U.S. Source FDAP Income & Withholding Taxes

When certain forms of U.S. income are paid to a non-U.S. taxpayer, the income is generally subject to a withholding tax at source.

This ensures that the federal government gets its share of U.S. income taxes owed on any U.S. income paid to non-U.S. taxpayers because non-U.S. taxpayers generally do not need to file a federal tax return each year.

U.S. source FDAP income is generally passive income paid to a nonresident. Sections 1441 and 1442 of the Internal Revenue Code prescribe a 30% withholding tax rate unless the rate can be reduced by a tax treaty.

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DISCLAIMER: I am a licensed attorney and certified public accountant (CPA) in the State of Florida. I am not a financial advisor. The information provided in this video is for entertainment purposes only. No such communication is provided in the course of an attorney-client relationship, and no communication is intended to constitute legal advice. You should speak with your own tax and legal professionals to discuss your circumstances before performing any of the tax, legal or accounting strategies demonstrated in this video. Thank you.