Use Forms 8804, 8805, and 8813 to pay and report section 1446 withholding tax based on effectively connected taxable income allocable to foreign partners.

Use Form 8804, Annual Return for Partnership Withholding Tax (Section 1446), to report the total liability under section 1446 for the partnership's tax year. Form 8804 is also a transmittal form for Form(s) 8805.

Use Form 8805, Foreign Partner's Information Statement of Section 1446 Withholding Tax, to show the amount of effectively connected taxable income and the total tax credit allocable to the foreign partner for the partnership's tax year.

File a separate Form 8805 for each foreign partner even if no section 1446 withholding tax was paid. Attach Copy A of each Form 8805 to the Form 8804 filed with the IRS.

Foreign partners must attach Form 8805 to their U.S. income tax returns to claim a credit for their shares of the section 1446 tax withheld by the partnership. A foreign partnership that receives a Form 8805 should see Tiered Partnerships on page 5. Any U.S. person erroneously subjected to the withholding tax would also receive Form 8805 from a partnership and should attach it to his or her income tax return.

Use Form 8813, Partnership Withholding Tax Payment Voucher (Section 1446), to pay the withholding tax under section 1446 to the United States Treasury. Form 8813 must accompany each payment of section 1446 tax made during the partnership's tax year.

All partnerships with effectively connected gross income allocable to a foreign partner in any tax year must file Forms 8804 and 8805 whether or not distributions were made during the partnership's tax year. The partnership may designate a person to file the forms. The partnership, or person it designates, must file these forms even if the partnership has no withholding tax liability under section 1446.

Publicly traded partnerships must file these forms only if they have elected to pay section 1446 withholding tax based on effectively connected taxable income allocable to foreign partners. See Publicly Traded Partnerships on page 5.

File Forms 8804, 8805, and 8813 with: Internal Revenue Service Center, Philadelphia, PA 19255.

To insure proper crediting of the withholding tax when reporting to the IRS, a partnership must provide a U.S. taxpayer identifying number (TIN) for each foreign partner. The partnership should notify any of its foreign partners without such a number of the necessity of obtaining a U.S. identifying number. An individual's identifying number is the individual's social security number (SSN) or individual taxpayer identification number (ITIN). Any other partner's identifying number is its U.S. employer identification number (EIN).

Certain aliens who do not have and are not eligible to get an SSN can apply for an ITIN on Form W-7, Application for IRS Individual Taxpayer Identification Number.

A foreign or domestic partnership that has effectively connected taxable income allocable to a foreign partner must pay a withholding tax equal to the applicable percentage of the effectively connected taxable income that is allocable to its foreign partners. However, this requirement does not apply to a partnership treated as a corporation under the general rule of section 7704(a). Effectively connected taxable income is defined on page 2. Applicable percentage is defined on page 3.

General partners and limited liability company members are jointly and severally liable as withholding agents for the partnership. For ease of reference, these instructions refer to various requirements applicable to withholding agents as requirements applicable to partnerships themselves.

A partnership must determine if any partner is a foreign person subject to section 1446. Under section 1446, a foreign person is a nonresident alien individual, foreign corporation, foreign partnership, or foreign trust or estate. A partnership may determine a partner's status by relying on a certification of nonforeign status or by any other means.

When making a payment of withholding tax to the IRS under section 1446, a partnership must notify all foreign partners of their allocable shares of any section 1446 tax paid to the IRS by the partnership. The partners use this information to adjust the amount of estimated tax that they must otherwise pay to the IRS.

A partnership must annually provide foreign partners with a copy of Form 8805 even if no section 1446 withholding tax is paid. Send Form 8805 to the foreign partner by the due date of the partnership return (including extensions).

Interest and penalties are described below. If the partnership files Form 8804 or Forms 8805 late, fails to furnish correct Forms 8805, or fails to pay the tax when due, it may be liable for penalties and interest unless it can show that failure to file or pay was due to reasonable cause and not willful neglect.

A partnership's payment of section 1446 withholding tax on effectively connected taxable income allocable to a foreign partner relates to the partner's U.S. income tax liability for the partner's tax year in which the partner is subject to U.S. tax on that income.

Amounts paid by the partnership under section 1446 on effectively connected taxable income allocable to a partner are allowed to the partner as a credit under section 33. The partner may not claim an early refund of withholding tax paid under section 1446.

Amounts paid by a partnership under section 1446 for a partner are to be treated as distributions made to that partner on the earliest of the following:

A partner that wishes to claim a credit against its U.S. income tax liability for amounts withheld and paid over under section 1446 must attach Copy C of Form 8805 to its U.S. income tax return for the tax year in which it claims the credit.

A “publicly traded partnership” is any partnership whose interests are regularly traded on an established securities market (regardless of the number of its partners). However, it does not include a publicly traded partnership treated as a corporation under the general rule of section 7704(a).

A publicly traded partnership that has effectively connected income, gain, or loss, generally must withhold tax on distributions of that income made to its foreign partners. The rate is 35%. In this situation, the partnership uses Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons; Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding; and Form 1042-T, Annual Summary and Transmittal of Forms 1042-S, to report withholding from distributions instead of following these instructions. It also must comply with the regulations under section 1461 and Regulations section 1.6302-2.

However, such a partnership may elect instead to pay a withholding tax based on effectively connected taxable income allocable to its foreign partners. To do this, the partnership must comply with the payment and reporting requirements of these instructions by the date on which Form 8804 is due for the partnership's first tax year. Also, the partnership must attach a statement to its first Form 8804 indicating that it is a publicly traded partnership that is electing not to withhold on distributions. Once made, the election may be revoked only with IRS consent.

The term “tiered partnership” describes the situation in which a partnership owns an interest in another partnership. The latter is a “subsidiary partnership.” A partnership that directly or indirectly owns a partnership interest in a subsidiary partnership is allowed a credit against its own section 1446 liability for any section 1446 tax paid by the subsidiary partnership for that partnership interest.

A partnership that is a direct or indirect partner in a subsidiary partnership and that has had section 1446 tax payments made on its behalf will receive a copy of Form 1042-S or Form 8805 from the subsidiary partnership. The partnership that is the direct or indirect partner must in turn file these forms with its Form 8804 and treat the amount withheld by the subsidiary partnership as a credit against its own liability to withhold under section 1446. This credit is allowed on line 6b of the Form 8804 filed by the partnership that is the direct or indirect partner. The partnership that is a direct or indirect partner must also provide a copy of the forms it receives to its partners, along with the information described in Reporting to Partners on page 3. These statements and forms will enable those partners to obtain appropriate credit for tax withheld under section 1446.