Information Reporting to U.S. Persons — Payments Subject to Back-up Withholding (Portfolio 643)

Description

The Bloomberg Tax Portfolio, Information Reporting to U.S. Persons — Payments Subject to Back-up Withholding, No. 643, discusses the requirements relative to backup withholding as required under §3406 and the types of payments that may be subject to the imposition of this tax. Back-up withholding is imposed on certain reportable payments when a payee or recipient fails to provide a taxpayer identification number or the appropriate documentation. The Portfolio describes the timing as to when withholding is required, the process to remit the tax to the IRS, and the reporting required at year end.

The Portfolio discusses the various types of payments that may be subject to back-up withholding, including interest, original issue discount (OID), dividends, broker proceeds, and miscellaneous payments. It addresses special reporting issues such as REMICs, REITs, and WHFITs, and the reporting requirements applicable at year end for payments subject to back-up withholding that are reportable on Forms 1099 to payees or recipients and the IRS. The Portfolio also focuses on the penalties that may be imposed due to failures to correctly prepare information returns and report to recipients and the IRS.

Table of Contents

I. Introduction
II. Failure to File Penalties
III. Failure to Pay Penalties
IV. Accuracy-Related Penalties
V. Fraud Penalty
VI. Certain Information Returns and Payee Statements
VII. Tax Return Preparer Penalties
VIII. Promoter and Protester Penalties
IX. Compensation Statements, Pension Plans, and Higher Education Savings
X. Certain Foreign Persons
XI. Reasonable Cause Exception
XII. Assessment and Collection