My foundation located outside the U.S. has tax withheld for certain U.S. investments. What to do now?
1.8k views | Last modified 12/27/2023 7:39:24 AM EST |

Applicable To
990-PF 990-N 990-EZ 990 8868 1120-POL

Foundations located outside the U.S. or foreign organizations are required to report any tax withheld at the source for any transaction that has happened within the United States. Usually, any foundation with any tax withholdings in the U.S. must file a Form 1042-S. A foundation reporting the tax being withheld at the source has to attach a Form 1042-S along with the Form 990-PF or any other attachment that verifies the reported withheld tax. 
Any foreign exempt foundation with tax withheld at the source must report it in Form 990-PF, and this amount will be considered a credit for the foundation. Here is an example
Z is a private foundation that has its main office in England and has sold a property to W, which is within the United States. The payment was completed, but a small portion of the payment was withheld as tax in that transaction. 
Z has to file a Form 1042-S because it has tax withheld at source for a transaction that happened in the United States and attaches it with its Form 990-PF.
When Z is filing a Form 990-PF return, Z can claim the amount that has been withheld at source as tax.
Here's how you can report your tax withheld in Form 990-PF using Tax990:

  1. Log into your Tax990 account. 
  2. On the dashboard, click on the "Start New Return" button. 
  3. Select the "Tax Year" and "Form 990-PF" options on the list of Federal returns. 
  4. Enter your organization details and click "Next." 
  5. On the "Organization Tax Year" page, select the tax year calendar or fiscal for which you want to file the information return.
  6. Once done, the subsequent steps will be to fill the actual parts of the form. 
  7. Under "Excise Tax Based on Investment Income," select "Credits/Payments." 
  8. Enter the value of the tax withheld for your investments in the U.S. in the box given against "Exempt foreign organizations-tax withheld at source." 
  9. Click Next and follow the subsequent steps as prompted. 
  10. Review the details, Pay, and click the Transmit button to transmit your return to the IRS. 

Note: This applies only to tax-exempt foreign organizations.
Private foundations located outside the U.S. have to paper file their Form 990-PF, as e-filing is not available to those foundations. These organizations can paper file their Form 990-PF and mail it to the address mentioned below:
Internal Revenue Service Center,
P.O. Box 409101,
UT 84409.

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