For those of you who will find this page to be long, tiring, and hard to get through, Keep in mind that I have cropped all the extranious words that do not get to the heart of the issue. I do sum this page up with a graphic at the bottom of the page.
| Treasury Regulation Sec. 1.6041A-1 (d)(3) Foreign transactions--(i) In general. No return shall be required under section 6041A with respect to payments described in this paragraph (d)(3). ... However, such payments may be reportable under Sec. 1.1461-1(b) and (c). For purposes of this paragraph (d)(3)(i)(A), the provisions in Sec. 1.6049-5(c) (regarding rules applicable to documentation of foreign status and definition of U.S. payor and non-U.S. payor) shall apply. The provisions of Sec. 1.1441-1 shall apply by substituting the term payor for the term withholding agent. |
"However, such payments may be reportable under Sec. 1.1461-1(b) and (c)." Let us look to regulation 1.1461-1(b) and (c) to see if it makes my domestic compensation for labor a reportable payment.
| Treasury Regulation 1.1461-1 (b) Income tax return--(1) General rule. A withholding agent shall make an income tax return on Form 1042 (or such other form as the IRS may prescribe) for income paid during the preceding calendar year that the withholding agent is required to report on an information return on Form 1042-S (or such other form as the IRS may prescribe) under paragraph (c)(1) of this section. (c) Information returns-- (1) Filing requirement--(i) In general. A withholding agent (other than an individual who is not acting in the course of a trade or business with respect to a payment) must make an information return on Form 1042-S (or such other form as the IRS may prescribe) to report the amounts subject to reporting, as defined in paragraph (c)(2) of this section, that were paid during the preceding calendar year. (c)(2) Amounts subject to reporting--(i) In general. Subject to the exceptions described in paragraph (c)(2)(ii) of this section, amounts subject to reporting on Form 1042-S are amounts paid to a foreign payee (including persons presumed to be foreign) that are amounts subject to withholding as defined in Sec. 1.1441-2(a). |
I am not a nonresident alien nor am I a foreign person, thus the person paying me is NOT a withholding agent, thus none of the rules for withholding agents apply to what I am paid. Amounts subject to reporting are amounts subject to withholding paid to a foreign payee.
Nothing in Treasury Regulation 1.1461-1 makes my compensation for labor into a reportable payment.
| Treasury Regulation Sec. 1.6041A-1(d)(3)(i)(A) However, such payments may be reportable under Sec. 1.1461-1(b) and (c). For purposes of this paragraph (d)(3)(i)(A), the provisions in Sec. 1.6049-5(c) (regarding rules applicable to documentation of foreign status and definition of U.S. payor and non-U.S. payor) shall apply. The provisions of Sec. 1.1441-1 shall apply by substituting the term payor for the term withholding agent. |
A reportable payment is something paid by a "payor". Regulation 1.6049-5(c) definitions of U.S. payor and non-U.S. payor shall apply for this paragraph shown above.
| Treasury Regulation 1.6049-5 (c) Applicable rules-- (5) U.S. payor, U.S. middleman, non-U.S. payor, and non-U.S. middleman. The terms payor and middleman have the meanings ascribed to them under Sec. 1.6049-4(a). |
Those meanings are:
| Treasury Regulation Sec. 1.6049-4 Return of information as to interest paid and original issue discount includible in gross income after December 31, 1982. (a) Requirement of reporting--(1) In general. Except as provided in paragraph (c) of this section, an information return shall be made by a payor, as defined in paragraph (a)(2) of this section ... (2) Payor. For payments made after December 31, 2002, a payor is a person described in paragraph (a)(2)(i) or (ii) of this section. (i) Every person who makes a payment of the type and of the amount subject to reporting under this section (or under an applicable section under this chapter) to any other person during a calendar year. (ii) Every person who collects on behalf of another person payments of the type and of the amount subject to reporting under this section (or under an applicable section under this chapter), or who otherwise acts as a middleman (as defined in paragraph (f)(4) of this section) with respect to such payment. |
And the type and amount subject to reporting under this section is:
| Treasury Regulation 1.6049-4(b) Information to be reported-- (1) Interest payments. (2) Original issue discount. |
This is a dead end. Nothing here makes my compensation for labor into a reportable payment, thus there is no need to furnish an identifying number, nor is there a requirement for backup withholding.
One last loose end to tie up:
| Treasury Regulation Sec. 1.6049-4 (2) [A] payor is ... (i) Every person who makes a payment of the type and of the amount subject to reporting under this section (or under an applicable section under this chapter) to any other person during a calendar year. |
"Under an applicable section under this chapter" means any of the other sections, of which we have already looked at all the sections that could possibly apply to make compensation for labor into a reportable payment. None do.
| Treasury Regulation Sec. 1.6041A-1(d)(3)(i)(A) However, such payments may be reportable under Sec. 1.1461-1(b) and (c). For purposes of this paragraph (d)(3)(i)(A), the provisions in Sec. 1.6049-5(c) (regarding rules applicable to documentation of foreign status and definition of U.S. payor and non-U.S. payor) shall apply. The provisions of Sec. 1.1441-1 shall apply by substituting the term payor for the term withholding agent. |
The provisions cross referenced do not apply to my compensation for labor either.
