Page 46 - Withholding Taxes for Foreign Entities

10:50 - 14-Feb-2020
Page 44 of 55
Fileid: … tions/P515/2020/A/XML/Cycle10/source
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
information. You are encouraged to file elec- Penalties penalty of $3,392,000 per year
tronically even if you are not required to do so. If ($1,130,500 for a small business).
you are required to file electronically but fail to If you do not file a correct and complete Form
do so, and you do not have an approved waiver 1042 or Form 1042-S with the IRS on time or if Exception. No penalty is imposed if you
on record, penalties may apply. For the instruc- you do not provide a correct and complete meet all the following requirements.
tions for filing Form 8966 electronically, see Form 1042-S to the recipient on time, you may 1. You provided a Form 1042-S to a recipient
Pub. 5124. be subject to a penalty. on time, but it was incorrect or incomplete.
Extensions of Time To File Failure to file Form 1042. The penalty for not 2. You provided a correct Form 1042-S to
the recipient by August 1.
filing Form 1042 when due (including exten-
You can request extensions of time to file sions) is usually 5% of the unpaid tax for each If you satisfy the requirements in (1) and (2)
month or part of a month the return is late, but
Forms 1042 and 1042-S with the IRS and addi- not more than 25% of the unpaid tax. above, the penalty for providing incorrect re-
tional extensions to furnish Forms 1042-S to re- turns (but not for filing late) will not apply to the
cipients. Failure to file correct Form 1042-S. A pen- greater of 10 Forms 1042-S or 0.50% of the to-
tal number of all types of information returns
Extension to file Form 1042. You can get an alty may be imposed for failure to file Form you had to provide during the calendar year.
1042-S when due (including extensions) or for
automatic 6-month extension of time to file failure to provide complete and correct informa-
Form 1042 by filing Form 7004. File Form 7004 tion. The amount of the penalty depends on Penalty for intentional disregard of require-
on or before the due date of Form 1042. Form when you file a correct Form 1042-S. The pen- ments to file or provide returns. If you inten-
7004 does not extend the time for payment of alty for each Form 1042-S is: tionally disregard the requirement to file Form
tax. • $50 if you file a correct form within 30 1042-S when due, to provide Form 1042-S to
the recipient when due, or to report correct in-
Form 7004 extends only the due date days, with a maximum penalty of $565,000 formation, the penalty is the greater of $560 or
! for filing the returns with the IRS. It per year ($197,500 for a small business); 10% of the total amount of the items that must
CAUTION does not extend the due date for fur- • $110 if you file after 30 days but by August be reported, with no maximum penalty.
nishing statements to recipients. 1, with a maximum penalty of $1,696,000
($565,000 for a small business); or Failure to file electronically. If you are re-
Extension to file Form 1042-S with the IRS. • $280 if you file after August 1 or do not file quired to file Form 1042-S electronically but you
fail to do so, and you do not have an approved
You can get an automatic 30-day extension of a correct form, with a maximum penalty of
time to file Form 1042-S by filing Form 8809. $3,392,000 per year ($1,130,500 for a waiver, penalties may apply unless you estab-
lish reasonable cause for your failure.
You should request an extension as soon as small business).
you are aware that an extension is necessary, Small businesses—lower maximum pen-
but no later than the due date for filing Form alties. A small business is a business that has Partnership Withholding
1042-S. You may request one additional exten- average annual gross receipts of $5 million or
sion of 30 days by submitting a second Form less for the most recent 3 tax years (or for the on Effectively
8809 before the end of the first extension pe- period of its existence, if shorter) ending before
riod. Requests for an additional extension are the calendar year in which the Forms 1042-S Connected Income
not automatically granted. Approval or denial is are due.
based on administrative criteria and guidelines. Under section 1446, a partnership (foreign or
The IRS will send you a letter of explanation ap- Exception. No penalty is imposed if the domestic) that has income effectively connec-
proving or denying your request for an addi- following statements are true. ted with a U.S. trade or business (or income
tional extension. 1. You filed Form 1042-S with the IRS on treated as effectively connected) must pay a
If you are requesting extensions of time time, but it was incorrect or incomplete. withholding tax on the effectively connected
! to file for more than one withholding 2. You filed a correct Form 1042-S by taxable income that is allocable to its foreign
partners. A publicly traded partnership must
CAUTION agent or payer, you must submit the August 1.
extension request electronically. withhold tax on actual distributions of effectively
If both statements (1) and (2) are true, the connected income. See Publicly Traded Part-
Extension to provide statements to recipi- penalty for filing incorrect returns (but not for fil- nerships, later. Chapter 4 withholding does not
apply to this income.
ents. You may request an extension of time to ing late) will not apply to the greater of 10 Forms
provide the statements to recipients by sending 1042-S or 0.50% of the total number of Forms This withholding tax does not apply to in-
a letter to: 1042-S and any other information returns you come that is not effectively connected with the
are required to file with the IRS for the calendar partnership's U.S. trade or business. That in-
Internal Revenue Service year. come may be subject to Chapter 3 withholding
Information Returns Branch tax, as discussed earlier in this publication.
Attn: Extension of Time Coordinator Failure to furnish Form 1042-S to recipient.
240 Murall Drive, Mail Stop 4360 A penalty may be imposed for failure to provide Who Must Withhold
Kearneysville, WV 25430 Form 1042-S to the recipient when due (includ-
ing extensions) or for failing to provide complete
and correct information. The amount of the pen-
The letter must include (a) your name, (b) your alty depends on when you provide the correct The partnership, or a withholding agent for the
TIN, (c) your address, (d) type of return, (e) a Form 1042-S. The penalty for each Form partnership, must pay the withholding tax. A
statement that your extension request is for pro- 1042-S is: partnership that must pay the withholding tax
viding statements to recipients, (f) reason for • $50 if you provide the correct Form 1042-S but fails to do so may be liable for the payment
delay, and (g) the signature of the payer or au- within 30 days, with a maximum penalty of of the tax and any penalties and interest.
thorized agent. Your request must be post- $565,000 per year ($197,500 for a small
marked by the date on which the statements business); The partnership must determine whether a
are due to the recipients. If your request for an • $110 if you provide the correct Form partner is a foreign partner. A foreign partner
extension is approved, generally you will be 1042-S after 30 days but by August 1, with can be a nonresident alien individual, foreign
granted a maximum of 30 extra days to furnish a maximum penalty of $1,696,000 corporation, foreign partnership, foreign estate
the recipient statements. See Pub. 1187. ($565,000 for a small business); or or trust, foreign tax-exempt organization, or for-
• $280 if you provide the correct Form eign government.
1042-S after August 1, with a maximum U.S. partner. A partner that is a U.S. person
should provide Form W-9 to the partnership.

Page 44 Publication 515 (2020)