IRS Form 1042-S – Ultimate Tips You Need To Know

IRS Form 1042-S

IRS Form 1042-S

American tax laws are hard enough for Americans to understand. It can be much more difficult when you add a person who has income paid in the United States, but is not a resident, nor a US citizen and received an IRS Form 1042-S reporting US-source income. For folks with US source income, it can seem like an endless maze. That is where Tax Samaritan can help you find the forms you need. And get your tax return done properly so that you can take care of your US tax obligations. All without paying more tax than you need to pay.

Why Did I Receive This Form?

The IRS Form 1042-S, Foreign Person’s U.S. Source Income Subject To Withholding, reports amounts paid to foreign persons including non-resident aliens, foreign partnerships, foreign corporations, foreign estates, and foreign trusts that are subject to income tax withholding.

A withholding agent must file an information return on Form 1042-S to report amounts paid to foreign persons that are reportable under the Internal Revenue Code. In general, 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. It includes withholding on “effectively connected income” of partnerships, and to Foreign Investment in Real Property Tax Act (FIRPTA) withholding.

With globalization and the shrinking world we live in, the issuance of the Form 1042-S is becoming more common. Most countries do not want to pass up a chance to collect some taxes. Of course, the United States is no exception.

The IRS Form 1042-S Is Complex

This can get complex because there are different kinds of income. There is a separate IRS Form 1040-S requirement for each type of income. This form is for recording the money withheld from the payment. And filed by the person who is doing the paying. It is possible that a person may receive this form and a W-2 form reporting withheld earnings.

Income withheld is reportable on things like gambling winnings, royalties from a book, scholarships or teachers or researchers. Some dividends paid by American corporations can also fall under this area. Income from real estate, pensions, alimony are just a few more examples of the types of income that must have federal tax withheld. The IRS 1042-S is the form that the IRS uses for this purpose.

Income of foreign persons can get even more complex if there is a tax treaty. Some nations have a tax treaty with the U.S. to help avoid forcing the person who lives in one country and gains income from another country, to have to pay taxes twice. There can be limits to the types of income that are covered by such a treaty. Such as on the amounts to be reported and the applicable tax-withholding rate.

Normal Tax Rate

The normal tax rate is 30 percent for non-residents. If there is a tax treaty, that number may change. If you have different types of income, for example if you were getting book royalties and payment for speaking engagements, you would get two – one for each type of income. The form has a booklet that explains all the different types of income and work.

These forms are sent to employees or the person receiving payment, as well as a copy to the IRS. It is similar to a W-2 in that regard. It is a record of income. The IRS Form 1042-S is a requirement in order to prepare the non-resident tax return. While there may appear to be some duplication, because you could get a W-2 reporting the income as well, you can report accurately when preparing the return.

Generally, every nonresident alien individual, nonresident alien fiduciary, and foreign corporation with United States income, including income with an effective connection with the conduct of a trade or business in the United States, must file a United States non-resident tax return. If you have received the IRS Form 1042-S, it is a good idea to get some professional help because of the complexity of the tax laws, exceptions and agreements between nations.

2 responses to “IRS Form 1042-S – Ultimate Tips You Need To Know
  • We live in Japan, my friend a Japanese citizen, 76 year old widow of US MILITARY retiree received a SSA-1042S ($15,800.00) and US Mil Annuitant pay 1042-S ($3,952.00) both without withholding and exemption code 4.

    She has no other US income or business, does she need to file US income tax for 2017?

All About Randall Brody
Randall is the Founder of Tax Samaritan, a boutique firm specializing in the preparation of taxes and the resolution of tax problems for Americans living abroad, as well as the other unique tax issues that apply to taxpayers. Here, they help taxpayers save money on their tax returns.

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