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Insufficient Documentation

Definition:

If the Service determines that a withholding agent relied on insufficient documentation and had actual knowledge or reason to know that a claim of U.S. status or of a reduced treaty rate is incorrect it could be liable for up to 30% of the gross amount of the income subject to withholding. Withholding agents should apply the due diligence standards pursuant to the regulations. As such, a withholding agent who has actual knowledge or reason to know that a withholding certificate or other documentary evidence is false must report and withhold at the full rate of 30%. A withholding agent shall be considered to have reason to know if the facts on the withholding certificates or other documentary evidence is such that a reasonably prudent person would question the claims made by a payee or beneficial owner. See Page 33