year. Form 1042 and Form 1042-S must be filed whether or not any tax was withheld or was required to be withheld (i.e., income was exempt from withholding).

Taxpayers may apply for a 6 month extension to file by submitting a Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns.

All withholding agents are required to deposit the tax withheld. The amount of taxes withheld determines the frequency of deposits. See IRM 20.1.4.11, Form 1042, for additional information on deposit requirements and due dates for Form 1042.

Generally, withholding agents are required to deposit funds electronically. See Treas. Reg. § 1.6302-2(c), § 31.6302-1(h)(3).

For deposit purposes, each month is divided into four periods ending on the 7th, 15th, 22nd and last day of the month. These are referred to as the "quarter-monthly" periods and are labeled 1 through 60 on the tax return.

When the total tax for the year is at least $200, the taxpayer is required to list their tax liability in the Record of Federal Tax Liability (ROFTL) Section.

See IRM 20.1.4-8 , Form 1042 Deposit Requirements For All Periods, to determine the frequency of deposits.

90% Rule/Safe Haven: T.D. 9507 removed the 90% safe harbor rule from Treas. Reg. § 1.6302-2 beginning for tax periods 2011 and subsequent. For tax periods 2010 and prior, taxpayers are considered to have met the $2,000 deposit requirement listed in (4) above if all the following statements are true:

Beginning January 1, 2011, taxpayers must use an electronic payment option for all Federal Tax Deposits. See Treas. Reg § 31.6302-1(h)(2)(iii).

Refer to IRM 21.7.1.4.8.1.3, EFTPS Deposit Requirements, for criteria that determines which taxpayers are required to use EFTPS.

Taxpayers that are required to make electronic deposits, but fail to do so, may be subject to a penalty. See IRM 21.8.2.12.6, Failure To Deposit Penalties - Form 1042.

For additional information, see Treas. Reg. § 31.6302-1(h).

All taxpayers must enroll to use EFTPS by completing Form 9779, EFTPS Business Enrollment.

Taxpayers can enroll in EFTPS by completing the enrollment Form 9779 online on the EFTPS website at http://www.eftps.gov, or by requesting an enrollment form by calling the IRS Tax Forms toll free number (800-829-3676), or by calling the EFTPS Customer Service toll free number (800-555-4477) and then mailing the completed form.

For any additional information, taxpayers can call the EFTPS Customer Service Center (800-555-4477). For all EFTPS Customer Service Center Numbers see IRM 21.7.1.4.8.1.1, EFTPS Enrollment.

Penalty processing on Form 1042 (Chapter Three Withholding (CTW)) began in processing year 2003.

Taxpayers are now liable for this penalty, see IRM 20.1.4.11, Form 1042, and should have been making timely deposits beginning in 2002.

The penalty calculation rate is:

Taxpayers can self compute the penalty (except the 15% penalty) and enter the amount on Form 1042, Line 71. The Form instructions provide the percentages to be used to calculate this penalty as listed above. Do not abate, unless a request is subsequently made by the taxpayer. See the Caution below.

Accounts Management work is worked by the International Department in the Cincinnati Accounts Management Center (CAMC) and the Ogden Accounts Management Center (OAMC).

Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, contains information that the taxpayer can use for additional reference.

A withholding agent must withhold income tax at the statutory rate or lower treaty rate, unless one of the following conditions are met:

All exempt or reduced withholding must be based on the applicable alien withholding certificate (W-8BEN-E, W-8ECI, W-8EXP, W-8IMY, or W-8CE) or a statement signed under the penalties of perjury attesting to the recipient's country of residence for income tax purposes. See IRM 21.8.2.18, Withholding Certificates.

The W-8 series documents were modified in 2014 as part of the implementation of the Foreign Account Tax Compliance Act (FATCA). See IRM 21.8.2.18.1, Form W-8, Certificate of Foreign Status, for a chart that shows the forms that became obsolete and their replacements.

Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, is an income tax return used to report amounts subject to withholding under chapter 3 (sections 1441-1443) and amounts withheld under chapter 4 that are withholdable payments (sections 1471-1474). The form is also used to report withholding on specified federal procurement payments under section 5000C, certain payments subject to tax under section 877A, and certain distributions made under sections 1445 and 1446.

Most requests for adjustments on Form 1042 occur when payers withhold tax at the wrong rate, or due to recipient documentation delays, or from recipients exempt from taxation, either under treaty provisions or for reasons described in IRC 1441 and IRC 1442. In most cases the overwithholding is discovered after the payer has sent a Form 1042-S showing the withholding to the payee.

Follow general guidelines in IRM 21 and specific adjustment procedures in IRM 21.7.9, BMF Duplicate Filing Conditions, to resolve the "-A" freeze unless the entity is a Qualified Intermediary (QI), in which case apply those specific procedures contained in Qualified Intermediary Agreements (QI). See IRM 21.8.2.12.10. For failure to deposit penalties, see IRM 21.8.2.12.6

The same criteria are used to decide the validity of issues raised by the taxpayer and must be submitted as an amended Form 1042 (the "Amended Return" at the top of the Form 1042 is checked) for adjustment or abatement. Form 843, Claims, and correspondence are not allowed.

When claims are received without enough information to determine if the special procedural criteria listed below have been met, correspond with the taxpayer. See IRM 21.8.2.12.9, Processing Claim Adjustments for Form 1042.

Refunds by the IRS to the withholding agent or payer can only be done if the conditions set forth in IRC 1464, IRC 1474, and IRC 6414 are met. A non-qualified intermediary (NQI) may not claim a collective refund on behalf of their accounts holders, see IRM 21.8.2.12.10.1, for situations in which certain QI withholding agents can claim collective refunds on behalf of their account holders, partners, owners, or beneficiaries. The following is a list of situations where refunds of amounts claimed are acceptable. See IRM 21.8.2.2.12, for types of Form 1042 claims and issues to forward to Exam for classification.

Overpayments discovered after the Form 1042-S information return has been filed (March 15) can be claimed only by the recipient on an income tax return (Form 1040-NR or Form 1120-F) with the credit substantiated by attaching a Form 1042-S. Box 7b must not have been checked for any applicable claim to be considered for a given year. Box 7b is checked to indicate the withholding is NOT being remitted to the IRS. In the subsequent calendar year, the U.S. Withholding Agent may need to remit some of the escrowed amounts from the prior year and file a second Form 1042-S for each such recipient using Income Code 50 and report the ultimately determined amount of withholding due. After this, the NRA recipient could file a claim on Form 1040-NR or Form 1120-F for any excess withholding.

If a complete package is received, but the error was discovered after the close of the calendar year, refer to Examination Classification. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ :

Follow the procedures in the following table for processing amended 1042-S forms (submitted with or without Form 1042):

Amended/corrected 1042-S forms are sometimes submitted with the amended Form 1042. In this case, the corrected 1042-S form is regarded as a supporting schedule for adjustments. If the corrected 1042-S form is with the amended Form 1042, attach copies of the 1042-S forms to the adjustment document. Send the original corrected/amended 1042-S forms to:

TRNS 193 notices are generated for all duplicate (multiple) return conditions processed through pipeline.

An adjustment to the Form 1042 account is made using MFT 12 and the appropriate Blocking Series. See IRM 21.5.1.5.3, CIS Source Documentation, and Document 6209, IRS Processing Codes and Information, for the appropriate Blocking Series.

An adjustment to the gross income paid (item reference number 011) can be done at any time.

However, no tax liability or withheld amount decrease adjustment can be made to the withholding tax after the due date of the Form 1042, unless special criteria exists. See IRM 21.8.2.12.8, Amended Returns - Form 1042.

When a claim for tax decrease is received, verify that the withholding agent has submitted substantiation.

