The Treasury Department and the Internal Revenue Service recently issued final and proposed regulations concerning global intangible low-taxed income under section 951A, the foreign tax credit, the treatment of domestic partnerships for purposes of determining the subpart F income of a partner, and the treatment of income of a controlled foreign corporation subject to a high rate of foreign tax under section 951A.
Commonly referred to as GILTI, the Treasury Department and the IRS issued final regulations that provide guidance to determine the amount of global intangible low-taxed income included in the gross income of certain U.S. shareholders of foreign corporations, including U.S. shareholders who are members of a consolidated group, it said in a news release.
The final regulations retain, with certain modifications, the anti-abuse provisions that were included in the proposed regulations and revise the domestic partnership provisions to adopt an aggregate approach for purposes of determining the amount of global intangible low-taxed income included in the gross income of a partnership’s partners under section 951A with respect to controlled foreign corporations owned by the partnership.
The final regulations also provide guidance relating to the determination of a United States shareholder’s pro rata share of a controlled foreign corporation’s subpart F income and global intangible low-taxed income included in the United States shareholder’s gross income, as well as certain reporting requirements relating to inclusions of subpart F income and global intangible low-taxed income., the IRS said.
In addition, the Treasury Department and the IRS issued final regulations under sections 78, 861 and 965 relating to certain foreign tax credit aspects of the transition to an exemption system for income earned through foreign corporations.
The Treasury Department and the IRS also issued proposed regulations regarding the treatment of domestic partnerships for purposes of determining amounts included in the gross income of their partners under section 951 with respect to controlled foreign corporations owned by the partnership and the treatment of income of a controlled foreign corporation that is subject to a high rate of foreign tax under section 951A. The Treasury Department and the IRS request comments on these proposed rules, it said in the news release.
Other news on the IRS front includes what taxpayers need to know about backup withholding
Taxpayers who receive certain types of income may need to have backup withholding taken from these payments. Backup withholding can apply to most payments reported on Forms 1099 and W-2G.
Here are some facts to help taxpayers understand backup withholding and determine if they should have it withheld from their income payments.
Backup withholding is the person or business paying the taxpayer doesn’t generally withhold taxes from certain payments. They don’t do this because it’s assumed the taxpayer will report and pay taxes on this income when they file their federal tax return. However, there are certain situations when the payer is required to withhold a certain percentage of tax to make sure the IRS receives the tax due on this income. This is what’s known as backup withholding.
Backup withholding is set at a specific percentage which presently is 24 percent, according to the IRS.
Here are some payments subject to backup withholding:
- Interest payments
- Payment card and third-party network transactions
- Patronage dividends, but only if at least half the payment is in money
- Rents, profits, or other gains
- Commissions, fees, or other payments for work done as an independent contractor
- Payments by brokers
- Barter exchanges
- Payments by fishing boat operators, but only the part that is paid in actual money and that represents a share of the proceeds of the catch
- Royalty payments
- Gambling winnings
These are some situations when the payer must take out backup withholding:
If a taxpayer identification number is missing. A taxpayer identification number specifically identifies the taxpayer. This includes number like a Social Security number and an individual taxpayer identification number.
- If the name provided does not match the name registered with the IRS for a specific TIN, taxpayers should make sure that the payer has their correct TIN.