Section 1446 Withholding and Forms 8804 and 8805 for Foreign Partners
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When a syndication has foreign partners and income that is effectively connected with a U.S. trade or business, such as rent from apartments, the partnership must withhold tax on each foreign partner's share, deposit it with the IRS and report it on Forms 8804 and 8805. The foreign partner gives the partnership a Form W-8BEN (or W-8BEN-E for an entity) and later claims credit for the tax withheld on a U.S. return.
If you are the sponsor, we built DoorRaise to collect investor tax forms and deliver K-1s. DoorRaise never prepares K-1s: the deal's accountant prepares them and hands them over. This guide is for investors outside the United States. It adds detail to the tax section of foreign investors in U.S. syndications.
Who is a foreign partner?
A foreign partner is a partner who is not a U.S. person for tax purposes: a nonresident alien individual, a foreign corporation or a foreign partnership, trust or estate. A green card holder or a person who meets the substantial presence test is generally treated as a U.S. person. Your status is declared on the tax form you give the sponsor, so check it with a CPA before you sign.
Which forms does the investor give?
| Form | Who gives it | Purpose |
|---|---|---|
| Form W-8BEN | Individual who is not a U.S. person | Certifies foreign status and, if claimed, treaty benefits |
| Form W-8BEN-E | Foreign entity | Same, for an entity |
| Form W-9 | U.S. person | Certifies a U.S. tax number. See W-9 and backup withholding |
The partnership needs the right form before the first payment or tax year ends. Without one, it may have to presume foreign status and withhold at the highest rate.
How does the withholding work?
- The partnership estimates each foreign partner's share of effectively connected taxable income for the year, based on the allocation in the operating agreement.
- It pays withholding installments to the IRS during the year (generally by the 15th day of the 4th, 6th, 9th and 12th months of a calendar-year partnership), using Form 8813.
- It files Form 8804 after year end with the total, and gives each foreign partner Form 8805, which shows the partner's share of income and the tax withheld.
- The foreign partner files a U.S. tax return and attaches Form 8805 to claim credit for the tax withheld, paying more or receiving a refund as the return computes.
The withholding is on income allocated to you, not only on cash distributed. In a year when depreciation shelters income, the allocation can be low or zero, and so can the withholding. When the income is allocated but retained in the company, tax can be withheld without a matching distribution, so ask how the sponsor handles it.
What are the rates?
For a foreign partner, the partnership generally applies the highest rate in Section 1 for individuals and Section 11 for corporations to the partner's share of effectively connected income. Rates can differ by the character of income, such as long-term capital gain or unrecaptured Section 1250 gain, which are taxed at their own maximum rates. The withholding is a prepayment, not the final tax: your return can come out lower than the amount withheld, which creates a refund.
What happens when the property is sold?
Gain on the sale of U.S. real property by a foreign person is taxed under the Foreign Investment in Real Property Tax Act (FIRPTA) as if it were effectively connected income. For a syndication, the deal company withholds on foreign partners' share of the gain under Section 1446 and reports it on Form 8805. Foreign partners include the gain in their U.S. return and claim credit. The withheld amount can exceed the final tax if the gain is small or has offsetting items, so budget for a delay in the refund.
Separately, if a foreign investor sells an interest in the partnership, Section 1446(f) can require the buyer to withhold on the amount realized, and the IRS has forms and instructions for that. Ask a CPA before any transfer. See selling an interest.
What about Form 1042-S?
Form 1042-S reports U.S.-source income paid to foreign persons that is not effectively connected, such as certain interest, and the withholding on it under Chapter 3. Rental operations through a partnership are generally effectively connected and covered by Forms 8804 and 8805, but a foreign investor may still receive a Form 1042-S for other payments. The K-1 and Form 8805 package from the deal's accountant explains which applies.
What to ask the sponsor
- Which W-8 form and which tax number do you need, and by when?
- Do you withhold under Section 1446, and when are installments paid?
- Will I receive Form 8805 and a K-1, and by what date?
- Who prepares them, and can I send questions to the accountant?
- How do you treat a refund or an over-withholding?
Frequently asked questions
Do I owe U.S. tax if I never receive a distribution?
You can owe tax on income allocated to you even if it was not distributed. Ask your CPA to review the K-1.
Is the withholding the final tax?
No. It is a payment toward your tax, and your return reconciles it.
Can a treaty reduce withholding?
Rarely for income from U.S. real estate. See the U.S. return foreign partners file.
Do I need an ITIN?
To file a U.S. return you need a taxpayer identification number. See investing with an ITIN.
Who prepares my K-1 and Form 8805?
The deal's accountant. The sponsor or DoorRaise delivers them.
Sources
- IRS, Instructions for Form 8804, 8805 and 8813
- 26 U.S.C. 1446, Withholding of tax on foreign partners' share of effectively connected income (Cornell LII)
- IRS, Partner's Instructions for Schedule K-1 (Form 1065)
- IRS, FIRPTA withholding
This article is general information as of November 2026, not legal, tax or investment advice. Withholding rules and rates change. Talk to a CPA who handles international clients. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.