When a withholding agent replies to the Letter 916C by submitting substantiation for the Form 1042 tax decrease:

IRC 5000C now imposes a 2% excise tax on foreign persons payable through withholding by federal agencies on government foreign procurement payments. The requirement to report and pay this tax began in 2011.

This excise tax is reportable on Line 64d (Line 71 for TY 2011-2013) of Form 1042; this amount should be reported on the ROFTL. Only entities with an Employment Code (EC) "F" present on CC ENMOD are required to pay this excise tax. See IRM 3.21.110.1.1, Background, IRM 3.22.110.24.18, Field 0764D - Form 1042 Excise Tax Amount, and IRM 3.13.222.81, Unpostable Code (UPC) 331 Reason Code (RC) 7, for additional information.

Masterfile has been programmed to identify line 64d entries (Line 71 for TY 2011-2013) as reference item 198.

If an amended return is received correcting line 64d (Line 71 for TY 2011-2013) of Form 1042, follow all general adjustment guidelines. Use REQ 54 to input TC 290 with reference code 198 to make the correction. If the correction results in a decrease, follow all CAT-A guidelines, use TC 291 and reference code 198 with a (-) minus to input the decrease.

Under Treas. Reg. § 1.1441-1(e)(5), certain entities can enter into agreements with the IRS to become Qualified Intermediaries (QIs). Qualified Intermediaries can be:

A foreign partnership or trust cannot become a QI. However, a foreign partnership, or a foreign simple or grantor trust, can enter into a Withholding Foreign Partnership (WP) or Withholding Foreign Trust (WT) agreement with the IRS under Treas. Reg. § 1.1441-5(c)(2) and (e)(5)(V). See Rev. Proc. 2017-21 for agreement and application procedures. A partnership or trust that has entered into a WP or WT agreement assumes chapter 3 and 4 responsibilities with respect to its partners, owners, or beneficiaries (as applicable).

The benefits of becoming a Qualified Intermediary include:

Refer taxpayers, who question how or where to apply for QI status, to Rev. Proc. 2022-43 which give guidance for entering into a QI Agreement.

There is a web site established for Qualified Intermediaries on https://www.irs.gov/businesses/corporations/qualified-intermediary-system. Additional information can also be found in Publication 515.

If taxpayers question the time frame for approval of QI status, advise them that a QI EIN in the range mentioned above will be issued upon receipt of the SS-4 application. Acceptance of a QI application currently takes approximately 30 days for approval and will be issued from the New York office. If there is a question on the QI status, ENMOD can be researched to see if the application was rejected. Entity will be notified to update ENMOD if the number is being revoked. See IRM 21.7.13, Assigning Employer Identification Numbers (EINs).

Withholding Foreign Trusts and Foreign Partnerships can find procedures in Rev. Proc. 2017-21.

A QI agreement generally is based in part on a Treasury Department Certification that the country has effective rules and/or procedures for providing tax information to the U.S. Treasury and the IRS regarding know-your-customer (KYC) rules as a vital component of adequate self-regulation. The IRS generally does not extend the QI system to any country that does not have acceptable KYC rules.

The following link is to a list of countries that have submitted approved KYC rules:http://www.irs.gov/Businesses/International-Businesses/List-of-Approved-KYC-Rules. This website is updated regularly.

If the EIN is in the range noted in paragraph (5) above and the INTERMEDIARY IND on the BRTVU is 1, the entity is a Qualified Intermediary. If the indicator is "2," the entity is a NON-QI. This indicator comes from the top portion of Form 1042 below the address stating "Check if you are a QI/Withholding foreign partnership or trust." If these conditions are present, the taxpayer is a Qualified Intermediary and there may be a line 67 entry.

If an unnumbered Form 1042 is received without a QI EIN, but the QI box is checked, send it back to the taxpayer with an explanation of the requirements.

Send loose, timely filed original (March 15 due date) copy(s) A of Form 1042-S to Ogden Code and Edit for processing.

Process late-filed original copy(s) A of Form 1042-S documents as follows:

BMF/International tax examiners must use the following chart when researching for the Form 1042 return.

If an amended Copy A of the Form 1042-S is received in the Accounts Management area, correspond with the withholding agent to inquire whether this amended Form 1042-S indicates that an adjustment is necessary on their Form 1042 account.

Accounts Management International Units must use the following chart for handling responses from the Withholding Agent.

When copy A of Form 1042-S is attached to a dummy Form 1042 return, the tax examiners must research for the DLN of the original Form 1042 return.

Associate all loose/corrected copies B, C or D of the Form 1042-S with the recipient's tax return, if on file.

Return loose copy(s) E of the Form 1042-S to the Withholding Agents for their records. Close the control bases.

Forward 1042-S forms received that are marked "Additions to Mag Tape" to Code and Edit for processing as original documents.

1042-S forms marked "Corrections to Mag Tape" are considered amended 1042-S forms and are processed as indicated in (4) above.

Send all original corrected/amended 1042-S forms to:

Return claims for refund of withholding at source received from Exempt Organizations and Private Foundations, with Form 1042-S, advising the taxpayer to file either Form 990-T or Form 990-PF as appropriate.

A Form 1042-S is required before sending the claim to Ogden Campus Examination.

Refer general questions concerning Central Withholding Agreements (CWAs) to the CWA program mailbox at: CWA.Program@irs.gov (questions should not be account-related or include any personal information such as Taxpayer Identification Number, Social Security Number, or address). The following is background information on the program.

Generally, IRC 1441(a) requires that withholding agents withhold 30 percent of the gross income of nonresident alien entertainers and athletes performing personal services or participating in athletic events in the United States. However, they may be able to enter into withholding agreements with the IRS for reduced withholding provided certain conditions are met.

A Central Withholding Agreement (CWA) is an agreement between a nonresident alien athlete or entertainer, a designated withholding agent, and an authorized representative of the IRS. The agreement is for a specific tour or series of events and the withholding is computed at graduated rates and is based on the budget provided and net profit estimates approved by the IRS. NRAs applying for a CWA must submit the information contained in Form 13930, Instructions on How to Apply for a Central Withholding Agreement, and must meet CWA eligibility requirements. For more information on CWA eligibility requirements, refer to IRM 4.64.1.10.

CWAs must be sent at least 45 days before the first CWA event to the following address:

The IRS will respond to Form 13930 submissions within 10 business days of receipt.

Effective October 1, 2018, nonresident alien (NRA) entertainers and athletes requesting a CWA using Form 13930 must have year to date gross tour income of at least $10,000 per applicant (refer to next paragraph for NRAs with gross income below $10,000).

Effective October 7, 2019, NRA entertainers and athletes with gross income of less than $10,000 per person (per application) may request a simplified CWA. NRAs applying for a simplified CWA must submit the information contained in Form 13930-A, Application for Central Withholding Agreement Less than $10,000.

Withholding under a simplified CWA is computed at graduated rates and is based on gross income estimates. No expenses are allowed under a simplified CWA.

Simplified CWAs must be submitted using Form 13930-A with the estimated withholding payment and all required documents at least 45 days before the first CWA event through www.pay.gov. The withholding payment submitted through pay.gov is applied to the withholding agent’s Form 1042 account for the year indicated on pay.gov at the time of submission. If the application is rejected, the payment cannot be refunded to the withholding agent until the Form 1042 reflecting an overpayment is filed for that year.

The IRS will respond to Form 13930-A submissions within 4 weeks of receipt. Form 13930-A applications missing any required information will be rejected. If the application is rejected, the IRS will issue Letter 4288, No Central Withholding Agreement (CWA).

