Every withholding agent, whether U.S. or foreign, must file Forms 1042 and 1042-S to report payments of amounts subject to NRA withholding unless an exception applies. Do not use Forms 1042 and 1042-S to report tax withheld on the following:
- Wages, salaries, or other compensation reported on Form W-2 (see Wages Paid to Employees—Graduated Withholding, earlier under Pay for Personal Services Performed),
- Any portion of a U.S. or foreign partnership's (other than a publicly traded partnership) effectively connected taxable income allocable to a foreign partner (see Partnership Withholding on Effectively Connected Income, later),
- Dispositions of U.S. real property interests by foreign persons (see U.S. Real Property Interest, later),
- Pensions, annuities, and certain other deferred income reported on Form 1099, and
- Income, social security, and Medicare taxes on wages paid to a household employee reported on Schedule H (Form 1040).
Forms 1042 and 1042-S must be filed by March 15 of the year following the calendar year in which the income subject to reporting was paid. If March 15 falls on a Saturday, Sunday, or legal holiday, the due date is the next business day.
Every U.S. and foreign withholding agent that is required to file a Form 1042-S must also file an annual return on Form 1042. You must file Form 1042 even if you were not required to withhold any income tax.
You must file Form 1042 with the:
Ogden Service Center
P.O. Box 409101
Ogden, UT 84409
Every U.S. and foreign withholding agent must file a Form 1042-S for amounts subject to NRA withholding unless an exception applies. The form can be filed electronically or on paper. A separate Form 1042-S is required for each recipient of income to whom you made payments during the preceding calendar year regardless of whether you withheld or were required to withhold tax. You must use a separate Form 1042-S for each type of income that you paid to the same recipient. See Statements to recipients, later.
You must furnish a Form 1042-S for each recipient even if you did not withhold tax because you repaid the tax withheld to the recipient or because the income payment was exempt from tax under the Internal Revenue Code or under a U.S. income tax treaty.
You must get prior annual approval to use a substitute Form 1042-S unless it meets the requirements listed in Publication 1179, General Rules and Specifications for Substitute Forms 1096, 1098, 1099, 5498, W-2G, and 1042-S. Get Publication 1179 for more information. taxmap/pubs/p515-008.htm#en_us_publink100057471
If all the owners provide documentation that permits them to receive the same reduced rate of withholding (for example, under an income tax treaty) you should apply the reduced rate of withholding. You are required, however, to report the payment on one Form 1042-S to the person whose status you rely upon to determine the withholding rate. If, however, any one of the owners requests its own Form 1042-S, you must furnish Form 1042-S to the person who requests it. If more than one Form 1042-S is issued for a single payment, the total amount paid and tax withheld reported on all Forms 1042-S cannot exceed the total amounts paid to joint owners.taxmap/pubs/p515-008.htm#en_us_publink100057472
Withholding agents or their agents generally must file electronically if required to file 250 or more Forms 1042-S with the IRS. You are encouraged to file electronically even if you are not required to.
A completed Form 4419, Application for Filing Information Returns Electronically (FIRE), should be filed at least 30 days before the due date of the return. Returns may not be filed electronically until the application has been approved by the IRS.
