What is the withholding requirement if a payment is made to a foreign corporation? What about an individual who is incorporated in their home country?
For tax purposes, the IRS looks at the “beneficial owner” of the income. If a nonresident alien “participates in the profits” of the corporation, the alien is considered an individual for taxation and withholding. The IRS seems to have given conflicting guidance in the past as to whether payments to third parties and expense reimbursements made under the “accountable plan” rules are subject to withholding. Can you explain? The IRS previously advised that expense reimbursements and third-party payments were subject to withholding because they were concerned that, by not withholding, payers were not reporting compensation that may be subject to taxation under many tax treaties. The IRS view was that if payers did not withhold, the IRS would be relying only on the artist to accurately report total compensation on a tax return, without confirmation on the Form 1042-S from the payer regarding expense compensation. The IRS has since confirmed that payers are not required to withhold on expen
Related Questions
- What is the withholding requirement if a payment is made to a foreign corporation? What about an individual who is incorporated in their home country?
- Is there any withholding requirement for a New York State foreign corporation employing New York State residents?
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