Instructions For Forms 1099-Sa And 5498-Sa - 2006 (Page 18 of 25) in pdf

Rules for Payments Made to U.S. Nonexempt

Q. Earnings on any IRA, Coverdell ESA,

Recipients Through a QI, NQI, or FTE

If you are the payer making a payment through a QI, NQI, or

Archer MSA, or HSA

FTE for a U.S. nonexempt recipient on whose behalf the QI,

Generally, income earned in any IRA, Coverdell ESA, Archer

NQI, or FTE is acting, use the following rules to complete Form

MSA, or HSA, such as interest or dividends, is not reported on

1099.

Forms 1099. However, distributions must be reported on Form

Known recipient. If you know that a payee is a U.S.

1099-R, 1099-Q, or 1099-SA.

nonexempt recipient and have the payee’s name, address, and

TIN (if a TIN has been provided), you must complete the Form

1099 with that information. Also, on the second name line below

R. Certain Grantor Trusts

the recipient’s name enter “IMY” followed by the name of the

QI, NQI, or FTE.

Certain grantor trusts may choose to file Forms 1099 rather

than a separate statement attached to Form 1041, U.S. Income

For payments made to multiple recipients: (a) enter the

Tax Return for Estates and Trusts. If you have filed Form 1041

name of the recipient whose status you relied on to determine

for a grantor trust in the past and you want to choose the Form

the applicable rate of withholding and (b) on the second name

1099 filing method for 2006, you must have filed a final Form

line, enter “IMY” followed by the name of the QI, NQI, or FTE.

1041 for 2005. To change reporting method, see Regulations

However, if the QI has assumed primary Form 1099 reporting

section 1.671-4(g) and the Instructions for Form 1041 and

or backup withholding responsibility, you are not required to

Schedules A, B, D, G, I, J, and K-1.

issue the Form 1099 or to backup withhold. See Qualified

intermediary on page GEN-15.

Unknown recipient. If you cannot reliably associate a

S. Special Rules for Reporting Payments

payment with valid documentation and are required to presume

a payee is a U.S. nonexempt recipient:

Made Through Foreign Intermediaries

1. File a Form 1099 and enter “unknown recipient” on the

and Foreign Flow-Through Entities on

first name line.

2. On the second name line, enter “IMY” followed by the

Form 1099

name of the QI, NQI, or FTE.

If you are the payer and have received a Form W-8IMY,

3. Enter the EIN of the QI, NQI, or FTE, if applicable, in the

Certificate of Foreign Intermediary, Foreign Flow-Through

recipient’s identification number box.

Entity, or Certain U.S. Branches for United States Tax

4. Furnish a copy of the Form 1099 with “unknown recipient”

Withholding, from a foreign intermediary or flow-through entity,

to the QI, NQI, or FTE who is acting on the recipient’s behalf.

follow the instructions below for completing Form 1099.

Definitions of the terms used in these instructions are on page

A payer that is required to report payments made to a

GEN-15.

U.S. nonexempt recipient account holder but does not

receive the necessary allocation information cannot

CAUTION

Presumption Rules

report those payments on a pro rata basis. Report unallocated

payments using the presumption rules above.

For additional information including details on the

Rules for Non-U.S. Payers

TIP

presumption rules, see the Instructions for the

Requester of Forms W-8BEN, W-8ECI, W-8EXP, and

Non-U.S. payers (foreign persons that are not U.S. payers)

W-8IMY and Pub. 515. To order, see How To Get Forms and

generally have the same reporting obligations as U.S. payers. A

Publications on page GEN-16.

U.S. payer is anyone who is:

•

A U.S. person,

If you are the payer and do not have a Form W-9,

•

Any U.S. governmental agency,

appropriate Form W-8, or other valid documentation, or you

•

A controlled foreign corporation (CFC),

cannot allocate a payment to a specific payee, prior to payment,

•

A foreign partnership that has one or more U.S. partners

you are required to use certain presumption rules to determine

who, in the aggregate hold more than 50 percent of the gross

the following:

income derived from the conduct of a U.S. trade or business,

•

The status of the payee as a U.S. or foreign person and

A foreign person who owns 50 percent or more of the gross

•

The classification of the payee as an individual, trust, estate,

income that is effectively connected with a U.S. trade or

corporation, or partnership.

business, or

•

A U.S. branch of a foreign bank or a foreign insurance

See Regulations sections 1.1441-1(b)(3), 1.1441-5(d) and

company.

(e), 1.6045-1(g)(3)(ii), and 1.6049-5(d).

For more information, see Regulations section

Under these presumption rules, if you must presume that the

1.6049-5(c)(5).

payee is a U.S. nonexempt recipient subject to backup

Exceptions. The following payments are not subject to

withholding, you must report the payment on a Form 1099.

reporting by a non-U.S. payer:

However, if before filing Form 1099 with the IRS the recipient is

1. A foreign source reportable payment paid outside the

documented as foreign, then report the payment on a Form

U.S. For example, see Regulations section 1.6049-5(b)(6).

1042-S.

2. Gross proceeds from a sale effected outside the U.S.,

On the other hand, if you must presume that the payee is a

see Regulations section 1.6045-1(a).

foreign recipient and prior to filing Form 1042-S with the IRS

3. An NQI or QI that provides another payer all the

you discover that the payee is a U.S. nonexempt recipient

information sufficient for that payer to complete Form 1099

based on documentation, then report all payments made to that

reporting. For example, see Regulations section

payee during the calendar year on a Form 1099.

1.6049-5(b)(14). However, if an NQI or QI does not provide

sufficient information for another payer to report a payment on

If you use the 90-day grace period rule to presume a payee

Form 1099, the intermediary must report the payment.

is foreign, you must file a Form 1042-S to report all payments

subject to withholding during the grace period. If you later

Rules for Reporting Payments Initially Reported

discover that the payee is a U.S. nonexempt recipient subject to

on Form 1042-S

backup withholding, you must file a Form 1099 for all

payments made to that payee after the discovery of the payee’s

If an NQI or QI receives a Form 1042-S made out to an

U.S. status.

“unknown recipient” and, the NQI or QI has actual knowledge

GEN-14

Instructions For Forms 1099-Sa And 5498-Sa - 2006 Page 18

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