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 Form 8804 Annual Return for Partnership Withholding Tax (Section 1446) and Form 8805 Foreign Partner’s Information Statement of Section 1446 Withholding Tax. Use Form 8813 Partnership Withholding Tax Payment Voucher (Section 1446) 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 1065 return (Online or Desktop), click K-1 Wizard, then click Continue (on smaller devices, click K-1 Wizard). in the top left corner of your screen, then click
- If you have already created a Schedule K-1, you will need to click + Add Schedule K-1 to create a new copy of a Schedule K-1 or click Edit to review a Schedule K-1 already created (desktop program: click Review instead of Edit).
- Click Step-by-Step Guidance and continue with the interview questions until you reach the screen titled Partner – Domestic or Foreign.
- Click the Circle next to Foreign Partner to select it.
- After you select Foreign Partner, new options will appear below it. If Section 1446 withholding requirements apply, click the Checkbox next to Check here if this partner is required to be reported on Form 8805 for Section 1446 Withholding Tax.
To complete Forms 8804, 8805, and/or 8813 within TaxAct 1065:
- From within your TaxAct return (Online or Desktop), click Federal (on smaller devices, click in the top left corner of your screen, then click Federal).
- Click the Miscellaneous Topics dropdown, then click the Section 1446 Foreign Partner Withholding Information dropdown, then click one of the following:
- Form 8805, Individual Foreign Partner Withholding
- Form 8804, Summary of Total 1446 Withholding
- Form 8813, Section 1446 Withholding Payment Voucher
- Continue with the interview process to enter all of the appropriate information.
Note that any link in the information above is updated each year automatically and will take you to the most recent version of the webpage or document at the time it is accessed.