Ask Tax Question

If there are nonresident Partners in a partnership tax return filing, is there anything special you are required to file with the return?

Partnership Tax Return
TaxConnections Members... Answer This Question Want To be One of Our Tax Experts? Register Here

Tax Professional Answers

User Photo
Gary Carter, PhD, MT, CPA
Under IRC Section 1446, a partnership that has income effectively connected with a U.S. trade or business must pay a withholding tax on the effectively connected taxable income that is allocable to its foreign partners. The partnership must pay the withholding tax, and is subject to penalties and interest for failure to do so. The amount of tax the partnership must withhold for a foreign individual partner is 39.6% in 2013. Additionally, if the partnership has non-effectively connected income allocable to a foreign partner, the general withholding rate (absent a treaty reduction) is 30%.

There are several items that reduce the required withholding on effectively connected income, such as a treaty exemption, state and local taxes the partnership pays on behalf of the partner, and partner-level deductions and losses that the foreign partner certifies to the partnership on Form 8804-C. If the partner's investment in the partnership is the only activity producing effectively connected income and the withholding tax is less than $1,000, no withholding is required.
Leave a Comment 243 weeks ago

User Photo
Douglas Stransky
Although the question relates to the partnership, it is worth noting that under U.S. federal income tax law, if the partnership is engaged in a U.S. trade or business, the nonresident, as a partner in the partnership, is also considered to have a U.S. trade or business with respect to the business activities performed by the partnership in the United States. See, e.g., I.R.C. § 875(1); Treas. Reg. § 1.875-1; Rev. Rul. 91-32, 1991-1 C.B. 107. As a result, income “effectively connected” with that U.S. trade or business is subject to U.S. federal income tax for the non-resident (whether an individual or a foreign corporation). I.R.C. §§ 871(b)(1) and 882(a)(1) tax a nonresident alien individual or foreign corporation on “taxable income which is effectively connected with the conduct of a U.S. trade or business within the United States.” I.R.C. § 641(b) treats a foreign trust, and Treas. Reg. § 1.871-2(a) treats a foreign fiduciary, as a nonresident alien individual for U.S. federal income tax purposes.
Leave a Comment 243 weeks ago

Meet Leading Tax Advisors

User Photo John Stancil

Lakeland, Florida, USA

Tax Advisor/CEO

User Photo Peter J. Scalise

New York, New York, USA

Federal Tax Credits & Incentives Practice Leader

User Photo John Dundon, II EA

Denver, Colorado, USA

Tax Director

User Photo Steven Potts JD EA IAR

Fullerton, California, USA


User Photo Caran Ebert, CPA

Topanga, California, USA

Tax Advisor

User Photo William Rogers, CFP, MBA, EA

Rancho Santa Fe, California, USA

CEO/Certified Financial Advisor

User Photo Randy Tarpey

Tyrone , Pennsylvania, USA


User Photo Lisa Nason CPA, MST

Greenville, South Carolina, USA

Managing Shareholder

User Photo David Hughey, EA, MAcc

Longview, Washington, USA

Tax Consultant/Tax Advisor


Santa Clara, California, USA

Tax Principal - President

User Photo Hugo Van Zyl

Stellenbosch, South Africa

Exchange Control & Master Tax Practitioner (SA)

User Photo Douglas Stransky

Boston, Massachusetts, USA

Tax Partner, International Tax

User Photo Chad Hatalla

Rheinfelden, Switzerland

Senior Tax Manager

User Photo Larry Stolberg, CPA, CA

Toronto Mississauga Oakville Burlington Hamilton, Canada

Tax Specialist

User Photo Dr. Daniel Erasmus

West Palm Beach, Florida, USA

Managing Partner/EMEA

View/Select our Current List of Tax Topics

# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Previous PageNext Page

Contact Us Today