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1042-S Software: Test Files

October 3rd, 2017 No comments

Filers are not required to file a 1042-S test file.  But the transmission of test files to the IRS is encouraged.

Testing is typically available for 2-months beginning in early January and running until the end of February. The following file status results will display:

Good, Federal Reporting – The test file is good for federal reporting.
Bad – The test file contained errors. You can click on the filename and see the list of errors associated with that test file.

 

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1042-S Software: Due dates and extension

October 3rd, 2017 No comments

Copy B of Form 1042-S must be printed and mailed by March 15th unless the the due date fails on a Saturday, Sunday or legal holiday.

The withholding agent must paper or electronically file Copy A of Form 1042-S by March 15th as well. A withholding agent can file for a 1-month extension to electronically file Form 1042-S to the IRS giving them until mid-April to efile.  Just contact our sales office at (480) 460-9311 and we can process this extension request.  You will receive a PDF confirming the time extension.

A withholding agent can not request any extension of time for furnishing Copy B to the foreign recipients.

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1042-S Software: Amended Form 1042-S

October 3rd, 2017 No comments

Amendments take time.  We can electronically file amendments of Form 1042-S on your behalf for current or prior years.  Please contact our sales office at (480) 460-9311 for more information and to order this service.

Here is what we would need:

  1. The record you want to correct along with the Unique Form Identifier that was used to identify that record. The Unique Form Identifier is a 10-digit number that withholding agents assigned to each Form 1042-S filed starting in tax year 2017.  We need that 10-digit number along with how many other times you have successfully filed an amendment to this specific record.  If this is the first time you have filed an amendment to a specific 1042-S form, then the amendment number would be 1.

    What happens if you need to file an amendment to a Form 1042-S filed in tax year 2016 or earlier when the Unique Form Identifier never existed?  In this case, you would generate and assign a random 10-digit Unique Form Identifier now to an old 1042-S form that was filed.

  2. What are you trying to correct or amend?  There are different types of corrections.A 1-step correction is when you are amending a money amount, a code of some sort (such as the income, exemption or status codes), a withholding agent address or if you are trying to a void the original transaction.

    A 2-step correction is when you are trying to correct a TIN or a recipient name or a recipient address.  Here, the 1st step is the original incorrect TIN/name that you used and the money amounts are set to 0.  This void the original transaction.  The 2nd step has the correct name/TIN and correct money amounts and its identified as an Amendment.

Amendments are filed using the most current form, layout and codes.

Call us and we can help.  Or send us an email at support@1099fire.com.

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1042-S Software: How can I order the 1042-S software?

October 3rd, 2017 No comments

Our 1042-S software contains Form 1042-T or transmittal summary when electronic filing.  You order the software online at this link

https://www.1099fire.com/buy_now.htm

You can also order by phone at (480) 460-9311.

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1042-S Software: What’s new for Tax Year 2017?

October 3rd, 2017 No comments

Changes to IRS Form 1042-S for tax year 2017.

Unique form identifier.

Beginning in tax year 2017, withholding agents will be required to assign a unique form identifier to each Form 1042-S they file.  The IRS says the Unique Form Identifier must be

  1. Exactly 10 digits.
  2. Unique to each original Form 1042-S filed for the current year.
  3. The identifying number cannot be the recipient’s US or foreign TIN.

Withholding agents can create the identifying numbers 0000000001, 0000000002 and so on for each Form 1042-S they efile.

Amended forms.

Beginning in 2017, withholding agents must check the Amended box and indicate the amendment number when filing an amended form. Any amended form must have the same unique form identifier as the original form that is being amended. Each time that you amend the same form (as determined by the unique form identifier), you must provide the amendment number in the box provided on the form (using “1” for the first amendment and increasing sequentially for each subsequent amendment).

Pro-rata reporting.

The “Pro-Rata Reporting” box was moved from the top of the form (below the title) down to new box 15.

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Can you print and mail 1042-S forms on our behalf?

November 7th, 2015 2 comments

Yes.

We can print and mail any size order with complete security.  Here are the steps you would want to take to have us print and mail 1042-S forms on your behalf:

  1. Contact sales at (480) 460-9311.  Sales can process your order or provide an estimate of the cost. Sales will also provide an account number.  We have very competitive pricing.  Call anytime.
  2. Send us your data in excel.  You can secure upload 1042-S data using this link
    https://nationalsoftware.sharefile.com/r/r4605c86ea294f758
  3. Once we receive the data, we will import and convert to PDF.  We print one (1) 1042-S per page with the instructions at the bottom.  We tri-fold and stuff in a #10 size envelope, add a label, seal and mail.
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Can you efile 1042-S forms on our behalf?

