IRS Form 1042-S
What Is a 1042 Tax Form?
IRS Form 1042-S, Foreign Person’s US Source Income Subject to Withholding, is used to report amounts paid to non-US citizens and non-residents by a withholding agent United States-based institution or business. This applies to non-resident aliens, foreign partnerships, foreign corporations, foreign estates, and foreign trusts subject to income tax withholding.
What Information is on Form 1042-S?
The form reports 1042 payment amounts withheld under Chapter 3 or Chapter 4 and repaid withheld amounts given back to the payee. Even if there are no deductions from the payment due to a treaty or taxation exception, you need to fill out a 1042-S IRS.
Each type of income received requires a separate 1042-S form. Some of the kinds of income reported include:
- Royalties
- Scholarships
- Dividends paid by American corporations
- Income from real estate
- Pension income
- Gambling winnings
- Normal income (in some cases)
- Interest on deposits
- Compensation for personal services performed in the US.
- Insurance premiums
For more information, see the Instructions for Form 1042-S from the IRS.
Who Needs to File 1042-S?
Any withholding agent (a person or institution, such as an employer, university, or business) that paid any amount subject to withholding to a foreign person must submit an IRS form 1042-S. The form is filed with the IRS and a completed copy is sent to the employer or business.
A separate Form 1042-S is required for:
- Each recipient (whether or not you withheld tax)
- Each tax rate of a specific type of income paid to the same recipient
- Each type of income paid to the same recipient
You can file a 1042-S IRS on paper or electronically. Electronic filing is required if there are 250 or more forms from the withholding agent.
Do I Need to Report 1042-S?
Distribution of an IRS Form 1042-S is the norm for informational purposes, for example, when sending to resident aliens. In this case, it’s not needed on your return. If the amounts in Box 7 (US Federal Tax Withheld) and Box 10 (Withholding Credit) of the form are both zero, then the 1042-S IRS is just for informational purposes. Otherwise, you’ll need to report it.
Tax laws aren’t easy to navigate, especially for those who aren’t residents of the US. Consult with a tax professional for information and guidance on individual circumstances. This can make filing the 1042 and complying with requirements easier.
What Is the Difference Between Form 1042 and 1042-S?
There is one key difference between Form 1042 and Form 1042-S:
- Form 1042, Annual Withholding Tax Return for US Source Income of Foreign Persons, is for reporting tax withheld on the income of foreign persons.
- Form 1042-S reports US source income subject to withholding.
Therefore, Form 1042 concerns how much income is withheld for tax purposes, and Form 1042-S reports payments made to foreign persons.
A withholding entity only needs to file a Form 1042-S with the IRS, not with the employee. You can file the IRS Form 1042-S by itself if you’re filing digitally; if you file on paper, Form 1042-S must always be submitted together with Form 1042-T.