# Prop. Treas. Reg. § 1.1474-2: Adjustments for overwithholding or underwithholding of tax.

Proposed regulation, not in force. REG-132881-17, 83 FR 64757, published 2018-12-18 <https://www.federalregister.gov/documents/2018/12/18/2018-27290/regulations-reducing-burden-under-fatca-and-chapter-3>. Interprets 26 U.S.C. § 1474.

Par. 13. Section 1.1474-2 is amended by revising the second sentence of paragraph (a)(3)(i) introductory text, paragraphs (a)(3)(i)(A) through (C), and paragraph (a)(4) to read as follows:

(a) * * *

(3) * * *

(i) * * * In such a case, the withholding agent may reimburse itself by reducing, by the amount of tax actually repaid to the beneficial owner or payee, the amount of any deposit of withholding tax otherwise required to be made by the withholding agent under § 1.6302-2(a)(1)(iii) for any subsequent payment period occurring before the end of the calendar year following the calendar year of overwithholding. * * *

(A) The repayment to the beneficial owner or payee occurs before the earliest of the due date (including extensions) for filing the Form 1042-S for the calendar year of overwithholding, the date the Form 1042-S is actually filed with the IRS, or the date the Form 1042-S is furnished to the beneficial owner or payee;

(B) The withholding agent states on a timely filed (including extensions) Form 1042-S for the calendar year of overwithholding the amount of tax withheld and the amount of any actual repayment; and

(C) The withholding agent states on a timely filed (including extensions) Form 1042 for the calendar year of overwithholding the amount of adjustments made to overwithholding under paragraph (a)(1) of this section and the amount of any credit claimed under § 1.6414-1.

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(4) Set-off. Under the set-off procedure, the withholding agent may repay the beneficial owner or payee by applying the amount overwithheld against any amount of tax which otherwise would be required under chapter 3 or 4 of the Internal Revenue Code or the regulations under part 1 of this chapter to be withheld from income paid by the withholding agent to such person. Any such set-off that occurs for a payment period in the calendar year following the calendar year of overwithholding shall be allowed only if—

(i) The repayment to the beneficial owner or payee occurs before the earliest of the due date (including extensions) for filing the Form 1042-S for the calendar year of overwithholding, the date the Form 1042-S is actually filed with the IRS, or the date the Form 1042-S is furnished to the beneficial owner or payee;

(ii) The withholding agent states on a timely filed (including extensions) Form 1042-S for the calendar year of overwithholding the amount of tax withheld and the amount of any repayment made through set-off; and

(iii) The withholding agent states on a timely filed (including extensions) Form 1042 for the calendar year of overwithholding the amount of adjustments made to overwithholding under paragraph (a)(1) of this section and the amount of any credit claimed under § 1.6414-1.

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