November 7th, 2015 No comments

Yes.

We can electronically file IRS Form 1042-S along with the 1042-T transmittal summary. We can efile any number of records with complete security.

A withholding agent must file electronically to the IRS if they have 250 or more 1042-S forms to file.  But even if you have less than 250 1042-S forms, electronic filing is far superior to paper filing because you receive a file status stating that the results are Good.

Here are the steps you would want to take to have us electronically file on your behalf:

  1. Contact sales at (480) 460-9311.  Sales can process your order or provide an estimate of the cost. Sales will also provide an account number.  Call anytime.

    We have very competitive pricing.  If you find another vendor that can offer the same outsourcing solutions at a lower price, we will beat them.  We do double check our competitor prices annually.

  2. Enter your data into the sample excel file found here

    https://www.1099fire.com/support/import/index.htm

    Fill everything out as best you can.

  3. Upload the excel file us using this sharefile link

    https://nationalsoftware.sharefile.com/r/r4605c86ea294f758

  4. We will import your data and send you a report that shows any potential errors in your file as well as a PDF of Copy B with your data on each respective 1042-S form. The software checks for prohibited characters, that the income code exists, that the tax rate is entered correctly, that gross income is a whole number, that the country codes used are correct and has many other checks.

    Typically we go back and forth with clients a few times checking errors and looking for changes to the excel file.  When the final Copy B is approved by you, we can electronically file to the IRS.  We will forward the file status within a few days.

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How can I attain a TCC number to efile 1042-S forms?

November 7th, 2015 No comments

Its easy.  This link

https://www.irs.gov/pub/irs-pdf/f4419.pdf

takes you to Form 4419 which is the Application for Filing Information Returns Electronically (FIRE).  Question 7 on Form 4419 asks you to select which forms you are efiling.  Select 1042-S and any other forms.  The TCC number to efile 1042-S forms is different from the TCC number to electronically file the 1099 or W-2 or 1095 forms.  Fill the form out and then mail to:

Internal Revenue Service
230 Murall Drive, Mail Stop 4360
Kearneysville, WV 25430

Or fax using one of the below numbers:

(877) 477-0572 (within the U.S)
(304) 579-4105 (International)

I recommend faxing and not mailing.  Mail is slow.  The IRS typically emails or calls or faxes back the TCC number and then mails the transmitter control code as well, but the mail takes many weeks to arrive.

 

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IRS Form 1042-S: How Can Recipients Receive a Refund of Withheld Money?

October 1st, 2014 11 comments

This is a common question.  You received Copy B of IRS Form 1042-S in the mail or by e-mail.  The form says that a US company withheld some amount of money from you and sent that withheld money to the IRS.  How can you, the recipient of this 1042-S form, get that withheld money?  Its your money.

Form 1042-S, Chapter 3, Non-Resident Withholding

The withheld amounts are known as Chapter 3 payments, and the IRS actually makes it easier for non-residents than US citizens to apply for a refund using Form 1040NR, the current non-resident alien income tax return.  This has wide application to foreign students who are on scholarship or otherwise earn taxable US income.  In many cases, a tax treaty may exist between the US and the non-resident’s home country that would supersede the withholding requirement, or reduce the taxable amount.

On Form 1040NR, Line 12 the filer can list 1042-S scholarship payments as an income amount, and Line 22 is available to list the amount of income exempt under a tax treaty.  Any remaining amounts are subject to US taxation after deductions. Presumably, other types of income would be listed as wages or other type of investment gain that would be listed in the appropriate spaces.

More importantly, amounts withheld for any reason and reported on 1042-S would be listed under Payments, Line 61 (d) on 1040NR.  This would be a credit against any tax owed on any type of income, and in case no tax is owed, then a refund would be available even to an address or account outside the US.

This process is identical to where anyone filing taxes may have had amounts withheld that exceed their tax, and have to wait for a refund.  There is no form or method to simply request a return of over-withheld amounts, and the non-resident is limited to the standard filing and refund process.  This may be frustrating for those non-residents who will not owe any tax in the end, but nonetheless have had amounts withheld.

Form 1042-S, Chapter 4, Non-Resident Withholding

Withholding agents who make payments from a US source to non-US financial institutions are required to file informational Form 1042-S as a part of FATCA, designed to identify US account holders who have assets outside the US borders.  1042-S can also include payments to non-US citizens receiving payments from a US source.  Each type of payee is designated differently, as either Chapter 3 (non-US citizens) or Chapter 4 (FFIs with US account holders).