| Treasury Regulation Sec. 1.6049-5 Interest and original issue discount subject to reporting after December 31, 1982. (c) Applicable rules-- (1) Documentary evidence for offshore accounts. A payor may rely on documentary evidence described in this paragraph (c)(1) instead of a beneficial owner withholding certificate described in Sec. 1.1441-1(e)(2)(i) in the case of a payment made outside the United States to an offshore account or, in the case of broker proceeds described in Sec. 1.6045-1(c)(2), in the case of a sale effected outside the United States (as defined in Sec. 1.6045-1(g)(3)(iii)(A)). A payor may rely on documentary evidence if the payor has established procedures to obtain, review, and maintain documentary evidence sufficient to establish the identity of the payee and the status of that person as a foreign person (including, but not limited to, documentary evidence described in Sec. 1.1441-6(c) (3) or (4)); and the payor obtains, reviews, and maintains such documentary evidence in accordance with those procedures. (c) Applicable rules-- (2) Other applicable rules. The provisions of Sec. 1.1441-1(e)(4)(i) through (ix) (regarding who may sign a certificate, validity period of certificates, retention of certificates, etc.) shall apply (by substituting the term payor for the term withholding agent and disregarding the fact that the provisions under Sec. 1.1441-1(e)(4) only apply to amounts subject to withholding under chapter 3 of the Code) to withholding certificates and documentary evidence furnished for purposes of this section. See Sec. 1.1441-1(b)(2)(vii) for provisions dealing reliable association of a payment with documentation. |
Interest and original issue discount, offshore accounts, foreign persons. None of this applies to me. None of this applies to make my compensation for labor into a reportable payment.
Regulation 1.6049-5(c)(2) cross references to regulation 1.1441-1, just as regulation 1.6041A-1(d)(3)(i)(A) does above. We will examine regulation 1.1441-1 in just a moment.
One last point to be made regarding IRC section 6049, of which the regulations thereunder are cross referenced:
| TITLE 26 - INTERNAL
REVENUE CODE Subtitle F - Procedure and Administration CHAPTER 61 - INFORMATION AND RETURNS Subchapter A - Returns and Records PART III - INFORMATION RETURNS Subpart B - Information Concerning Transactions With Other Persons Sec. 6049. Returns regarding payments of interest (a) Requirement of reporting Every person - (1) who makes payments of interest (as defined in subsection (b)) aggregating $10 or more to any other person during any calendar year, or (2) who receives payments of interest (as so defined) as a nominee and who makes payments aggregating $10 or more during any calendar year to any other person with respect to the interest so received, shall make a return according to the forms or regulations prescribed by the Secretary, setting forth the aggregate amount of such payments and the name and address of the person to whom paid. |
Interest payments have absolutely nothing to do with compensation for labor.
As shown above in both 1.6049-5(c) and 1.6041A-1(d):
| Treasury Regulation Sec. 1.6041A-1(d)(3)(i)(A) However, such payments may be reportable under Sec. 1.1461-1(b) and (c). For purposes of this paragraph (d)(3)(i)(A), the provisions in Sec. 1.6049-5(c) (regarding rules applicable to documentation of foreign status and definition of U.S. payor and non-U.S. payor) shall apply. The provisions of Sec. 1.1441-1 shall apply by substituting the term payor for the term withholding agent. |
"The provisions of Sec. 1.1441-1 shall apply by substituting the term payor for the term withholding agent."
| Treasury Regulation 1.1441-1(a) (a) Purpose and scope. This section, Secs. 1.1441-2 through 1.1441-9, and 1.1443-1 provide rules for withholding under sections 1441, 1442, and 1443 when a payment is made to a foreign person. (b) General rules of withholding-- (1) Requirement to withhold on payments to foreign persons. A withholding agent [payor] must withhold 30-percent of any payment of an amount subject to withholding made to a payee that is a foreign person unless it can reliably associate the payment with documentation upon which it can rely to treat the payment as made to a payee that is a U.S. person or as made to a beneficial owner that is a foreign person entitled to a reduced rate of withholding. (d) Beneficial owner's or payee's claim of U.S. status--(1) In general. Under paragraph (b)(1) of this section, a withholding agent [payor] is not required to withhold under chapter 3 of the Code [withholding of tax on nonresident aliens and foreign corporations] on payments to a U.S. payee, to a person presumed to be a U.S. payee in accordance with the provisions of paragraph (b)(3) of this section, or to a person that the withholding agent [payor] may treat as a U.S. beneficial owner of the payment. |
There is a lot of reading involved in the study of Treasury Regulation 1.1441-1. This regulation has 31,615 words in it. It only applies to payor's and payors only pay reportable payments,
I had one heck of a time figuring out how to show the truth in regard to IRC sectioin 6041A. This image is a recap that shows why I had such a hard time getting my mind around the cross referenced regulations in regulation 1.6041A-1.
A payor is the person that makes an information return (on a reportable payment). In order for compensation for labor to be a reportable payment, it needs to be paid by a payor. As can clearly be seen, compensation for labor is NOT a reportable payment under IRC 6041A or any of the regulations cross referenced because the payors under all these sections do NOT pay compensation for labor and the cross referenced sections do not deal with compensation for labor.