NRAs requesting CWAs under either Form 13930 or Form 13930-A must have filed and paid (or made payment arrangements) for all previous U.S. taxes, and must agree to timely file Form 1040-NR. The designated withholding agent under either Form 13930 or 13930-A will be required to file Form 1042 and Form 1042-S for each year in which income is paid to the NRA covered by the withholding agreement and issue Form 1042-S to each NRA athlete or entertainer affected by the agreement.

Additional information about the CWA program can be found on irs.gov at http://www.irs.gov/Individuals/International-Taxpayers/Central-Withholding-Agreements.

The total withholding tax liability of the partnership for its tax year is reported on Form 8804, Annual Return for Partnership Withholding Tax (Section 1446).

Form 8805, Foreign Partner's Information Statement of § 1446 Withholding Tax, is used to show the amount of effectively connected taxable income and the withholding tax attributable to each foreign partner for the partnership's tax year. The partnership also provides additional information on the Schedules K-1 and, starting for tax year 2021/processing year 2022, K-3 (Form 1065) to the partner regarding the components making up the amount of effectively connected taxable income reported so that the partner may prepare its tax return. If the foreign partner is a foreign trust or estate, the foreign trust or estate must provide a copy of the Form 8805 furnished by the partnership to each of its beneficiaries. In addition, the foreign trust or estate must complete Schedule T, lines 11-13 of Form 8805, for each of its beneficiaries and must provide that Schedule T information to each beneficiary. A foreign trust or estate must attach to the Form 1040-NR it files any Forms(s) 8805 it receives and copies of the Form(s) 8805 it must furnish to its beneficiaries with the Schedule(s) T completed.

The foreign partner must attach Form 8805 to its return in order to claim a credit on Form 1040-NR, Form 1120-F, or, if the partner is itself a partnership, Form 8804.

Any U.S. person erroneously made subject to the withholding tax would also receive Form 8805 from a partnership and must attach the form to its income tax return to obtain credit.

If a foreign partnership (upper-tier partnership) that is a partner in another partnership (lower-tier partnership) that has withheld and paid over amounts under IRC 1446, the upper-tier partnership may claim a credit for the tax withheld by the lower-tier partnership as though it were an amount paid by the upper-tier partnership for purposes of §1446. Accordingly, the upper-tier partnership must complete and file Form 8804 and Form 8805 as appropriate to satisfy its §1446 withholding tax obligation, include in determining its withholding obligation its allocable share of effectively connected taxable income from the lower tier partnership, and report the amount of tax withheld on their behalf to its partners. An upper-tier partnership that has had §1446 withholding tax payments made on its behalf by a lower-tier partnership should receive a copy of Form 1042-S or Form 8805 from the lower-tier partnership.

Form 8813, Partnership Withholding Tax Payment Voucher (§1446), is used to transmit installment payments to the IRS.

If a discrepancy exists between the amounts shown on the Form 8804 and the posted IDRS data, resolve the matter at the Campus level. Where appropriate, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

For tax periods beginning after December 31, 2015, the due date for filing Form 8804 and for paying any amount due with the return is generally the 15th day of the 3rd month after the close of the partnership's tax year. However, with respect to partnerships described in §1.6081-5(a)(1), Form 8804 is not due until the extended due date for Form 1065 as prescribed by §1.6081-5(a). Partnerships may file Form 7004 to request an extension of time to file Form 8804, until the 15th day of the 9th month after the close of the partnership’s taxable year. Filing Form 7004 does not extend the time to pay.

Generally effectively connected taxable income (ECTI) allocated to a foreign partner is subject to withholding at 21% for corporate partners and 37% for non-corporate partners.

Tax due on Form 8804, Annual Return for Partnership Withholding Tax (§ 1446), is required to be paid as estimated tax following essentially the same rules as those existing for corporations, except as modified by § 1.1446-3. For specific information regarding the estimated tax requirements and the penalty computation, see the Form 8804 Schedule A instructions.

The following are the requirements that a partnership must have met in order to qualify for the prior year safe harbor: