Instructions for IRS Form 1042-s - Foreign Person's U.S. Source Income Subject to Withholding 2018

January 1, 2018 "Instructions For Irs Form 1042-s - Foreign Person's U.s. Source Income Subject To Withholding" contain the updated filing procedures for the IRS-issued Form 1042-S. Download your copy of the instructions by clicking the link below.

IRS Form 1042-S is a tax form issued by the United States Internal Revenue Service.

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2018
Department of the Treasury
Internal Revenue Service
Instructions for Form 1042-S
Foreign Person's U.S. Source Income Subject to Withholding
2017, the rate of withholding under
provisions commonly known as FATCA
Section references are to the Internal Revenue
Code unless otherwise noted.
section 1446 by a publicly traded
or Chapter 4 of the Internal Revenue
partnership on a distribution of income
Code (chapter 4) in addition to those
Future Developments
effectively connected to a U.S. trade or
amounts required to be reported under
For the latest information about
business has changed to 21% for
Chapter 3 of the Internal Revenue Code
developments related to Form 1042-S,
corporate partners and 37% for all other
(chapter 3). Form 1042-S requires the
and its instructions, such as legislation
partners.
reporting of an applicable exemption to
enacted after they were published, go to
the extent withholding under chapter 4
For tax years beginning after
IRS.gov/Form1042-S.
did not apply to a payment of U.S
December 31, 2017, the rate of
source fixed or determinable annual or
withholding by a Qualified Investment
General Instructions
periodical (FDAP) income (including
Entity on a distribution to a nonresident
deposit interest) that is reportable on
alien or foreign corporation that is
What's New
Form 1042-S. For payments to
treated as gain from the sale or
intermediaries, flow-through entities,
exchange of a U.S. real property
Boxes 9 and 11 of Form 1042-S have
and recipients, Form 1042-S requires
interest by the shareholder has changed
been switched and clarifying language
that the chapter 3 status (or
to 21%.
has been added to those boxes on the
classification) and, when the payment
form. Clarifying language has also been
Changes to codes. To reflect changes
reported is a withholdable payment, the
added to boxes 7b and 10 of the form,
made to the chapter 4 regulations
chapter 4 status, be reported on the
and the instructions for
Boxes 7
regarding U.S. branches of foreign
form according to the codes provided in
Through 11, Federal Tax
Withheld.
entities that act as intermediaries,
these instructions. For the requirement
chapter 4 status codes have been
These instructions have been revised
of a withholding agent to file a Form
added for U.S. branches treated as U.S.
to modify and add certain definitions.
1042-S for chapter 4 purposes, see
persons and U.S. branches not treated
See Definitions, later.
Regulations section 1.1474-1(d).
as U.S. persons that are reporting under
New sections
Requirement To
Interest on deposits. Beginning
Regulations section 1.1471-4. Finally,
Withhold
and
Before Completing Form
January 1, 2013, deposit interest
the LOB Treaty Category code for
1042-S
have been added to clarify a
described in section 871(i)(2)(A)
individuals (code 01) has been
withholding agent's obligations under
aggregating $10 or more paid to certain
removed. Withholding agents making
chapters 3 and 4 and provide general
nonresident alien individuals with
payments to an individual who is
steps that should be considered when
respect to a deposit maintained at an
claiming treaty benefits should leave
completing Form 1042-S.
office within the United States and held
Box 13j blank.
by a resident of certain countries must
The income codes, exemption
Qualified derivatives dealers
be reported on Form 1042-S. For more
codes, recipient status codes, and LOB
(QDDs). These instructions provide
information, see Interest on deposits
codes have been moved to the end of
guidance on how to report payments on
paid to certain nonresident aliens in the
the instructions (see
Appendix A
and
Form 1042-S that are made to and by
bullet list under
Amounts Subject to
Appendix
B).
QDDs. See
Payments by U.S.
Reporting on Form
1042-S, later.
