(1)
General rules. Payers of Iowa income to nonresidents are
required to withhold Iowa income tax and to remit the tax to the department on
all payments of Iowa income to nonresidents except as otherwise described in
this rule. Withholding agents should use the following methods and rates in
withholding for nonresidents:
a.
Wages
or salaries. Use the same withholding procedures, tables, formulas,
and rates as are used for residents. See rule
701-307.2 (422). Subrule
307.4(5) is an exception to the general rule. In addition, in accordance with
the reciprocal tax agreement between Iowa and Illinois described in 701-subrule
300.13(1), Iowa withholding tax is not withheld on wages of Illinois residents
who perform personal services in Iowa.
b.
Payments other than wages,
salaries, and other compensation for personal services. In lieu of
using withholding tables or computer formulas to determine the amount of Iowa
income tax to be withheld from payments made to nonresidents other than for
salaries, wages, or other compensation for personal services, or income
payments to nonresidents for agricultural commodities or products, Iowa income
tax should be withheld at a rate of 5 percent of the amount of the payment.
Subrule 307.4(6) describes the optional exemption from withholding of income
payments made to nonresidents for the sale of agricultural commodities or
products.
Nonresidents who prefer to make Iowa estimate payments
instead of having Iowa income tax withheld from income payments from Iowa
sources should refer to subrule 307.4(3) and rule
701-308.3 (422).
(2)
Income of
nonresidents subject to withholding. Listed below are various types of
income paid to nonresidents which are subject to withholding. The list is for
illustrative purposes only and is not deemed to be all-inclusive.
a. Personal service, including salaries,
wages, commissions and fees for personal service wholly performed within this
state and such portions of similar income of nonresident traveling salespersons
or agents as may be derived from services rendered in this state.
b. Rents and royalties from real or personal
property located within this state.
c. Interest or dividends derived from
securities or investments within this state, when such interests or dividends
constitute income of any business, trade, profession or occupation carried on
within this state and subject to taxation.
d. Income derived from any business of a
temporary nature carried on within this state by a nonresident, such as
contracts for construction and similar contracts.
e. Income derived from sources within this
state by attorneys, physicians, engineers, accountants, and similar sources as
compensation for services rendered to clients in this state.
f. Compensation received by nonresident
actors, singers, performers, entertainers, and wrestlers for performances in
this state. See subrule 307.4(5) for an exception to this rule.
g. The Iowa gross income of a nonresident who
is employed and receiving compensation for services shall include compensation
for personal services which are rendered within this state. Compensation for
personal services rendered by a nonresident wholly without the state is
excluded from gross income of the nonresident even though the payment of such
compensation may be made by a resident individual, partnership or
corporation.
h. The gross income
from commissions earned by a nonresident traveling salesperson, agent or other
employee for services performed or sales made whose compensation depends
directly on volume of business transacted by the nonresident, includes that
proportion of the total compensation received which the volume of business or
sales by the employee within this state bears to the total volume of business
or sales within and without the state.
i. Payments made to landlords by agents,
including elevator operators, for grain or other commodities which have been
received by the landlord as rent constitute taxable income of the landlord when
sold by the landlord. Subrule 307.5(6) contains information about the exemption
from withholding on incomes paid to nonresidents for the sale of agricultural
commodities or products.
j. Wages
paid to nonresidents of Iowa who earn the compensation from regularly assigned
duties in Iowa and one or more other states for a railway company or for a
motor carrier are not taxable to Iowa. Pursuant to
49 U.S.C. Section
11502, the nonresidents in this situation are
subject only to the income tax laws of their states of residence. Thus, when an
Iowa resident performs regularly assigned duties in two or more states for a
railroad or a motor carrier, the only state income tax that should be withheld
from the wages paid for these duties is Iowa income tax.
k. Wages paid to nonresidents of Iowa who
earn compensation from regularly assigned duties in Iowa and one or more states
for an airline company. In accordance with
49 U.S.C. Section
40116, airline employees who are nonresidents
of Iowa are subject only to the income tax laws of their states of residence or
the state in which they perform 50 percent or more of their duties.
l. Wages paid to nonresidents of Iowa who
earn compensation from regularly assigned duties in Iowa for a merchant marine
company. In accordance with 46 U.S.C. Section
11108,
interstate waterway workers who are nonresidents of Iowa are subject only to
the income tax laws of their states of residence.
(3)
Nonresident certificate of
release. Where a nonresident payee makes the option to pay estimated
Iowa income tax, a certificate of release from withholding will be issued by
the Iowa department of revenue to the designated payers. The certificate of
release will be forwarded to the specified withholding agent(s) and payer(s),
and will state the amount of income covered by the estimated tax payment. Any
income paid in excess of the amount so stated will be subject to withholding
tax at the current rate. See 701-Chapter 308 for information on making estimate
payments.
(4)
Recovering
excess tax withheld. A nonresident payee may recover any excess Iowa
income tax withheld from income of the payee by filing an Iowa income tax
return after the close of the tax year and reporting income from Iowa sources
in accordance with the income tax return instructions.
(5)
Exemption from withholding of
nonresidents engaged in film production or television production in this
state. Nonresidents engaged in film production or television
production in this state are not subject to state withholding on wages earned
from this activity if the nonresidents' employer has applied to the department
for exemption from withholding of state income tax and the employer's
application includes the following information about the nonresident employees:
a. The employees' names.
b. The employees' permanent mailing
addresses.
c. The employees' social
security numbers.
d. The estimated
amounts the employees are to be paid for services provided by the employees in
this state.
