Tax & Accounting Blog

Withholding on U.S. Business Income of Foreign Vendors – Part 2: Claiming Exemption from Withholding on Effectively Connected Income

Withholding on U.S. Business Income of Foreign Vendors – Part 2: Claiming Exemption from Withholding on Effectively Connected Income

A foreign enterprise that is engaged in a U.S. trade or business during the tax year may request an exemption from NRA withholding on its Effectively Connected Income (ECI) that is identified on line 9 of a valid Form W-8ECI presented to the payer prior to payment (unless an exemption is not available). To be valid, … Read More

IRS Issues Temporary Regulations on Foreign Asset Reporting

IRS Issues Temporary Regulations on Foreign Asset Reporting

The IRS  issued temporary and proposed regulations fleshing out the Code Section 6038D requirement for individuals to attach a statement to their income tax return to provide information on foreign financial assets in which they have an interest. The temporary regulations are effective for tax years ending after December 19, 2011 but taxpayers can apply … Read More

IRS Releases Form 8937 to Report Organizational Actions Affecting Security Holders’ Basis

IRS Releases Form 8937 to Report Organizational Actions Affecting Security Holders’ Basis

The IRS has released on its website Form 8937, Report of Organizational Actions Affecting Basis of Securities, and its Instructions. The Instructions include details on who must file the form and how certain entities can otherwise satisfy their organizational action reporting obligations. New form and instructions. The Form 8937 contains two parts. Part I consists … Read More

Withholding on U.S. Business Income of Foreign Vendors – Part 1

Withholding on U.S. Business Income of Foreign Vendors – Part 1

Foreign vendors being paid by U.S. organizations may include foreign enterprises that are engaged in a U.S. trade or business. Income of a foreign vendor that is effectively connected with the enterprise’s U.S. trade or business is subject to U.S. income tax after allowable deductions at graduated rates. Such effectively connected income (called ECI), when paid by … Read More

IRS Proposes Regulations on Broker Reporting of Options and Debt Instruments

IRS Proposes Regulations on Broker Reporting of Options and Debt Instruments

In 2010, the IRS published Final regs relating to broker reporting of stock. On Nov. 25, 2011, the IRS issued proposed regs that would integrate rules for broker reporting of options and debt instruments into the current final regs that explain how brokers must report stock transactions. However, the proposed regs also would make some … Read More

Information Reporting on Form 1042-S: A New Challenge for Accounts Payable

Information Reporting on Form 1042-S: A New Challenge for Accounts Payable

Reporting income and taxes withheld on payments made to corporate vendors recently became more challenging for accounts payable (A/P) departments of both for-profit and not-for-profit organizations with the new IRS compliance focus on payments to nonresident alien individuals, foreign entities and foreign governments (collectively, foreign persons). A/P departments familiar with the ins and outs of Form … Read More