Withholding Agents
and
Amounts Paid
Appendix C
has been added. It
Substitute forms. A substitute form
by Qualified
Intermediaries, later. For
provides an expanded Example 1,
furnished to a recipient must conform in
more information on the withholding and
which explains how to complete Form
format and size to the official IRS form
reporting requirements associated with
1042-S for a payment of U.S. source
and contain the exact same information
payments made to and by QDDs, see
FDAP income made directly to a
as the copy filed with the IRS. However,
Revenue Procedure 2017-15.
beneficial owner. This expanded
the size of the form may be adjusted if
Example 1 is comprehensive in that it
Foreign taxpayer identification num-
the substitute form is presented on a
provides information regarding how to
ber (FTIN). These instructions reflect
landscape oriented page instead of
complete every applicable entry field on
updated requirements for 2018 for when
portrait. Only one Form 1042-S may be
Form 1042-S, along with explanations
a financial institution must report an
submitted per page, regardless of
for each of the entries. It also explains
account holder's FTIN. See
Box 13i,
orientation. Withholding agents that
why the remaining boxes are not
Recipient's Foreign Taxpayer Identifying
furnish a substitute Form 1042-S (Copy
required to be completed.
Number, later.
B, C, or D) to the recipient must furnish
Appendix D
has been added. It
a separate substitute Form 1042-S for
Reminders
provides a comprehensive example of
each type of payment of income (as
how to complete Form 1042-S for
determined by the income code in Box
Foreign Account Tax Compliance
gambling winnings made directly to an
1). Withholding agents are no longer
Act (FATCA). Beginning in 2014, the
individual.
permitted to combine all payments of
Form 1042-S was modified to
income on a single substitute Form
accommodate reporting of payments
Changes to withholding rates. For
tax years beginning after December 31,
and amounts withheld under the
Mar 07, 2018
Cat. No. 64278A
2018
Department of the Treasury
Internal Revenue Service
Instructions for Form 1042-S
Foreign Person's U.S. Source Income Subject to Withholding
2017, the rate of withholding under
provisions commonly known as FATCA
Section references are to the Internal Revenue
Code unless otherwise noted.
section 1446 by a publicly traded
or Chapter 4 of the Internal Revenue
partnership on a distribution of income
Code (chapter 4) in addition to those
Future Developments
effectively connected to a U.S. trade or
amounts required to be reported under
For the latest information about
business has changed to 21% for
Chapter 3 of the Internal Revenue Code
developments related to Form 1042-S,
corporate partners and 37% for all other
(chapter 3). Form 1042-S requires the
and its instructions, such as legislation
partners.
reporting of an applicable exemption to
enacted after they were published, go to
the extent withholding under chapter 4
For tax years beginning after
IRS.gov/Form1042-S.
did not apply to a payment of U.S
December 31, 2017, the rate of
source fixed or determinable annual or
withholding by a Qualified Investment
General Instructions
periodical (FDAP) income (including
Entity on a distribution to a nonresident
deposit interest) that is reportable on
alien or foreign corporation that is
What's New
Form 1042-S. For payments to
treated as gain from the sale or
intermediaries, flow-through entities,
exchange of a U.S. real property
Boxes 9 and 11 of Form 1042-S have
and recipients, Form 1042-S requires
interest by the shareholder has changed
been switched and clarifying language
that the chapter 3 status (or
to 21%.
has been added to those boxes on the
classification) and, when the payment
form. Clarifying language has also been
Changes to codes. To reflect changes
reported is a withholdable payment, the
added to boxes 7b and 10 of the form,
made to the chapter 4 regulations
chapter 4 status, be reported on the
and the instructions for
Boxes 7
regarding U.S. branches of foreign
form according to the codes provided in
Through 11, Federal Tax
Withheld.
entities that act as intermediaries,
these instructions. For the requirement
chapter 4 status codes have been
These instructions have been revised
of a withholding agent to file a Form
added for U.S. branches treated as U.S.
to modify and add certain definitions.
1042-S for chapter 4 purposes, see
persons and U.S. branches not treated
See Definitions, later.
Regulations section 1.1474-1(d).
as U.S. persons that are reporting under
New sections
Requirement To
Interest on deposits. Beginning
Regulations section 1.1471-4. Finally,
Withhold
and
Before Completing Form
January 1, 2013, deposit interest
the LOB Treaty Category code for
1042-S
have been added to clarify a
described in section 871(i)(2)(A)
individuals (code 01) has been
withholding agent's obligations under
aggregating $10 or more paid to certain
removed. Withholding agents making
chapters 3 and 4 and provide general
nonresident alien individuals with
payments to an individual who is
steps that should be considered when
respect to a deposit maintained at an
claiming treaty benefits should leave
completing Form 1042-S.
office within the United States and held
Box 13j blank.
by a resident of certain countries must
The income codes, exemption
Qualified derivatives dealers
be reported on Form 1042-S. For more
codes, recipient status codes, and LOB
(QDDs). These instructions provide
information, see Interest on deposits
codes have been moved to the end of
guidance on how to report payments on
paid to certain nonresident aliens in the
the instructions (see
Appendix A
and
Form 1042-S that are made to and by
bullet list under
Amounts Subject to
Appendix
B).
