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:
To complete Forms 8804, 8805, and 8813 within TaxAct 1065: