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Recipient Terms

Resident Alien

Definition: A resident alien is treated as a United States person for US tax purposes and is a non-US person who meets either the green card test, or the substantial presence test for the calendar year (January 1 – December 31). A person that does not meet either test is a nonresident alien. There are rules for determining the Residency Starting and Ending Dates for aliens.  In some cases aliens are allowed to make elections that take precedence over the green card test and the substantial

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Exempt Recipient

Definition: You are not required to file Form 1099-INT for payments made to certain payees including, but not limited to, a corporation, a tax-exempt organization, any individual retirement arrangement (IRA), Archer medical savings account (MSA), Medicare Advantage MSA, health savings account (HSA), a U.S. agency, a state, the District of Columbia, a U.S. possession, a registered securities or commodities dealer, nominees or custodians, brokers, or notional principal contract (swap) dealers. For additional exempt recipients, see Regulations section 1.6049-4 for more information.   For situations when you

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Due Diligence Standards for Payments to Each Payee

Definition: Due diligence standards refer to the process for reviewing or analyzing withholding certificates and other forms of documentary evidence to determine whether the information in the documents is consistent with the claims made on those forms.  Generally, a payee or withholding agent making payments of amounts subject to NRA withholding or FATCA withholding must collect a withholding certificate (FORM W-8/W-9/Self certification) from the payee or income recipient (LINK). The Treasury regulations outline due diligence standards for reviewing these forms.  A withholding agent may rely on the information and certifications stated on withholding certificates

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US Person

Definition: For federal tax purposes, you are considered a U.S. person if you are: An individual who is a U.S. citizen or U.S. resident alien; A partnership, corporation, company, or association created or organised in the United States or under the laws of the United States; An estate (other than a foreign estate); or A domestic trust (as defined in Regulations section 301.7701-7.   Domestic Trust definition:  Treas. Reg. s. 301.7701-7. See Also

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U.S. Nonexempt Recipient

Definition: A US nonexempt recipient is a US person that is subject to Form 1099 reporting and backup withholding.  This means that the US nonexempt recipient must provide a Form W-9 in order to avoid backup withholding and will receive a Form 1099 to report certain payments. Generally, a US nonexempt recipient can be an individual, a partnership, or an estate.

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U.S. Branch of Foreign Bank or Insurance Company

Definition: A U.S. Branch of a Foreign Bank or Insurance Company is a branch located in the United States of a bank or insurance company that was organized outside of the United States.  A US branch of a foreign bank must abide by special rules subject to Federal Reserve Board supervision.  A US branch of a foreign insurance company is subject to state regulatory supervision. If a US branch of a foreign bank or insurance company agrees to be treated as a US person, it must

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Beneficial Owner

Definition: The beneficial owners of a simple trust are the beneficiaries of the simple trust. Withholding and Reporting: A U.S. simple trust is required to withhold under Chapter 3 as a withholding agent on the distributable net income includible in the gross income of a non-U.S. beneficiary if that distributable net income is an amount subject to withholding under Chapter 3 (U.S. source FDAP income).  The U.S. simple trust must withhold when it makes a distribution to the non-U.S. beneficiary.  If the U.S. simple trust is required to, but does

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Substantial Presence Test

Definition: The substantial presence test is a way to calculate whether a person will be considered a US resident alien for US tax purposes. In order to meet the substantial presence test and be considered a US resident alien (LINK), the person must be  be physically present in the United States on at least: 31 days during the current year, and 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting: All the days present in the

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