What You Need To Know About The 1042-S Form
The 1042-S Form is used to report amounts paid to foreign persons (including persons presumed to be foreign) that are subject to income tax withholding, even if no amount is deducted and withheld from the payment because of a treaty or exception to taxation, or if any amount withheld was repaid to the payee.
The United States Internal Revenue Service (IRS) 1042-S Form for a Foreign Person’s U.S. Source Income Subject to Withholding applies to the reporting of annual income and amounts to be withheld as described in IRS Instructions for Form 1042-S. Other items attendant to the Form 1042-S filing include specified Federal procurement contract payments that have been paid to a foreign national, and meet the criteria for being subject to withholding under IRS code section 5000C, as well as any distribution of income attained by a publicly traded partnership, or effectively connected to a nominee.
The standard rate of tax withholding for a nonresident alien that has received a 1042-S Form is 30%, but there are exceptions including scholarship/fellowship income to F, J, M and Q visa holders.
Every withholding agent or intermediary, whether U.S. or foreign, who has control, receipt, custody, disposal or payment of any fixed or determinable, annual or periodic U.S. source income over foreign persons, must file these forms with the IRS. For example, employers that employ non-resident aliens (such as foreign workers or foreign students) would need to file a 1042-S Form with the IRS for every non-resident alien they employ and also send a (completed) copy of that form to the non-resident alien they employ.
Forms 1042 and 1042-S are filed separately. The main difference between forms 1042 and 1042-S is that form 1042-S is concerned with payments made to foreign persons, while form 1042 is concerned with determining how much income will be withheld for tax withholding purposes.
Definition of Foreign Person’s Filing Form 1042-S
IRS criteria for mandatory income tax withholding defines nonresident aliens as individuals who are not a citizen or legal resident of the United States. Persons falling under this classification should file a return using IRS Form 1040NR in conjunction with the Form 1042-S to report amounts paid subject to income tax withholding.
Form 1042-S items in Box 7 US Federal Tax Withheld, and Box 10 Withholding Credit determine if there has been withholding. If those boxes contain a ‘0’ on a filing, nothing has been withheld. Exceptions to taxation may be applicable and may also be specified by tax treaties of the recipient’s country of residence.
Tax Samaritan is Your Form 1042-S Tax Filing Solution
With a reputation for helping people with their tax and financial goals, Tax Samaritan is an international tax accounting firm experienced at assisting taxpayers that received a 1042-S form. Our enrolled tax agents bring the convenience and collaboration of a local office to your home or office, wherever you are located in the world, whether abroad or in the United States. We strive to make U.S. tax preparation both accessible and easy for you, providing expert advice, tax solutions, and wealth management to our U.S. taxpayer clients.
If you’re a U.S. taxpayer requiring assistance with a Form 1042-S, or with another tax or financial accounting issue, we can help make the process easy for you. Experience the straightforward approach to tax and financial services with Tax Samaritan.
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