Typically, the withholding agents are banks or other payers in the US that are making the payments to foreign financial institutions (FFI), who have a US account holder.   These withholding agents are the ones who file the form with the IRS, and if the FFI is not registered with the IRS and does not have a Global Intermediary Identification Number, then the US source must withhold 30% of the payment, and deposit that money with the IRS.

The withholding amount of 30% would be deposited with the IRS, similar to the way that tax is withheld on employee wages.  This information would be supplied to the payee in Copy B of Form 1042-S that would detail the amount withheld from the payment, similar to a W-4.  The question for many recipients of these forms is how to obtain the withheld amount, assuming the transfer was legitimate and not an effort to avoid payment of tax or a taxable inclusion in gross income.

The amounts withheld would be presumably treated like any amounts withheld and deposited with the IRS, and would be available for refund with the filing of the US taxpayer’s annual return.  On Form 1042-S, Box 1 requires an income code for the US sourced payments (i.e. dividends, independent contractor services, capital gains, etc.).  It would depend upon the type of payment and whether it would be included on the 1040 annual return as taxable income for possible refund amounts.

Form 1040: No Place to List 1042-S Payments

The real issue is that there is no place on Form 1040 to list the 1042-S withheld amounts, since the recipient was technically the FFI.   The US citizen as the ultimate beneficiary simply receives the 1042-S copy B to list the amounts withheld, similar to a W-2 for employees.  Assuming that the payment was not taxable, then the only place to list the withheld amounts is Line 67 on the 1040, which is “Reserved”.  An alternative is to list it on Line 62 with amounts withheld in Forms W-2 and 1099.   Then one could attach Copy C of 1042-S to the return to document the amount.  This differs dramatically from the other instance where 1042-S Chapter 3a mounts are listed for non-residents.  The 1040-NR has two places to list amounts withheld under 1042-S, making the process easier.

The fact that the IRS has implemented an international network of FFIs to monitor US account holders is not a surprise.  However, the fact that there is no specific instruction or form to request withheld amounts makes the 30% almost appear to be a tax penalty for holding assets offshore.  In other words, a US taxpayer should make sure that an FFI is registered with the IRS and has a GIIN prior to making any US sourced transfers.  Failure to do so could result in a long delay in receiving withheld amounts under 1042-S.

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FATCA and Foreign Bank Accounts: The Issue of Withholding and Reporting for Expatriates

October 1st, 2014 No comments

The Foreign Account Tax Compliance Act (FATCA) is a broad based law that adds to the already complex banking problem faced by many expatriates who live or work in foreign countries.  Many of these expats have bank accounts in foreign financial institutions, which may fall under the reporting requirements established under FATCA.  Essentially, FFIs must share the name and account data of US taxpayers who hold accounts and this reporting requirement is controlled through either an intergovernmental agreement or the FATCA law itself.

The reporting requirement is onerous enough on its own, but failure to comply will result in any US sourced payments to that FFI to be subject to a 30% withholding rate.  This was done in large part to affect those who were sending money offshore in order to evade taxes.  One result was that many FFIs simply stopped accepting US account holders, even if they were residents of the foreign country.  This affected many expats who found themselves unable to open an account at certain banks.

Many expats are retired abroad and receive their money from a US bank through wire transfer or ACH transfers, so the new FATCA law cast such a broad net that it affected almost any US citizen with a foreign bank account.  So, if an expat has an account at an FFI who does not comply with FATCA, then any type of payment could have a 30% withholding until the expat could show that they were complying with tax laws.  Theoretically, this could include pension or Social Security payments, or even wire transfers from one’s own account to an FFI.

The other issue for expats is that of declaring interest earned in an FFI account.  While this is not covered by FATCA, there is a requirement to report this type of worldwide income on Form 8938, and including it on the tax return.  If the amount of interest or dividends exceeds $1500 per year then there is a separate and additional reporting requirement with Form FinCEN -114.  At the moment, the taxpayer has the reporting burden for this type of income, and FFIs are not necessarily required to handle it.

However, given the degree of scrutiny by the IRS over foreign accounts, it is not hard to imagine an expansion of FATCA that would require FFIs to send an annual accounting to either the IRS or their assigned governmental agency in the foreign country.  This would be an easy step to take since the reporting of account holder names and data is already being supplied.  A simple interest and dividend statement would not be a difficult thing for FFIs to supply if requested under FATCA.  This would effectively place FFIs in the position of being ‘tax agents’ on behalf of the IRS if they have US taxpayers as account holders.

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