Home > Basics > What is Form 1042-S and Who Needs to Submit One?

What is Form 1042-S and Who Needs to Submit One?

Foreign workers and students who are considered non-resident aliens and are working in the United States are subject to tax withholding. IRS Form 1042-S is an annual information return for any monetary amounts given to a non-resident alien by a United States based institution or business.

The IRS says that any withholding agent (such as an employer, business, or university) that paid any amount subject to withholding (as described on Form 1042-S on page 4) to a non-resident alien would need to submit a 1042-S information return for every payment recipient.

Some of the payments which are required to be reported on Form 1042-S include but are not limited to: corporate distributions, interest, rents, royalties, compensation for dependent and independent services, pensions and other deferred income, and most gambling winnings.

Some payments are not subject to withholding such as scholarships used for tuition, expense, books, and fees for universities. Also, any service payment that was performed in the person’s country of origin is not subject to withholding. However, these payments are still required to be reported on a 1042-S form. There are more circumstances that are detailed on page 4 of Form 1042-S.

For non-resident alien employees, the form’s purpose is somewhat similar to the W-2 form that employees who are American citizens receive from their employers. The withholding agent files the 1042-S form with the IRS and sends a copy to the payee for information purposes. However, employment earnings are not the only transaction that the form covers.

Non-resident aliens have different laws that regulate tax withholdings than resident aliens. It is important that employers, businesses, universities, and anyone who pays foreign nationals any type of payment to know the resident status of their payees. For tax purposes, resident aliens are treated the same as U.S. citizens.

A non-resident alien can briefly be described as any person who is not a citizen or resident of the United States. If an alien meets the “green card test” or the “substantial presence test” for the calendar year, they are considered a resident alien. If any alien does not meet either one of those tests, they are considered an alien.

It should be noted that any amounts paid to residents of a U.S. possession or territory are not required to be reported on Form 1042-S as long as the payee is a U.S. citizen, resident alien, or U.S. national.

Some of people who would receive a 1042-S form from a withholding agent include students and postdoctoral fellows at American universities who are considered non-resident aliens, and employees at any business who are non-resident aliens under a tax treaty.

A tax treaty between the United States and the foreign national working in the United States may override U.S. income tax laws. Since each scenario is different due to tax treaties, a foreign national should consult an accountant or their employer on whether or not taxes should be withheld from the transaction amount.

Regardless of whether or not taxes are withheld from the transaction amount, any withholding agent that pays an amount of money to a non-resident alien in the U.S. is still required to file a 1042-S form.

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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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  1. John Wilson
    March 30th, 2016 at 19:04 | #1

    I won a $100 gift card for a contest (which I never used as the company did not ship to Canada). I received a 1042-S form showing $42.86 tax witholding credit. Do I need to do anything? I am a Canadian citizen.

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  2. March 30th, 2016 at 20:28 | #2

    Its up to you if you want to do something. A US business paid you $100 (which you didnt use). They withheld
    money and sent part to the IRS. As a Canadian citizen, you have an opportunity to get the withheld money but
    its more paperwork. If you do nothing, the IRS keeps that money.

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  3. DJ
    April 3rd, 2016 at 01:54 | #3

    So if I am paying someone to perform services for my business, ie. developing a website and the person is NOT a citizen of the US and is NOT performing their duties for you within the US then would I need to provide them a 1042S? There could be potentially dozens of persons which a business owner would pay directly many times throughout the year for services provided. It’s not very feasible to provide a 1042S for this type of service, right?

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  4. April 3rd, 2016 at 08:50 | #4

    > So if I am paying someone to perform services for my business, ie. developing a website and the person
    > is NOT a citizen of the US and is NOT performing their duties for you within the US then would I need
    > to provide them a 1042S?

    Yes. It doesnt matter where they perform their duties. A US business paying a non-US resident money
    then they must withhold 30% and fill Form 1042-S.

    > There could be potentially dozens of persons which a business owner would pay directly many times
    > throughout the year for services provided. It’s not very feasible to provide a 1042S for this type of
    > service, right?

    I dont understand the question. If you pay a non-US resident who does not have a valid SSN money, then you are
    supposed to withhold 30% and send that to the IRS and File Form 1042-S. To say “its not very feasible to
    provide a 1042S” doesnt make sense. Its not easy withholding and/or filling out that form but you have
    to do it. I dont like filling out 1040’s and but I do it because the penalty for not doing it is extremely
    large. I dont like filling out the 1099-MISC forms either but I do that as well.

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  5. John O’Brien
    July 15th, 2016 at 14:16 | #5

    When shoukd we receive a 1042S form? We have surrendered an annuity and, despite recording a W-8BEN with the investment company, they did not send us a 1042S…..(overlooked this fact) and just deducted 30%. We are non resident aliens under the USA Spain tax treaty. They have told us to claim back the reduction from the IRS but refuse to send us the 1042S forms till early March 2017….leaving only two weeks for our tax lawyer here to file before March 15th cut off date.
    Any advice welcome, plus an address of a tax lawyer in the USA.

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  6. August 3rd, 2016 at 05:25 | #6

    If you did this transaction (surrender an annuity) in 2016, then you wont receive the 1042-S form
    until the due date which is March 15, 2017. The withholding agent has to print, mail and efile
    the 1042-S forms by March 15 for the prior calendar year.

    I dont have any address for tax lawyers in the US.

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  7. Joseph Barksdale
    August 3rd, 2016 at 06:52 | #7

    The IRS instructions indicate that the services must be performed in the US – would not include those performed in another country.

    From the IRS website on International Taxpayers – Pay for Personal Services Performed
    This section explains the rules for withholding tax from pay for personal services. You generally must withhold tax at the 30 percent rate on compensation you pay to a nonresident alien individual for labor or personal services performed in the United States, unless that pay is specifically exempted from NRA withholding or subject to graduated withholding, Wage Withholding under Internal Revenue Code Section 3402. This rule applies regardless of your place of residence, the place where the contract for service was made, or the place of payment.

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