QDDs. See
Payments by U.S.
Reporting on Form
1042-S, later.
Withholding Agents
and
Amounts Paid
Appendix C
has been added. It
Substitute forms. A substitute form
by Qualified
Intermediaries, later. For
provides an expanded Example 1,
furnished to a recipient must conform in
more information on the withholding and
which explains how to complete Form
format and size to the official IRS form
reporting requirements associated with
1042-S for a payment of U.S. source
and contain the exact same information
payments made to and by QDDs, see
FDAP income made directly to a
as the copy filed with the IRS. However,
Revenue Procedure 2017-15.
beneficial owner. This expanded
the size of the form may be adjusted if
Example 1 is comprehensive in that it
Foreign taxpayer identification num-
the substitute form is presented on a
provides information regarding how to
ber (FTIN). These instructions reflect
landscape oriented page instead of
complete every applicable entry field on
updated requirements for 2018 for when
portrait. Only one Form 1042-S may be
Form 1042-S, along with explanations
a financial institution must report an
submitted per page, regardless of
for each of the entries. It also explains
account holder's FTIN. See
Box 13i,
orientation. Withholding agents that
why the remaining boxes are not
Recipient's Foreign Taxpayer Identifying
furnish a substitute Form 1042-S (Copy
required to be completed.
Number, later.
B, C, or D) to the recipient must furnish
Appendix D
has been added. It
a separate substitute Form 1042-S for
Reminders
provides a comprehensive example of
each type of payment of income (as
how to complete Form 1042-S for
determined by the income code in Box
Foreign Account Tax Compliance
gambling winnings made directly to an
1). Withholding agents are no longer
Act (FATCA). Beginning in 2014, the
individual.
permitted to combine all payments of
Form 1042-S was modified to
income on a single substitute Form
accommodate reporting of payments
Changes to withholding rates. For
tax years beginning after December 31,
and amounts withheld under the
Mar 07, 2018
Cat. No. 64278A
Purpose of Form
1042-S. For more information, see
each Form 1042-S they file. This
Substitute
Forms, later.
identifying number is used, for example,
Use Form 1042-S to report income
to identify which information return is
described under
Amounts Subject to
Account-by-account reporting by
being corrected or amended when
Reporting on Form
1042-S, later, and to
U.S. financial institutions. For
multiple information returns are filed by
report amounts withheld under
amounts paid on or after January 1,
a withholding agent with respect to the
chapter 3 or chapter 4.
2016, a U.S. financial institution or a
same recipient. The unique identifying
U.S. branch of a foreign financial
Use Form 1042-S to report specified
number cannot be the recipient's U.S. or
institution maintaining an account within
federal procurement payments paid to
foreign TIN. The unique identifying
the United States is required to report
foreign persons that are subject to
number must be numeric. The length of
payments of the same type of income
withholding under section 5000C.
a given identifying number must be
(as determined by the income code in
exactly 10 digits. The identifying number
Use Form 1042-S to report payments
Box 1) made to multiple financial
must be unique to each original Form
of eligible deferred compensation items
accounts held by the same beneficial
1042-S filed for the current year. The
or distributions from nongrantor trusts to
owner on separate Forms 1042-S for
identifying number can be used on a
covered expatriates that are subject to
each account. See
Account-by-Account
new original form in a subsequent year.
withholding under section 877A. See
Reporting by Certain Financial
Box 1, Income
Code, later.
Institutions, later.
Amended forms. Beginning in 2017,
withholding agents filing an amended
Withholding agent's status codes.
Use Form 1042-S to report certain
form must indicate the amendment
Withholding agents must enter both a
distributions that are made by publicly
number (see top of form below title, to
chapter 3 and chapter 4 status code
traded trusts and qualified investment
the right of the “Amended” checkbox).
entities (as defined under section 897(h)
regardless of the type of payment being
The amendment number must be
(4)). See
Distributions Attributable to
made. Also, status codes under
numeric and the length must be exactly
Dispositions of U.S. Real Property
chapter 3 (code 34) and chapter 4 (code
one digit. Any amended form must have
Interests by Publicly Traded Trusts and
50) apply to a withholding agent that is a
the same unique form identifier as the
Qualified Investment Entities
(QIEs),
foreign branch of a U.S. financial
original form that is being amended.
later.
institution. See
Boxes 12b and 12c,
Each time that you amend the same
Withholding Agent's Chapter 3 and
Also use Form 1042-S to report
form (as determined by the unique form
Chapter 4 Status
Code, later.
distributions of effectively connected
identifier), you must provide the
Recipient country code. If the
income by a publicly traded partnership
amendment number in the box provided
recipient is unknown, leave Box 13b,
or nominee. See
Publicly Traded
on the form (using “1” for the first
Recipient's Country Code, blank and
Partnerships (Section 1446 Withholding
amendment and increasing sequentially
enter “Unknown Recipient” in Box 13a,
Tax), later.
for each subsequent amendment). See
Recipient's name.
Amended
Forms, later, for more
Every person required to deduct
information.
Treaty claims and limitation on ben-
and withhold any tax under
!
efits articles. Withholding agents that
chapter 3 or chapter 4 is liable
List of foreign country codes.
CAUTION
are withholding at a reduced rate based
for such tax.
Beginning in 2017, Form 1042-S filers
on a treaty claim by an entity must
will use the same list of country codes
Do not use Form 1042-S to report an
include a limitation on benefits code
used on other IRS forms (for example,
(LOB code) in Box 13j for the recipient
item required to be reported on any of
Forms 926, 1118, 3520, and 8805). This
when they receive documentation
the following forms.
list of foreign country codes may be
establishing the applicable limitation on
Form W-2 (wages and other
found at IRS.gov/countrycodes.
compensation made to employees
benefits provision of the treaty under
Note. Although the list of country codes
(other than compensation for dependent
which the entity qualifies. Withholding
is maintained by Modernized e-File,
personal services for which the
agents are not, however, required to
Form 1042-S filers who file
beneficial owner is claiming treaty
obtain new documentation unless they
electronically will continue to use the
benefits), including wages in the form of
are otherwise required to renew such
FIRE System. See instructions for
group-term life insurance).
documentation. See
Box 13j, LOB
Electronic
Reporting, later. Also, if
Form 1099.
Code, later.
applicable, the option to file Form
Form 8288-A, Statement of
Chapter Indicator. Withholding agents
1042-S by paper is still available.
Withholding on Dispositions by Foreign
must enter either “3” or “4” in Box 3 to
Persons of U.S. Real Property Interests,
Foreign taxpayer identifying number
indicate the chapter with respect to
or Form 8805, Foreign Partner's
and date of birth. Beginning in 2017, a
which a Form 1042-S is being filed. See
Information Statement of Section 1446
financial institution that files a Form
Chapter
indicator, in Box 3, later, for
Withholding Tax. Withholding agents
1042-S with respect to a payment on an
more information.
otherwise required to report a
obligation that it maintains at its U.S.
FIRE System. For files submitted on
distribution partly on a Form 8288-A or
office or U.S. branch must report the
the FIRE System, it is the responsibility
Form 8805 and partly on a Form 1042-S
recipient's foreign taxpayer identifying
of the filer to check the status within 5
may instead report the entire amount on
number (FTIN) and date of birth (if the
business days to verify the results of the
Form 8288-A or Form 8805.
recipient is an individual). See
Box 13i,
transmission. The IRS will not mail error
Form 8966, FATCA Report. Foreign
Recipient's Foreign Taxpayer Identifying
reports for files that are bad.
financial institutions (FFIs), sponsoring
Number, and
Box 13l, Recipient’s Date
entities of certain FFIs and other foreign
of
Birth, later, for additional information
Unique form identifier. Beginning in
entities, and withholding agents are
regarding this requirement.
2017, withholding agents are required to
required to report on Form 8966 certain
assign a unique identifying number to
account holders and payees. An FFI or
-2-
Instructions for Form 1042-S (2018)
Where, When, and
withholding agent may also be required
Recipient copies. You may request
to file Form 1042-S to report payments
an extension of time to provide the
How To File
of U.S. source FDAP income made to
statements to recipients by sending a
Forms 1042-S, whether filed on paper
such persons and to report tax
letter to:
or electronically, must be filed with the
deducted and withheld, if any.
Internal Revenue Service by March 15,
Internal Revenue Service
Who Must File
2019. You also are required to furnish
Information Returns Branch
Form 1042-S to the recipient of the
Attn: Extension of Time
Every withholding agent (defined in
income by March 15, 2019.
Coordinator
Definitions, later) must file an
240 Murall Drive Mail Stop 4360
information return on Form 1042-S to
Copy A is filed with the IRS. Send all
Kearneysville, WV 25430
report amounts paid during the
paper Forms 1042-S with Form 1042-T,
preceding calendar year that are
Annual Summary and Transmittal of
See Extension to provide statements to
described under
Amounts Subject to
Forms 1042-S, to the address in the
recipients in Pub. 515, Withholding of
Reporting on Form
1042-S, later.
Form 1042-T instructions. You must use
Tax on Nonresident Aliens and Foreign
However, withholding agents who are
Form 1042-T to transmit paper Forms
Entities.
individuals are not required to report a
1042-S. Use a separate Form 1042-T to
payment on Form 1042-S if they are not
transmit each type of Form 1042-S. See
See Pub. 1187, Specifications
making the payment as part of their
Payments by U.S. Withholding
Agents,
for Filing Form 1042-S, Foreign
!
trade or business and no withholding is
later, and the Form 1042-T instructions
Person's U.S. Source Income
CAUTION
required to be made on the payment.
for more information. If you are a
Subject to Withholding, Electronically,
For example, an individual making a
financial institution or you have 250 or
for more information about filing
payment of interest that qualifies for the
more Forms 1042-S to file (irrespective
extension requests electronically
portfolio interest exception from
of whether you are a financial institution
instead of on Form 8809.
withholding is not required to report the
or not), follow the instructions under
payment if the portfolio interest is paid
Electronic
Reporting, later.
Electronic Reporting
on a loan that is not connected to the
Attach only Copy A to Form
If you are either a person (including a
individual's trade or business. However,
1042-T. Copies B, C, and D
corporation, partnership, individual,
TIP
an individual who is a withholding agent
should be provided to the
trust, or estate) that is required to file
paying an amount that actually has been
recipient of the income. Copy E should
250 or more Forms 1042-S, or a
subject to withholding is required to
be retained by the withholding agent. All
financial institution, whether U.S. or
report the payment. Also, an individual
copies must match the copy filed with
foreign, you are required to submit
paying an amount on which withholding
Forms 1042-S electronically.
the IRS. Any differences between the
is required must report the payment,
copy of the form issued to recipients
whether or not the individual actually
Electronic submissions are filed
and the copy filed with the IRS will lead
withholds. See
Multiple Withholding
using the Filing Information Returns
to delays in processing the recipient's
Agent
Rule, later, for exceptions to
Electronically (FIRE) System. The FIRE
tax return. The IRS may disallow claims
reporting when another person has
System operates 24 hours a day, 7 days
for refund or credit for amounts withheld
reported the same payment to the
a week, at fire.irs.gov. For more
reported on Form 1042-S if the form
recipient.
information, see Pub. 1187.
attached to such claims differs from the
You must file a Form 1042-S even if
copy that was filed with the IRS.
The electronic filing requirement
you did not withhold tax under chapter 3
applies separately to original and
because the income was exempt from
With respect to a withholdable
amended returns. For a withholding
tax under a U.S. tax treaty or the Code,
payment, the recipient copy should be
agent other than a financial institution,
including the exemption for income that
provided to the intermediary or
the filing requirement applies
is effectively connected with the
flow-through entity named as a recipient
individually to each reporting entity as
conduct of a trade or business in the
with respect to a chapter 4 reporting
defined by its separate taxpayer
United States, or you released the tax
pool, if applicable.
identification number (TIN). For
withheld to the recipient. For
example, if you have 300 original Forms
Extension of time to file. To request
exceptions, see
Amounts That Are Not
1042-S, they must be filed
an extension of time to file Forms
Subject to Reporting on Form
1042-S,
electronically. However, if 200 of those
1042-S, file Form 8809, Application for
later.
forms contained erroneous information,
Extension of Time To File Information
Amounts paid to an individual that is
the amended returns may be filed on
Returns. See the Form 8809
a bona fide resident of a U.S.
paper forms because the number of
instructions for where to file that form.
possession or territory are not subject to
amended Forms 1042-S is less than the
You should request an extension as
reporting on Form 1042-S if the
250-or-more filing requirement.
soon as you are aware that an
beneficial owner of the income is a U.S.
extension is necessary, but no later than
If you file electronically, do not
citizen, national, or resident alien (such
the due date for filing Form 1042-S. By
file the same returns on paper.
!
amounts may be subject to Form 1099
filing Form 8809, you will get an
Duplicate filing may cause
reporting).
CAUTION
automatic 30-day extension to file Form
penalty notices to be generated.
1042-S. If you need more time, a
If you file Form 1042-S, you also
second Form 8809 may be submitted
must file Form 1042, Annual
!
Note. Even though as many as 249
before the end of the initial extended
Withholding Tax Return for U.S.
Forms 1042-S may be submitted on
CAUTION
due date. See Form 8809 for more
Source Income of Foreign Persons. See
paper to the IRS by a filer other than a
information.
Form 1042 and its instructions for more
financial institution, the IRS encourages
information.
filers to transmit forms electronically.
Instructions for Form 1042-S (2018)
-3-
Additional Information
may be subject to a penalty for failure to
Hardship waiver. To receive a
file a correct information return. See
hardship waiver from the required filing
For more information on the withholding
Penalties, later.
of Forms 1042-S electronically, submit
of tax, see Pub. 515. To order this
Form 8508, Request for Waiver From
publication and other publications and
Account-by-Account Reporting
Filing Information Returns Electronically.
forms, call 1-800-TAX-FORM
by Certain Financial Institutions
Waiver requests should be filed at least
(1-800-829-3676). You also can
For amounts paid on or after January 1,
45 days before the due date of the
download forms and publications from
2016, a U.S. financial institution or U.S.
returns. See Form 8508 for more
IRS.gov.
branch of a foreign financial institution
information.
Record Retention
maintaining an account within the
Truncation TIN (TTIN) Rules
United States is required to report
Withholding agents should retain a copy
payments of the same type of income
Withholding agents may truncate the
of the information returns filed with the
(as determined by the income code in
recipient's taxpayer identification
IRS, or have the ability to reconstruct
Box 1) made to multiple financial
number (social security number (SSN),
the data, for at least 3 years after the
accounts held by the same recipient on
individual taxpayer identification number
reporting due date.
a separate Form 1042-S for each
(ITIN), or employer identification
Substitute Forms
account. For this purpose, a financial
number (EIN)) on the recipient's copy of
The official Form 1042-S is the standard
account is an account described in
Form 1042-S (that is, copies B, C, and
for substitute forms. All substitute forms
Regulations section 1.1471-5(b)(1). See
D), including a substitute form. To
must comply with the rules set forth in
instructions for
Box 13k, Recipient’s
truncate the recipient's taxpayer
Pub. 1179, General Rules and
Account
Number, later, for information
identification number, only the last four
Specifications for Substitute Forms
on designating each account with a
digits of a taxpayer identification
1096, 1098, 1099, 5498, and Certain
separate account number.
number must be displayed and the
Other Information Returns. A substitute
remaining digits must be replaced with
Combined Reporting
either asterisks (*) or Xs. For example,
of Form 1042-S that is furnished to the
Procedures
an SSN or ITIN must be truncated on
recipient (Copy B, C, or D) must
the recipient's copy as XXX-XX-nnnn.
conform in format and size to the official
Revenue Procedure 99-50 provides
An EIN must be truncated as XX-
IRS form and must contain the exact
special procedures for successor
XXXnnnn.
same information as the copy filed with
entities to use combined information
the IRS. However, the size of the form
reporting under chapter 3 in certain
Withholding agents may also
may be adjusted if the substitute form is
situations following a merger or
truncate a recipient’s foreign taxpayer
presented on a landscape oriented
acquisition. A withholding agent may
identification number on the recipient’s
page instead of portrait. Only one Form
also use these procedures for purposes
copy of Form 1042-S (copies B, C, and
1042-S may be submitted per page,
of reporting under chapter 4.
D), including a substitute form. The
regardless of orientation. You may be
Deposit Requirements
same rules for truncating a recipient’s
subject to a penalty for failure to furnish
U.S. TIN stated above must be followed
For information and rules concerning
a correct information return. See
if truncating a recipient’s foreign
federal tax deposits, see Depositing
Penalties, later.
taxpayer identification number.
Withheld Taxes in Pub. 515 or Deposit
Note. A withholding agent is required to
Requirements in the Instructions for
Note. The recipient's taxpayer
provide a recipient with a separate
Form 1042.
identification number and foreign
substitute Form 1042-S for each type of
taxpayer identification number must not
Definitions
payment of income (as determined by
be truncated on Copy A filed with the
the income code in Box 1).
IRS. The withholding agent's EIN cannot
Withholding agent. A withholding
All of the fields on the substitute
be truncated on any copy.
agent is any person, U.S. or foreign, that
form must match the copy filed
!
has control, receipt, or custody of an
Need assistance? For additional
with the IRS and must comply
amount subject to withholding under
information and instructions on filing
CAUTION
with IRS standards (see Pub. 1179).
chapter 3, who can disburse or make
Forms 1042-S electronically, extensions
Any differences between the substitute
payments of an amount subject to
of time to file (Form 8809), and hardship
form issued to recipients and the copy
withholding, or who makes a
waivers (Form 8508), see Pub. 1187.
filed with the IRS will lead to delays in
withholdable payment under chapter 4.
You also can call the Information
processing the recipient's tax return.
The withholding agent may be an
Reporting Program at 866-455-7438
The IRS may disallow claims for refund
individual, corporation, partnership,
(toll free) or 304-263-8700 (not a
or credit for amounts withheld reported
trust, association, or any other entity.
toll-free number). Do not call the
on Form 1042-S if the substitute form
The term withholding agent also
Information Reporting Program for tax
attached to such claims differs from the
includes, but is not limited to, a qualified
law questions. The Information
copy that was filed with the IRS.
intermediary (QI), a nonqualified
Reporting Program also can be reached
intermediary (NQI), a withholding
by fax at 877-477-0572 (toll free) and
Penalty for filing incorrect
foreign partnership (WP), a withholding
international fax at 304-579-4105 (not a
substitute form. Privately printed
foreign trust (WT), a flow-through entity,
toll-free number).
substitute Forms 1042-S must be exact
a U.S. branch that is treated as a U.S.
If you have tax law questions
copies of both the format and content of
person under Regulations section
pertaining to Form 1042-S, call
the official Form 1042-S. If you file a
1.1441-1(b)(2)(iv)(A), a territory FI, a
1-267-941-1000 (not a toll-free number).
substitute for Form 1042-S, Copy A,
nominee under section 1446, and an
with the IRS that is not an exact copy of
authorized agent. A person may be a
the official Form 1042-S, Copy A, you
withholding agent even if there is no
-4-
Instructions for Form 1042-S (2018)
requirement to withhold from a payment
agent is filing Form 1042 (in its own
owner of income paid to a foreign
or if another person has already
name) on behalf of the payer.
complex trust (a foreign trust that is not
withheld the required amount from a
a foreign simple trust or foreign grantor
3. The books and records and
payment.
trust) is the trust itself.
relevant personnel of the agent are
In most cases, the U.S. person who
available to the payer.
The beneficial owner of income paid
pays (or causes to be paid) the item of
to a foreign estate is the estate itself.
4. The payer remains fully liable for
U.S. source income to a foreign person
the acts of its agent and does not assert
A payment to a U.S. partnership,
(or to its agent) must withhold. However,
any of the defenses that otherwise may
U.S. trust, or U.S. estate is not subject
other persons may be required to
be available, and
to withholding under chapter 3 or 4. A
withhold. For example, if a payment is
U.S. partnership, trust, or estate should
5. If the agent is filing Form 1042 (in
made by a QI (whether or not it
provide the withholding agent with a
its own name) on behalf of the payer,
assumes primary withholding
Form W-9, Request for Taxpayer
the agent is reported as the withholding
responsibility) and the QI knows that
Identification Number and Certification.
agent in Boxes 12a through 12i and
withholding was not done by the person
In most cases, these beneficial owner
information about the payer is reported
from which it received the payment,
rules apply for purposes of section
in Boxes 16a through 16e of the Form
then that QI is required to do the
1446; however, there are exceptions.
