Withholding of Tax on Nonresident Aliens and Foreign Entities, Publication 515

Publication 515, the Employer Fringe Benefit Guide, is an authoritative document provided by the U.S. Internal Revenue Service (IRS) to guide employers in understanding and complying with tax regulations related to fringe benefits for foreign entities. It covers key topics such as tax treaty terminations, withholding responsibilities, and reporting changes.

What’s New In 2024?

  • U.S. Treasury terminated the tax treaty with Hungary on January 8, 2023.
  • Cease of treaty effects: January 1, 2024, for taxes withheld at source, and for other taxes, for taxable periods beginning on or after January 1, 2024.

Key Reminders

  • Taxpayer First Act lowered e-file threshold to 10 (effective January 1, 2024).
  • Central Withholding Agreement (CWA) simplified application process for individuals with income below $10,000.
  • Deposit interest of $10 or more paid to nonresident alien individuals must be reported on Form 1042-S.
  • Electronic deposits required for all Form 1042-S tax deposits.

Withholding and Reporting Changes (Starting 2023)

  • Final regulations (T.D. 9926) under sections 1446(a) and (f) apply to transfers of certain partnership interests.
  • Section 1446(f) withholding generally applies to transfers from January 1, 2018, and certain provisions apply from January 1, 2023.
  • Includes withholding on transfers of interests in publicly traded partnerships and changes to withholding requirements for partnership distributions.

For a detailed overview of Publication 515, the Employer Fringe Benefit Guide, please refer to the attached PDF below.