IRS Requirement May Hit Some Producers

September 25, 2000

The Internal Revenue Service may require farmers to withhold taxes on contracts made with a foreign based custom harvester. At a minimum, says the National Association of Wheat Growers, producers are required to report any such transaction to the IRS on Form 1042_S.

In order to relieve growers from the responsibility of withholding taxes, the foreign harvester must present a Form_W8ECI (Certificate of Foreign Person’s Claim for Exemption from Withholding on Income Effectively Connected with the Conduct of a Trade or Business in the United States).

This form verifies that the harvester has established an identity within the U.S. tax system. However, if Form_W8ECI is not presented, the grower must withhold 30% of the total amount and submit these withholdings immediately to the U.S. Treasury, according to NAWG.

For additional general information interested persons may contact U.S. Custom Harvesters Executive Director Brad Fay at 701_250_1036 (or by email at pasta4u@btigate.com) or contact an individual tax professional.