If the under withholding has been "cured" by obtaining a Form W-8 or other applicable documentation after a payment, and such documentation is found sufficient, there is generally no remaining liability for tax, interest, and penalties for the withholding agent. However, exceptions apply in cases where the withholding agent is relieved from the tax liability by showing that the underwithheld tax was paid by the payee. In those cases, the withholding agent may still be liable for interest and applicable penalties. Additionally, reporting-related penalties might still apply where no underwithholding results on account of the cure, but the filed Form 1042-S reflected incorrect information.
Sources:
§ 1.1441-3. Determination of amounts to be withheld.
§ 1.1471-3. Identification of payee.
T.D. 8734
Publication 1281 (12/2023)
Rev. Proc. 2014-47
CCA 201037027
