Tax & Accounting Blog

NRA Withholding and Reporting on Payments to Foreign Nationals – Part 11: What if the Payment Includes Both U.S. Source and Foreign Source Income?

1099, Tax Information Reporting, TIN Compliance, W-8 & W-9 Foreign Reporting, Withholding Management July 20, 2012

If you know that the payment includes both U.S. source and foreign source income and you do not have a reasonable allocation of the U.S. source amount, you must treat the entire amount as U.S. source income.

The recipient of the income can submit a U.S. tax return with an allocation of the income between U.S. and foreign sources and can obtain a refund of any overwithheld taxes.