Release of Excess Tax Withheld

As the Revenue Act of 1918 does not provide for the withholding of tax in the case of corporate dividends, any tax so withheld since December 31, 1917, shall be released by the withholding agent and paid over to the corporation from which it was withheld, or its proper representative.

Where withholding agents have so released any excess of tax, an itemized statement showing the names, addresses, and amounts refunded should have been attached to the annual list return (Form 1013, page 45) in order to reconcile any discrepancy between the aggregate amount of tax returned as shown by the monthly list returns (Form 1012, page 43) and the aggregate amount as shown by the annual list return. If a bank or withholding agent has filed its annual list return without such supplementary information as to items thus released, an amended return should be prepared and filed with the collector, accompanied by an explanatory letter.

Withholding in the Case of Enemies

Payments made after October 6, 1917, to the Alien Property Custodian are in the same category as payments made to or for citizens or residents of the United States. Withholding at the source is accordingly not required, except in the case of interest payments on corporate bonds or other obligations containing a "tax-free" covenant.

Liability of Withholding Agent

Every withholding agent is made liable for tax required to be withheld at the source and is indemnified against the claims and demands of any individual, corporation, or partnership for the amount of any payments made in accordance with the law. If any tax required to be deducted and withheld is paid by the recipient of the income it shall not be recollected from the withholding agent and in cases in which the tax is so paid, no penalty shall be assessed or collected from the recipient of the income or the withholding agent for failure to return or pay the same, unless such failure was fraudulent and for the purpose of evading payment.

Information at Source

Payments of Miscellaneous Income of $1,000 or More

All persons, including disbursing officers, employees of the United States, and fiduciaries, making payments to any individual citizen or resident of the United States, domestic partnership, personal service corporation, or fiduciary of fixed or determinable income of $1,000 or more in a taxable year, whether such total sum is made up of wages, salaries, commissions or compensation in any other form must render a report thereof on Form 1099 (page 41), accompanied by a letter of transmittal on Form 1096 (page 49), to the Commissioner of Internal Revenue for the preceding calendar year on or before March 15th.

Reports are not required in the following cases:

(1) Interest on the obligations of the United States, of states, territories, or political subdivisions thereof or of the District of Columbia, and compensation paid officers and employees by a state or political subdivision thereof for personal services;

(2) Bills paid for merchandise, telegrams, telephone, freight, storage, and similar charges;

(3) Amounts paid to employees for expenses incurred in business;

(4) Premiums paid to insurance companies;

(5) Annuities representing return of capital;

(6) Interest accrued on bank deposits if not credited; (7) Payments of rent made to real estate agents or representatives, but agents or representatives are required to report payments to landlord or owner if they amount in the aggregate to $1,000 or more for the year;

(8) Payments made by domestic establishments or foreign branch houses thereof to nonresident alien employees for services performed entirely in foreign countries; (9) Interest on bonds of domestic and foreign corporations; (See Forms 1012 and 1096-A, pages 43 and 51); (10) Salaries, wages, etc., paid to nonresident alien individuals and foreign corporations (See Form 1042, page 47). Payments to Nonresident Alien Individuals and Corporations

All persons or organizations making payment of fixed or determinable annual or periodical income to nonresident alien individuals or foreign corporations not engaged in business in the United States and not having an office or place of business therein, must render a report therefor on Form 1098 (page 39) regardless of amount. These reports must be filed with the collector of internal revenue on or before March 1 of the year following that during which the payments were made, accompanying the annual return on Form 1042 (page 47). Payments of Dividends

When directed by the Commissioner, either specially or by general regulation, every domestic or resident foreign corporation and every personal service corporation, shall render a return on Form 1097 of its payments of dividends and distributions to stockholders for such period as may be specified, stating the name and address of each stockholder, the number and class of shares owned by him, the date and the amount of each dividend paid to him, and when the surplus out of which it was paid was accumulated.

Brokers' Returns

Brokers, only when directed by the Commissioner, either specially or by general regulation, shall render a return on Form 1100 showing the names and addresses of their customers to whom payments were made or for whom business was transacted during the calendar year or for other specified period next preceding and giving the other information called for by the form.

Interest on Bonds of Domestic or Resident Corporations

In the case of payments of interest, regardless of the amount. on bonds and similar obligations of domestic or resident foreign corporations, the original ownership certificates, when duly filed, shall constitute and be treated as returns of information (see Form 1000, page 23; Form 1001, page 25; Form 1001-A, page 27; Form 1001-B, page 29).

Foreign Items

The term "foreign item" means any dividend upon the stock of a nonresident foreign corporation or any item of interest on bonds of foreign countries or nonresident foreign corporations, whether or not such dividend or interest is paid in the United States or by check drawn on a domestic bank. If a foreign country or nonresident foreign corporation issuing bonds has appointed a paying agent in this country charged with the duty of paying the interest upon its bonds, such paying agent shall be the source of information. If such foreign country or foreign corporation has no such agent, then the last bank or collecting agent in this country shall be the source of information. In the case of dividends on the stock of a nonresident foreign corporation, however, the first bank or collecting agent accepting such item for collection shall be the source of information.

In the collection of foreign items certificate Form 1001-A should at all times be used, unless the bonds are owned by a citizen or resident of the United States or a resident partnership and contain a "tax-free" covenant clause, and the issuing corporation has a paying agent in the United States, in which case certificate Form 1000 should be used in order to obtain the benefit of the payment of the tax assumed by the debtor corporation. In the latter case, if personal exemption is claimed, certificate Form 1001-A should be filed.

If the owner of a foreign item is unknown, however, the procedure outlined on page 11 should be followed.

If such foreign bonds or stocks are owned by a nonresident alien individual, corporation, or partnership, certificate Form 1001-A may be executed on behalf of such owner by any re

sponsible bank or banker, either foreign or domestic, having knowledge of such ownership. It is not necessary that the name of the foreign owner be filled in on the form when executed by such bank or banker.

The original certificates of ownership filed in connection with the collection of foreign items, shall constitute and be treated as reports of information. The use of substitute certificates Form 1058 and Form 1059 is not permitted in connection with foreign items.

Disclosure of Actual Ownership of Stock

The regulations provide that dividends on stock of domestic corporations or resident foreign corporations are prima facie income of the record owner of the stock and such record owner will be liable for any tax thereon, unless a disclosure of the actual ownership is made to the Commissioner of Internal Revenue. If the record owner is a citizen or resident of the United States or a resident corporation, and the actual owner is a nonresident alien, the actual ownership should be disclosed on Form 1087 (page 37).

In all cases where the actual owner is a nonresident alien individual and the record owner is a person in the United States, the record owner will be considered, for tax purposes, to have the receipt, custody, control and disposal of the dividend income and will be required to make return for the actual owner on Form 1040, and pay the tax found by such return to be due.

Where bearer certificates with coupons attached are issued against stock of domestic corporations and such bearer certificates are owned by nonresident aliens, certificate Form 1087, signed by the holders of the bearer certificates should be filed.