Form 1042-S requires detailed reporting of US-sourced income, withholding amounts, and recipient information. A filer must complete both pages and sign the form to successfully submit it to the IRS.
Let’s understand the step-by-step filing instructions of 1042-S.
Form 1042-S Filing Instructions
Form 1042-S must be filed with the IRS, and a copy should also be sent to the business, student, entity, or employee payee to complete their U.S. federal tax return. It’s the responsibility of the withholding agent to complete the form. The withholding agent could be:
- Employer
- Business
- University
- Other institution
Form 1042-S should be filed regardless of whether (or not) tax is withheld.
Information Required to File 1042-S form
Make sure you have the necessary details before filling out Form 1042-S
- Payer Information: Name, address, EIN (Employer Identification Number).
- Recipient Information: Name, address, country of residence, TIN (Taxpayer Identification Number, if applicable).
- Income Information: Type of income, amount paid, and withholding amount.
- Withholding Agent Information: Details of the entity responsible for withholding tax.
Each Box on Form 1042-S
- Box 1: Income Code
- Box 2: Gross Income
- Box 3: Chapter Indicaton
- Box 4: Exemption Code
- Box 7a: U.S. Federal Tax Withheld
- Box 12a: Recipient’s Country Code
- Boxes 13-20: Payer and Recipient Details
Detailed box-by-box 1042-S Filing Instructions
Payer and Withholding Agent Information
Box 1: Income Code
In box 1, enter the correct income code that best describes the type of income paid to the foreign recipient. The IRS has provided a list of income codes in the Form 1042-S instructions. Some common examples include 06 for dividends paid by U.S. corporations and 15 for scholarships and grants.
Tip: Make sure to select the correct code that corresponds to the payment being reported.
Box 2: Gross Income
Here, mention the total amount of income paid to the foreign recipient before any tax withholding or deductions. It is important to report the full amount of income, regardless of whether tax was withheld.
Tip: The amount of income should be entered in U.S. dollars using a decimal format (e.g., 1000.00).
Box 3: Chapter Indicator
The chapter indicator identifies whether the withholding was under Chapter 3 (which deals with withholding on payments to foreign persons) or Chapter 4 (which deals with FATCA withholding). Enter 3 if the withholding falls under Chapter 3, and enter 4 if the withholding falls under Chapter 4. This designation ensures the IRS understands under which set of rules the tax was withheld.
Box 4: Exemption Code
If the recipient qualifies for an exemption from withholding, enter the appropriate exemption code in this box. The IRS provides a list of exemption codes in the Form 1042-S instructions. For example, use 04 if the recipient is a tax-exempt organization. If no exemption applies, leave this box blank.
Box 5: Withholding Rate
In this box, enter the percentage of tax that was withheld from the gross income. The standard U.S. withholding rate for payments to foreign persons is 30%, unless a tax treaty between the U.S. and the recipient’s country provides for a lower rate. If a reduced treaty rate was applied, ensure that the correct rate is entered. The rate should be written as a percentage with two decimal places, such as 30.00 or 15.00.
Box 6: Net Income
This box represents the gross income amount (Box 2) minus the U.S. tax withheld (Box 7a). If no tax was withheld, the net income will be the same as the gross income. Enter the net amount in U.S. dollars using decimal formatting.
Box 7a: U.S. Federal Tax Withheld
Here, report the total amount of federal tax withheld from the payment to the recipient. This amount should match the withholding rate applied in Box 5. If no tax was withheld, enter 0.00. It is essential that this amount is accurate, as it determines the tax liability reported to the IRS.
Box 7b: Withholding by Other Agents
If another withholding agent has already withheld tax from the payment before it reached you, report the amount withheld by that agent in this box. This ensures that the total withheld tax is properly accounted for and prevents double taxation.
Recipient’s Information
Box 8: Taxpayer Identification Number (TIN)
Enter the recipient’s U.S. Taxpayer Identification Number (TIN) in this box. This could be a Social Security Number (SSN), Individual Taxpayer Identification Number (ITIN), or Employer Identification Number (EIN). If the recipient does not have a U.S. TIN and is not required to have one, enter “N/A” instead. However, if a tax treaty benefit is claimed, a valid TIN is usually required.
Box 9: Recipient’s Foreign Taxpayer Identification Number
If the recipient has a foreign taxpayer identification number issued by their home country, enter it here. This number is useful for cross-border tax reporting but is not required in all cases.
Box 10: Recipient’s Name
Enter the full legal name of the recipient exactly as it appears on official documents. If the recipient is an individual, write their first name, middle initial (if applicable), and last name. If the recipient is an entity, such as a corporation or partnership, enter the full legal name of the organization.
Box 11: Recipient’s Street Address
Write the recipient’s street address, including the house or building number, street name, and apartment or suite number (if applicable). Do not abbreviate city names or street names to avoid processing errors.
Box 12a: Recipient’s City or Town
Enter the city or town where the recipient resides. This should match their official address records.
Box 12b: Recipient’s State, Province, or Region
If applicable, enter the state, province, or region of the recipient’s address. If the country does not have states or provinces, leave this box blank.
Box 12c: Recipient’s Country Code
Enter the two-letter country code for the recipient’s country of residence, as specified by the IRS. The correct country code can be found in IRS Publication 515 or the Form 1042-S instructions.
Box 13: Recipient’s Postal Code
Write the recipient’s postal code (ZIP code, if applicable). Ensure that the format is correct for the recipient’s country.
Payer and Withholding Agent Details
Box 14a: Payer’s Name
Enter the full legal name of the entity making the payment. This is usually the withholding agent responsible for ensuring compliance with tax regulations.
Box 14b: Payer’s U.S. TIN
Enter the U.S. Taxpayer Identification Number (TIN) of the payer. This could be an Employer Identification Number (EIN). If the payer does not have a U.S. TIN, leave this box blank.
Box 14c: Payer’s GIIN (if applicable)
If the payer is a foreign financial institution (FFI) and has a Global Intermediary Identification Number (GIIN) issued under FATCA, enter it here. If this does not apply, leave the box blank.
Box 15: Payer’s Street Address
Enter the full street address of the payer, including building number, street name, and suite number if applicable.
Box 16: Payer’s City or Town
Write the city or town where the payer is located.
Box 17: Payer’s State or Province
If applicable, enter the state or province of the payer’s address. If the payer is located outside the U.S. and does not have a state or province, leave this box blank.
Box 18: Payer’s Country Code
Enter the two-letter country code of the payer’s country of residence.
Box 19: Payer’s Postal Code
Provide the payer’s postal code (ZIP code) in the correct format for their location.
Final Thoughts
After completing all required boxes, carefully review the form for accuracy. Ensure that all names, addresses, TINs, and amounts are correct. Tax1099, an IRS-authorized e-file provider, allows you to e-file Form 1042-S with the IRS and receive instant status updates on your Form 1042-S returns.
The deadline to File Form 1042-S is March 17, 2025
