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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. MERVIN
    June 26th, 2017 at 09:10 | #1

    @Erich J. Ruth
    Do I need to file form 1040-NR in case if there’s any withhold tax on my income or it’s compulsory for a Non-Resident to file it every year by mid-June? Thanks!!!

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  2. June 26th, 2017 at 09:21 | #2

    I dont know the details of Form 1040-NR. You would want to contact the IRS or someone who specializes in
    Form 1040-NR.

    Form 1042-S is a withholding statement. The payer typically withholds money and sends that money to the IRS.
    You, the recipient, can apply that withheld amount as a credit for any tax due on Form 1040-NR.

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  3. MERVIN
    June 26th, 2017 at 09:35 | #3

    So, If I am a Non-Resident and my payer needs to send me a copy of 1042-S which is a withholding statement.

    Currently there’s no withhold tax on my income, so if my payer send me a copy of 1042-S. Would that be just for information?

    So if there’s no withhold amount on 1042-S, I do not need to file any return…Right??

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  4. June 26th, 2017 at 12:01 | #4

    If the withheld amount is for $0, then yes, Form 1042-S is just for informational purposes. The payer is satisfying their tax obligation by reporting that information, however meaningless, to the IRS.

    You file Form 1040-NR is you have tax obligation. I honestly dont know the details of Form 1040-NR.

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  5. MERVIN
    June 26th, 2017 at 12:15 | #5

    @Erich J. Ruth
    Thanks Erich for your Patience & Help in explaining everything.

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