1042-S.
appropriate withholding. In addition,
1. Chapter 3 withholding rate pool.
withholding must be done by any QI that
A sponsoring entity is a reporting
A payment of a single type of income,
assumes primary withholding
agent with respect to withholdable
determined in accordance with the
responsibility under chapters 3 and 4, a
payments and must fulfill the above
income codes used to file Form 1042-S,
WP, a WT, a U.S. branch that agrees to
conditions to be an authorized agent.
that is subject to a single rate of
be treated as a U.S. person under
For more information on these
withholding and a single chapter 4
Regulations section 1.1441-1(b)(2)(iv)
conditions, see Regulations sections
exemption code.
(A), or an authorized agent. Finally, if a
1.1441-7(c) and 1.1474-1(a)(3)(ii).
2. Chapter 4 withholding rate pool.
payment is made by an NQI or a
A pool of account holders or payees
Beneficial owner. For payments other
flow-through entity that knows, or has
provided on an FFI withholding
than those for which a reduced rate of
reason to know, that withholding was
statement (or a chapter 4 withholding
withholding is claimed under an income
not done, that NQI or flow-through entity
statement) that is described in
tax treaty, the beneficial owner of
is required to withhold since it also falls
Regulations section 1.1471-1(b)(20).
income in most cases is the person who
within the definition of a withholding
is required under U.S. tax principles to
agent.
Disregarded entity. A business entity
include the income in gross income on a
Account holder. Generally, the
that has a single owner and is not a
tax return. A person is not a beneficial
account holder is the person that holds
corporation under Regulations section
owner of income, however, to the extent
the account. See Regulations section
301.7701-2(b) is disregarded as an
that person is receiving the income as a
1.1471-5(a).
entity separate from its owner.
nominee, agent, or custodian, or to the
extent the person is a conduit whose
Amount subject to withholding.
Dividend equivalent. To the extent
participation in a transaction is
Generally, an amount subject to
specified in section 871(m), and the
disregarded. In the case of amounts
chapter 3 withholding is an amount from
regulations thereunder, a dividend
paid that do not constitute income,
sources within the United States that is
equivalent is a payment (within the
beneficial ownership is determined as if
fixed or determinable annual or
meaning of Regulations section
the payment were income.
periodical (FDAP) income. FDAP
1.871-15(i)) that, directly or indirectly, is
income is all income included in gross
Foreign partnerships, foreign simple
contingent on, or determined by
income, including interest (as well as
trusts, and foreign grantor trusts are not
reference to, the payment of a dividend
OID), dividends, rents, royalties, and
the beneficial owners of income paid to
from U.S. sources. Dividend equivalent
compensation. Amounts subject to
the partnership or trust. The beneficial
payments include the following
chapter 3 withholding do not include
owners of income paid to a foreign
payments.
amounts that are not FDAP, such as
partnership in most cases are the
1. A substitute dividend made under
most gains from the sale of property
partners in the partnership, provided
a securities lending or sale-repurchase
(including market discount and option
that the partner is not itself a
transaction involving a U.S. stock, and
premiums), as well as other specific
partnership, foreign simple or grantor
2. A payment made under a
items of income (such as interest on
trust, nominee, or other agent. The
specified notional principal contract, a
bank deposits and short-term OID). See
beneficial owner of income paid to a
specified equity-linked instrument.
Regulations section 1.1441-2.
foreign simple trust (a foreign trust that
is described in section 651(a)) in most
Authorized agent. An agent is an
Exempt beneficial owner. An exempt
cases is the beneficiary of the trust, if
authorized agent for purposes of filing
beneficial owner means a person that is
the beneficiary is not a foreign
Form 1042 or making tax deposits and
described in Regulations section
partnership, foreign simple or grantor
payments on behalf of its principal
1.1471-6 and includes a foreign
trust, nominee, or other agent. The
(payer) only if all five of the following
government, a political subdivision of a
beneficial owner of a foreign grantor
conditions apply.
foreign government, a wholly owned
trust (a foreign trust to the extent that all
instrumentality or agency of a foreign
1. There is a written agreement
or a part of the income of the trust is
government or governments, an
between the payer and the person
treated as owned by the grantor or
international organization, a wholly
acting as agent.
another person under sections 671
owned agency or instrumentality of an
2. A Form 8655, Reporting Agent
through 679) is the person treated as
international organization, a foreign
Authorization, is filed with the IRS if the
the owner of the trust. The beneficial
Instructions for Form 1042-S (2018)
-5-

Download Instructions for IRS Form 1042-s - Foreign Person's U.S. Source Income Subject to Withholding 2018

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