Returns Required(p30)

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 part 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).

Every U.S. and foreign withholding agent that is required to file a Form 1042-S also must 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 can use a substitute Form 1042-S if it meets the requirements listed in Publication 1179. Get Publication 1179 for more information.

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.

Withholding agents or their agents generally must file electronically if they are 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.

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 is (a) on a deposit maintained at a bank's office in the United States and (b) not effectively connected with a trade or business within the United States.

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.

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.

You can request extensions of time to file Forms 1042 and 1042-S with the IRS and additional extensions to furnish Forms 1042-S to recipients.

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.

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 Internal Revenue Service; Information Returns Branch; Attn: Extension of Time Coordinator; 240 Murall Drive, Mail Stop 4360; 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. See Publication 1187.

If you do not file a correct and complete Form 1042 or Form 1042-S with the IRS on time or if you do not provide a correct and complete Form 1042-S to the recipient on time, you may be subject to a penalty.

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:

• $30 if you file a correct form within 30 days, with a maximum penalty of $250,000 per year ($75,000 for a small business);
• $60 if you file after 30 days but by August 1, with a maximum penalty of $500,000 ($200,000 for a small business); or
• $100 if you file after August 1 or do not file a correct form, with a maximum penalty of $1,500,000 per year ($500,000 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.

No penalty is imposed if the following statements are true.

1. You filed Form 1042-S with the IRS on time, but it was incorrect or incomplete.
2. You filed a correct Form 1042-S by
   August 1.

If both statements (1) and (2) are true, the penalty for filing incorrect returns (but not for filing late) will not apply to the greater of 10 Forms 1042-S or .5% of the total number of Forms 1042-S and any other information returns you are required to file with the IRS for the calendar year.

A penalty may be imposed for failure to provide Form 1042-S to the recipient when due (including extensions) or for failing to provide complete and correct information. The amount of the penalty depends on when you provide the correct Form 1042-S. The penalty for each Form 1042-S is:

• $30 if you provide the correct Form 1042-S within 30 days, with a maximum penalty of $250,000 per year ($75,000 for a small business);
• $60 if you provide the correct Form 1042-S after 30 days but by August 1, with a maximum penalty of $500,000 per year ($200,000 for a small business); or
• $100 if you provide the correct Form 1042-S after August 1, with a maximum penalty of $1,500,000 per year ($500,000 for a small business).

No penalty is imposed if you meet all the following requirements.

1. You provided a Form 1042-S to a recipient on time, but it was incorrect or incomplete.
2. You provide a correct Form 1042-S to the recipient by August 1.

If you satisfy the requirements in (1) and (2) above, the penalty for providing incorrect returns (but not for filing late) will not apply to the greater of 10 Forms 1042-S or .5% of the total number of all types of information returns you had to provide during the calendar year.

If you intentionally disregard the requirement to file Form 1042-S when due, to provide Form 1042-S to the recipient when due, or to report correct information, the penalty is the greater of $250 or 10% of the total amount of the items that must be reported, with no maximum penalty.

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. The maximum penalty is $100,000.