Form 1042-S, Foreign Person’s United States Source Income Subject to Withholding, If a Valid US Tax ID is not provided to US firms distributing the income, the US firm has an obligation to withhold a flat 30% tax on the Gross income distribution. The Federal tax withholding and Gross income summary are reported on Form 1099 or Form 1042S. If you received these forms it’s worth checking to claim back the excess tax withholding by filing a valid US tax return with an ITIN application.
Compensation, Wages, Salary, and Honoraria Payments [Tax Treaty benefits claim] – Foreign person who is eligible to claim treaty benefits?
Who is a Foreign Person?
In simple terms any individual for example British National, Singapore National, or other country nationality person residing outside of the United States and he or she is not an American citizen, green card holder, or resident in the united states for the 183 days when the income is received are classified as a foreign person.
Who is a Foreign person, eligible to claim a treaty benefit for the income received as a salary, wages, compensation, or Honoraria payment?
Individuals who will be submitting Form 8233 to the payer of the USA Income
Individuals who will be:
- Claiming the benefits of a tax treaty who are either exempt
- or Subject to a reduced rate of federal tax withholding of tax on their wages, salary, compensation, and honoraria payments.
Documents to be submitted by a Foreign person who is eligible to claim the tax treaty benefits.
- A letter of employment from the payer of the income, or
- A copy of the employment contract, or
- A letter requesting your presence for a speaking engagement, etc.
- Information on the Form W-7[US TAX ID/ITIN] application that the person is entitled to claim the benefits of a tax treaty,
- A copy of the completed Form 8233 must have the applicant and withholding agent information completed.
Important Note: Individuals present in the U.S. who are receiving honoraria payments, do not have to obtain a letter of denial from the SSA. A letter from the Authorized School Official stating the purpose of the visit and that the individual will be receiving payment in the form of honoraria will suffice.
If a Form W-7 is attached then one of the documents proving identity, foreign status the original passport is to be sent unless you are taking the service of the IRS Acceptance Agent who can certify the passports.
Please note even though the Form W7 ITIN application looks simple and straightforward to complete any small mistake would lead to rejection. As the ITIN application process time is estimated to be between 6 to 12 weeks at peak tax season time you could potentially waste a lot of time and risk the process of losing the original passport which is mandatory if you are sending the Form W7 application directly without using an Acceptance Agent service. For more details on the step-by-step ITIN application work process by acceptance agents please check this blog.
Our team specializes in international expatriate U.S. personal tax return service. If you need assistance with ITIN Renewal/US 1040 filing for refund claim/FATCA Compliance work/FBAR FINCEN114 Filing, ITIN/ Form W7 Application/E.I.N./Form W8BENE or Certified Acceptance Agents [C.A.A.] services/1040NR U.S. tax filing for refund claim of excess 1042S / 8288A/ 8805/ W2/ 1099. We are happy to assist our clients in a timely, efficient, and cost-effective way.