Partnerships with foreign partners may be required to make Section 1446 withholding payments. Generally, if a partnership has taxable income effectively connected with the conduct of a trade or business within the United States that is allocable to a foreign partner, the IRS requires the partnership to report and pay a withholding tax under IRC Section 1446. This withholding must be paid regardless of foreign partners’ ultimate U.S. tax liability and whether or not the partnership makes any distributions during the year.
See Revenue Procedure 92-66 and Treasury Regulation 1.1446-3 for information on the time and manner for paying, as well as other obligations.
Report the withholding amounts paid on Forms 8804 and 8805. Use Form 8813 to pay the quarterly installments of withholding tax to the United States Treasury.
To enter foreign partner information into the TaxAct program:
- From within your TaxAct return (Online or Desktop), click K-1 Wizard. On smaller devices, click the menu icon in the upper left-hand corner, then select K-1 Wizard.
- From the Federal K-1 Wizard – Partner Summary, click New Copy of Schedule K-1 (Desktop users click Add) to create a new copy of a Schedule K-1 or click Review to review a Schedule K-1 already created.
- The program will proceed with the interview questions for you to enter or review the appropriate information for each partner. You will be able to indicate the partner as a foreign partner on the K-1 screen Partner – Domestic or Foreign.
- Then, if Section 1446 withholding requirements apply, select the checkbox indicating the partner should be reported on Form 8805.
To complete Forms 8804, 8805, and 8813 within TaxAct 1065:
- From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click the menu icon in the upper left-hand corner, then select Federal.
- Click Miscellaneous Topics to expand the category, and then click the sub-category Section 1446 Foreign Partner Withholding Information and then select one of the following topics:
- Form 8805, Individual Foreign Partner Withholding
- Form 8804, Summary of Total 1446 Withholding
- Form 8813, Section 1446 Withholding Payment Voucher