A withholding agent for NRA (nonresident aliens) withholding purposes is any person, U.S. or foreign, that has control, receipt, custody, disposal, or payment of any item of income of a foreign person that is subject to NRA withholding. This includes individuals, U.S. corporations, foreign intermediaries, and certain U.S. branches. The withholding agent is responsible for withholding tax on payments of U.S. sourced, FDAP (Fixed or Determinable, Annual or Periodic) income to foreign persons and making deposits of such tax to the U.S. Treasury, unless an applicable exclusion provided by the Code or an income tax treaty applies.
If the withholding agent does not withhold the required tax and the foreign person does not satisfy its withholding tax obligation, both the withholding agent and the foreign person will be held liable for the tax, including any associated interest and penalties. The withholding agent is also responsible for correctly reporting the income paid and the withholding applied on Form 1042-S.
Relevant regulations include Treas. Reg. Sec. 1.1441-7(a), which defines the term "withholding agent" and outlines their responsibilities. Additionally, Internal Revenue Code Sec. 1461 and Treas. Reg. Sec. 1.1461-2(b) provide further details on the liability and reporting obligations of withholding agents.
Sources:
§ 1.1441-7. General provisions relating to withholding agents.
Publication 515 (2024)
IRM Part 4. Examining Process. Chapter 10. Examination of Returns. Section 21. U.S. Withholding Agent Examinations - Form 1042
IRM Part 3. Submission Processing. Chapter 22. International Error Resolution. Section 110. Processing Form 1042 Withholding Returns
IRM Part 3. Submission Processing. Chapter 21. International Returns and Documents Analysis. Section 110. Processing Form 1042 Withholding Returns
IRM Part 3. Submission Processing. Chapter 22. International Error Resolution. Section 111. Chapter Three and Chapter Four Withholding Database
