Tax & Accounting Blog

NRA Withholding and Reporting on Payments to Foreign Nationals – Part 5: What if I Have No Information When I Have to Make a Payment?

1099, ONESOURCE, Tax Information Reporting, Withholding Management July 5, 2012

The Section 1441 regulations provide presumptions that you must follow in order to avoid liability for underwithholding when you make payments to recipients for whom you have no documentation. (See the table in IRS Publication 515  for references to specific withholding regulations for different types of payments.)

An individual recipient on whom you have no information is presumed to be a U.S. person (i.e., a U.S. citizen or resident alien). Therefore, if you have no documentation, you must impose 28 percent backup withholding on the payment and report the payment and taxes on Form 1099-MISC.

However, if you or anyone in your organization knows or has reason to know that the recipient is a foreign national who might be a nonresident alien, you must withhold the higher 30 percent tax and report the income and taxes withheld on Form 1042-S.