Guide to Global Payroll Management - 2020 - D-34

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Guide to Global Payroll Management

Exceptions Tables
Exception #1
Note. Federal tax withholding and/or information reporting must take place within the current tax year.
Third-Party
Withholding on
Passive Income

Persons who are eligible to claim Exception 1 include:

Documentation you must submit if you're eligible to claim
Exception 1:

1(a) Individuals who are partners of a U.S. or foreign partnership
that invests in the United States and that owns assets that
generate income subject to IRS information-reporting and federal
tax withholding requirements; or

1(a) A copy of the portion of the partnership or LLC agreement
displaying the partnership's employer identification number and
showing that you're a partner in the partnership that's conducting
business in the United States.

1(b) Individuals who have opened an interest-bearing bank
deposit account that generates income that's effectively
connected with their U.S. trade or business and is subject to IRS
information reporting and/or federal tax withholding; or

1(b) A signed letter from the bank on its official letterhead,
displaying your name and stating that you've opened a business
account that's subject to IRS information reporting and/or federal
tax withholding on the interest generated during the current tax year.

1(c) Individuals who are "resident aliens" for tax purposes and
have opened an interest-bearing bank deposit account that
generates income subject to IRS information reporting and/or
federal tax withholding; or

1(c) A signed letter from the bank on its official letterhead,
displaying your name and stating that you've opened an individual
deposit account that's subject to IRS information reporting and/or
federal tax withholding on the interest generated during the current
tax year.

1(d) Individuals who are receiving distributions during the current
tax year of income such as pensions, annuities, rental income,
royalties, dividends, etc., and are required to provide an ITIN to
the withholding agent (for example, an investment company,
insurance company, financial institution, etc.) for the purposes of
tax withholding and/or reporting requirements.

1(d) A signed letter or document from the withholding agent, on
official letterhead, showing your name and verifying that an ITIN is
required to make distributions to you during the current tax year that
are subject to IRS information reporting and/or federal tax
withholding. Self-generated income statements will only be
accepted with a copy of the contract or a letter with a postmarked
envelope addressed from the withholding agent.

Exception #2
Note. Federal tax withholding and/or information reporting must take place within the current tax year.
2(a). Wages,
Salary,
Compensation,
and Honoraria
Payments
Claiming the
benefits of a tax
treaty

Persons who are eligible to claim Exception 2(a) include:

Individuals claiming the benefits of a tax treaty who:
* Are either exempt or subject to a reduced rate of withholding
of tax on their wages, salary, compensation, and honoraria
payments;
and
* Will be submitting Form 8233 to the payer of the income.

Documentation you must submit if you're eligible to claim
Exception 2(a):

* A letter of employment from the payer of the income; or
* A copy of the employment contract; or
* A letter requesting your presence for a speaking engagement,

etc.;

along with:

* Evidence (information) on the Form W-7 that you're entitled to

claim the benefits of a tax treaty, and
* A copy of the completed withholding agent's portion of Form
8233 attached to Form W-7.

Instructions for Form W-7 (Rev. September 2019)

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Guide to Global Payroll Management - 2020

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