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

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

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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Erich J. Ruth

Erich J. Ruth provides technical support for National Software which is the parent company for 1099FIRE. 1099FIRE develops and markets a comprehensive range of products that enables any size of business or institution to effectively manage and comply with year-end filing requirements. 1099FIRE is an employee-owned company located in Phoenix, Arizona.

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Categories: IRS Form 1042-S Tags: ,
  1. Sunil
    February 24th, 2015 at 12:41 | #1

    I have a 1042-S Form C to be attached with my federal tax return.
    Most of the efiling softwares like turbotax and hrblock don’t have this form listed. They are suggesting me to go through a CPA.

    The form 1042-S has $189 gross income and $57 federal withheld.
    The CPA is charging me $100+ just to include this form.
    Online softwares are free or less than $20 to file.

    Is it ok to skip reporting this? What are the consequences if I don’t report this form.
    Please suggest.

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  2. imran
    December 13th, 2016 at 15:14 | #2

    hi i have received form 1042-s form against my winnings in las vegas and they detucted 30% amount from all the winnings of mine so as i am a visitor can i get refund on all the amounts that i they detucted and how if i dont have a itin number regards

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  3. December 13th, 2016 at 15:22 | #3

    Look at the 1042-S form. Specially look at Box 10 which is Total Withholding Credit. That credit is how much
    you may or may not be eligible for. You dont get a refund. Instead, if you fill out Form 1040-NR where NR stands
    for non-resident, you have the box on that form where you can enter the total withholding credit from the 1042-S.
    If you owed tax to the IRS, the withholding credit will offset what you owe.

    With that said, it depends on where you are from and whether the US has a tax treaty with that country. If the US
    does not have a tax treaty with the country that you are from, then the 1042-S is just for informational purposes.

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  4. Palak Jalan
    January 19th, 2017 at 13:26 | #4

    Hi,

    I am an international student from India on a F-1 visa at Houston, Texas. I have a Graduate Assistant position at the school and hence I get W-2 and fairly understand about 1040 NREZ as I filed it last year.

    This year (2016), I received a travel ” Award” from the school to work on a research project over summer. The school’s department says that since this was an “award” category and I did not have to submit any receipts for it, it will be treated as other U.S. source income and it was taxed at 30% instead of 14% and I received only 70% of the amount.

    Am I supposed to receive 1042-S from the school? If yes, how do I file for this 30% withheld this year on 1040 NR and what is the best way to go about it.

    Any help is much appreciated 🙂

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  5. January 19th, 2017 at 13:30 | #5

    Other US source income means the 1042-S applies. You dont get the 30% that was withheld directly. Instead, when you fill out 1040-NR, there is a box that asking for total withholding amount from the 1042-S and there you can type in how much was withheld and use that as a credit toward any tax paid.

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  6. Mohamed
    April 26th, 2017 at 07:01 | #6

    I filed a 1120-f to claim withheld income refund due to tax treaty benefit. I would like to ask how I can check the refund status online? Or i need to make a call to IRS? Any help is much appreciated

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  7. April 26th, 2017 at 07:12 | #7

    I dont know anything about Form 1120-F. Typically you dont get a refund check for withheld income. For the 1042-S, you get to apply that credit toward tax due on Form 1040-NR. You dont get a check in the mail.

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  8. harshd
    May 5th, 2017 at 21:24 | #8

    Hi,

    I submitted form 1040 NR with form 1042-S copy C. However, it seems that due to mailing issues, IRS was not able to receive the tax return mailing packet. Also, I included original copy c of form 1042-s. Can I just send 1042-S copy b to IRS when I send my tax return packet again?

    Any help is much appreciated 🙂

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  9. May 5th, 2017 at 21:36 | #9

    Copy B and Copy C are the same. I think you will be fine sending Copy B. I dont think you need to send the original. A photocopy of Copy C is fine. A photocopy of Copy B is probably fine as well.

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  10. ambereen quankep
    October 8th, 2017 at 14:31 | #10

    I am a Canadian citizen on vacation in the US. I had $4600 winnings in a Casino. They withheld 30% in Fed and 4 some % in NM state income tax. I don’t have any other US income and retired in Canada. Can I get approximately $1700 in total taxes withheld? How do I go about it? Much appreciated.

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  11. October 8th, 2017 at 18:56 | #11

    > Can I get approximately $1700 in total taxes withheld?

    Kinda. You can use the amount withheld toward any tax due to the IRS. Specifically
    what this means is on Form 1040-NR (where NR stands for non-resident) there is a box
    that asks “Total Withholding Credit from 1042-S” which is Box 10 on Form 1042-S. You
    can apply that withholding credit (which in your case is $1700+) toward any tax due on
    that Form 1040-NR. You can only apply this withholding credit if you are from a country
    which has a tax treaty with the IRS which Canada does.

    The IRS doesnt just write you a check for the withheld amount.

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