For information and instructions on filing Forms 1042-S electronically, get Publication 1187, Specifications for Filing Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding, Electronically. If you file electronically, you will use the Filing Information Returns Electronically (FIRE) system. You get to the system through the Internet at fire.irs.gov
If Form 1042-S is filed on paper, it must be filed with Form 1042-T. You may need to file more than one Form 1042-T. See the instructions for that form for more information.taxmap/pubs/p515-008.htm#en_us_publink100057474
If you pay deposit interest of $10 or more to a nonresident alien individual who resides in Canada and is not a U.S. citizen, you may have to report it on Form 1042-S. This reporting requirement generally applies to interest that (a) is on a deposit maintained at a bank's office in the United States, and (b) is not effectively connected with a trade or business within the United States. However, this reporting requirement does not apply to interest paid on certain bearer certificates of deposit as described in section 1.6049-8(b) of the regulations if you pay that interest outside the United States. taxmap/pubs/p515-008.htm#en_us_publink100057475
Although you only have to report on Form 1042-S the deposit interest paid to residents of Canada who are not U.S. citizens, you can comply by reporting payments to all foreign persons receiving bank deposit interest, if that way is easier for you.taxmap/pubs/p515-008.htm#en_us_publink100057476
You determine whether a payee is a Canadian resident based on the permanent residence address required to be provided on the Form W-8BEN. If you have actual knowledge that the payee is a U.S. person, you must report the payment on Form 1099-INT. taxmap/pubs/p515-008.htm#en_us_publink100057477
You must furnish a statement to each recipient for whom you are filing a Form 1042-S by the due date for filing Forms 1042 and 1042-S with the IRS. You may use a copy of the official Form 1042-S for this purpose. Or, you may provide recipients with the information together with, or on, other (commercial) statements or notices. These statements must clearly identify the type of income (as described on the official form), the amount of tax withheld, the withholding rate (including 00.00 if exempt), and the country involved. You may include more than one type of income on the copies of the Form 1042-S that you provide to the recipient of the income. You may not, however, include more than one income line on the copy of the form filed with the IRS. taxmap/pubs/p515-008.htm#en_us_publink100057478
You can get an automatic 6-month extension of time to file Form 1042 by filing Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns. File Form 7004 on or before the due date of Form 1042. Form 7004 does not extend the time for payment of tax.
The automatic and any approved additional request only extend the due date for filing the returns with the IRS. It does not extend the due date for furnishing statements to recipients.
You can get an automatic 30-day extension of time to file Form 1042-S by filing Form 8809, Application for Extension of Time To File Information Returns. You should request an extension as soon as you are aware that an extension is necessary, but no later than the due date for filing Form 1042-S. You may request one additional extension of 30 days by submitting a second Form 8809 before the end of the first extension period. Requests for an additional extension are not automatically granted. Approval or denial is based on administrative criteria and guidelines. The IRS will send you a letter of explanation approving or denying your request for an additional extension.
You may request an extension of time to provide the statements to recipients by sending a letter to Enterprise Computing Center—Martinsburg, Information Reporting Program, Attn: Extension of Time Coordinator, 240 Murall Drive, Kearneysville, WV 25430. The letter must include (a) your name, (b) your TIN, (c) your address, (d) type of return, (e) a statement that your extension request is for providing statements to recipients, (f) reason for delay, and (g) the signature of the payer or authorized agent. Your request must be postmarked by the date on which the statements are due to the recipients. If your request for an extension is approved, generally you will be granted a maximum of 30 extra days to furnish the recipient statements. If you are requesting extensions of time to file for more than 10 withholding agents or payers, you must submit the extension requests electronically. See Publication 1187.taxmap/pubs/p515-008.htm#en_us_publink100057480
The penalty for not filing Form 1042 when due (including extensions) is usually 5% of the unpaid tax for each month or part of a month the return is late, but not more than 25% of the unpaid tax.
A penalty may be imposed for failure to file Form 1042-S when due (including extensions) or for failure to provide complete and correct information. The amount of the penalty depends on when you file a correct Form 1042-S. The penalty for each Form 1042-S is:
- $15 if you file a correct form within 30 days, with a maximum penalty of $75,000 per year ($25,000 for a small business),
- $30 if you file after 30 days but by August 1, with a maximum penalty of $150,000 ($50,000 for a small business), or
- $50 if you file after August 1 or do not file a correct form, with a maximum penalty of $250,000 per year ($100,000 for a small business).
A small business is a business that has average annual gross receipts of $5 million or less for the most recent 3 tax years (or for the period of its existence, if shorter) ending before the calendar year in which the Forms 1042-S are due.
If you fail to provide a complete and correct statement to each recipient, a penalty of $50 for each failure may be imposed. The maximum penalty is $100,000 per year. If you intentionally disregard the requirement to report correct information, the penalty for each Form 1042-S (or statement to recipient) is the greater of $100 or 10% of the total amount of the items that must be reported, with no maximum penalty. taxmap/pubs/p515-008.htm#en_us_publink100057481
If you are required to file Form 1042-S electronically but you fail to do so, and you do not have an approved waiver, you may be subject to a penalty of $50 per form unless you show reasonable cause. The penalty applies separately to original and amended returns.