The employer's application for exemption from withholding for
the nonresident employees will not be approved by the department if the
employer fails to provide all the required information.
Only those nonresident employees described in the application
for exemption from withholding will be covered when the application is approved
by the department. If additional nonresident employees are hired after the
initial application for exemption is filed, those employees should be described
in an amendment to the application for exemption which must be filed with the
department of revenue.
Applications for exemption from withholding for nonresident
employees engaged in film production or television production should be
directed to the Iowa Department of Revenue, Compliance Division, Examination
Section, Hoover State Office Building, P.O. Box 10456, Des Moines, Iowa
50306.
(6)
Exemption from withholding for the sale of agricultural commodities or
products. Withholding agents are not required to withhold state income
tax from income payments made to nonresidents or representatives of the
nonresidents for the sales of agricultural commodities or products, if the
withholding agents provide certain information to the department of revenue
about the sales. The following paragraphs describe the agricultural commodities
and products that are included in the exemption from withholding, specify the
information needed on the sales and clarify other issues related to the
exemption from withholding. 701-subrule 308.3(4) describes an election for
withholding agents to make estimate payments on behalf of nonresident taxpayers
for net incomes of the nonresidents from agricultural commodities or products.
a. Agricultural commodities or products
included in the exemption from withholding. Withholding agents are not required
to withhold state income tax from income payments they make to nonresidents or
representatives of the nonresidents for the sale of commodity credit
certificates, grain (corn, soybeans, wheat, oats, etc.), livestock (cattle,
hogs, sheep, horses, etc.), domestic fowl (chickens, ducks, turkeys, geese,
etc.), or any other agricultural commodities or products, if the withholding
agents provide the department of revenue with the information specified in
paragraph "b" of this subrule.
b. Information to be provided to the
department by withholding agents claiming exemption from withholding on income
payments made to nonresidents for the sales of agricultural items. The
following information is to be provided on a listing to the department of
revenue by withholding agents electing exemption from withholding of state
income tax on income payments made in the calendar year to nonresidents or
representatives of the nonresidents on the sales of agricultural commodities or
products made in the year:
(1) Name of the
nonresident (last name, first name and middle initial).
(2) Home address of the
nonresident.
(3) Social security
number of the nonresident.
(4)
Aggregate payments made in the calendar year for the nonresident (includes
payments made to a representative of the nonresident on behalf of the
nonresident).
(5) Two-digit Iowa
county code number of the first one of the following that applies to the
nonresident:
1. County in which the
nonresident owns real property or personal property.
2. County in which the nonresident leases
real property or personal property.
3. County in which the nonresident has
agricultural products stored or in which livestock is located.
4. County where the nonresident has performed
custom farming activities in the year.
5. County where the nonresident has other
business activities in Iowa other than merely sales activities.
If a nonresident does not own or lease property in Iowa or
have other connection with Iowa as described in subparagraph
307.4(6)"b"(5), items "3," "4," and "5," the nonresident is
not subject to Iowa income tax on the income payments for agricultural
commodities or products and the nonresident's income payments should not be
included on the listing.
In a situation where a withholding agent is unable to get all
the information that is to be provided to the department on income payments on
sales of agricultural items, the agent is relieved of the requirement to
withhold if the agent can provide written evidence showing an attempt was made
to acquire all the information.
The listing of aggregate income payments to nonresidents with
an Iowa connection for sales of agricultural commodities and products in the
calendar year should be sent to the department by the withholding agent on or
before April 1 of the year following the year in which the income payments were
made. In lieu of the listing, the withholding agent may compile the information
on aggregate income payments to nonresidents on a magnetic tape, diskette or
other electronic reporting, provided the submission meets departmental
guidelines described in 701-paragraph 8.3(1)"e."
The listing, magnetic tape or other electronic submission
should be sent to the following address: Iowa Department of Revenue, Compliance
Division, Examination Section, Hoover State Office Building, P.O. Box 10456,
Des Moines, Iowa 50306; idr@iowa.gov.
A withholding agent is not exempt from withholding of state
income tax on income payments to nonresidents on sales of agricultural
commodities or products if the withholding agent does not provide the
department of revenue with information on income payments made during the year
by April 1 of the subsequent year.
(7)
Exemption from
withholding of payments made to nonresidents for deferred compensation,
pensions, and annuities. Iowa income tax withholding is not required
from payments of deferred compensation, pensions, and annuities made to
nonresidents which are attributable to personal services of the nonresidents in
Iowa since these payments are not subject to Iowa income tax. See rule
701-302.45 (422) for the
exclusion from Iowa income tax for these payments received by
nonresidents.
(8)
Exemption
from withholding of a nonresident's distributive share of income from a
pass-through entity. For tax years beginning on or after January 1,
2022, a partnership, S corporation, estate, or trust is not required to
withhold state income tax on a nonresident member's distributive share of
Iowa-source income from the pass-through entity. Instead, pass-through entities
are subject to the composite return requirements in 701-Chapter 405.
(9)
Exemption from withholding of
payments made to an out-of-state business or out-of-state employee due to
state-declared disaster. On or after January 1, 2016, see 701-Chapter
276 for withholding requirements of an out-of-state business or out-of-state
employee who enters Iowa to perform disaster and emergency-related work during
a disaster response period as those terms are defined in Iowa Code section
29C.24.
This rule is intended to implement Iowa Code section
422.15, Iowa Code section
422.16 as amended by 2007 Iowa
Acts, House File 923, section 16, and Iowa Code sections
422.17 and
422.73.
