Rev. Proc. 57-13

SECTION 1. PURPOSE.

The purpose of this Revenue Procedure is to set forth the procedure whereby an employer may refund tax withheld from wags paid to a nonresident alien employee in accordance with the requirements enumerated in Revenue Ruling 54-584, C.B. 1954-2, 212.

SEC. 2. BACKGROUND.

Revenue Ruling 54-584, supra, holds that the tax withheld from wages paid to a nonresident alien employee, under the provisions of section 143(b) of the Internal Revenue Code of 1939 (corresponding to section 1441 of the 1954 Code), which has not yet been paid to the District Director of Internal Revenue as required by section 143(c) of the 1939 Code, may be refunded direct to such nonresident alien employee by his employer upon receipt of satisfactory evidence that the employee has filed an appropriate income tax return and paid the amount of tax, if any, due thereon without claiming credit for such tax withheld; or, the excess of the tax withheld over the amount due on the return may be refunded if the employee has not paid the amount of tax due. In order for the employee to obtain a refund of the tax withheld, the Revenue Ruling requires that he must:

(1) Secure his employer's agreement to refund the tax withheld directly to him and obtain from his employer, in addition to his agreement to make such refund, a sworn statement showing the amounts of wages paid and tax withheld.

(2) File the appropriate income tax return, together with the statement obtained from the employer, with the appropriate District Director of Internal Revenue.

(3) Secure a receipt or statement from the District Director that will satisfactorily indicate to his employer that returns were properly filed and that:

(a) The amount of the tax liability shown on the return was paid in full without claiming credit for the tax withheld under section 143(b) of the 1939 Code, or

(b) Where such liability was not paid, credit only in the amount equal to the tax liability shown on the return was claimed, or

(c) The return filed disclosed no tax liability and no credit claimed for tax withheld, and that

(d) A refund of withheld tax in a stated amount may be made directly to the employee.

(4) Furnish to the employer the receipt or statement from the District Director.

SEC. 3. DEFINITIONS.

.01 The `amounts of wages paid' means the amounts paid for services, allowances for travel and subsistence, and any other amounts paid, to the extent such amounts constitute gross income from sources within the United States and are not specifically exempted by any provision of the Code.

.02 The `appropriate income tax return' normally means Form 1040C, `U.S. Departing Alien Income Tax Return.' If an income tax return should have been filed for a prior year, Form 1040B, `U.S. Nonresident Alien Income Tax Return,' will also be required. Where a nonresident alien had no taxable income from United States sources, Form 2063, `U.S. Departing Alien Income Tax Statement,' will be required in lieu of Form 1040C.

.03 The `appropriate District Director of Internal Revenue' means the District Director who issues the Certificate of Compliance required by section 6851(d) and (e) of the 1954 Code, and who normally is located in the district in which the nonresident alien is employed or where the employer's principal office is located. Frequently, however, the Certificate of Compliance is obtained from the District Director located in or near the city of embarkation.

SEC. 4. PRESCRIBED FORMS.

For the purposes of the `agreement' to be obtained from the employer and the `receipt or statement' from the District Director no prescribed form has been made and none is available. However, they should be the equivalent in form and content to the exhibits made a part hereof.

Exhibit `A' .-Employer's Refund Agreement and Statement of Wages Paid and Tax Withheld.

Exhibit `B' .-Statement Authorizing Refund of Income Tax Withheld from Nonresident Alien Employee.

SEC. 5. EMPLOYERS REPORT ON REFUND OF TAX WITHHELD.

.01 The amount of tax originally withheld under section 1441 of the 1954 Code and subsequently refunded or released, in accordance with Revenue Ruling 54-584, supra, shall be reported in item 9 of Form 1042S, `U.S. Annual Information Statement Of Income Paid During 1957 Subject to Chapter 3, Internal Revenue Code.'

.02 A brief statement relative to the release of tax withheld, using the reverse side of the Form 1042S, if additional space is necessary, or a copy of Exhibit `B' should be included with the Form 1042S.

.03 While the gross amount of income paid shall be reported by the employer on Form 1042, `U.S. Annual Return of Income Tax to be Paid at Source,' only the net amount of tax withheld shall be reported under the heading `Amount of Tax Withheld' and remitted with the return.

SEC. 6. PROCEDURE FOR CORRECTING ERROR IN REPORTING AND REMITTING TAX WITHHELD.

.01 The types of errors commonly made in reporting tax withheld and requiring correction are as follows:

1. Tax withheld from nonresident alien, under section 1441 of the 1954 Code, is reported and paid by means of Form 941, `Employer's Quarterly Federal Tax Return,' instead of Form 1042 as required.

2. Tax is erroneously withheld from nonresident alien employee under section 3402 of the 1954 Code instead of section 1441 as required; withheld amount is remitted with the employer's quarterly return Form 941 before discovery of the error.

.02 Erroneous amounts paid on Form 941 should be adjusted on the next quarterly return on that form filed after discovery of the error, in accordance with the regulations and instructions pertaining to such form.

.03 The gross amount of income paid and the net amount of tax withheld from the nonresident alien employee, under the provisions of section 1441 of the 1954 Code, shall then be reported on the annual return, Form 1042, and the tax, if any, paid as if the error had not occurred.

SEC. 7. Revenue Ruling 54-584, supra, is hereby amplified.

                              EXHIBIT `A'