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.
by 
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.
If you have any questions or comments about our software, feel free to contact us at any time.
Hi Erich,
I am Australian citizen and I hold some UTC shares. Apparently due to non-submission of
W8-BEN form, dividends have been taxed at a higher rate (28%) over a number of years . I want to claim the withheld tax . Can you please advise which form needs to used to claim it (from IRS) and how to get that form. Any additional advice on this would be appreciated.
Joseph Tharappel
Hi Erich,
I’m a nonresident aliens with no dependents. I worked in US for 4 month as J1 visa last year. In march I received the W2 Form from my employer, so I filled out the 1040NR-EZ form and sent to IRS in Texas. Now I’ve just received this 1042-S Form, but I didn’t understand well What I should do and what does it means. A lot of friends in prior years didn’t send any 1042-S form to IRS to receive tax refunds.
what should I do ?
appreciate your help
The 1042-S should have been sent by March 15. If you got it this late, the payer is way behind in sending out that form.
If you received taxable wages during the year, you should receive a Form W-2 from your employer with an 30 days after the end of the year. If any of your wages are exempt from income tax under a tax treaty, you should receive a Form 1042-S rather than a W-2. Record your taxable wages on page one of Form 1040NR or Form 1040NR-EZ on the line for wages. Do not include any amount of exempt by treaty on these lines. Any wages exempt by treaty are reported on line 22 of Form 1040NR and on page 5, Item L. On Form 1040NR-EZ they are reported on line 6 and on page 2, Item J. Attach one copy of any Form W-2 or Form 1042-S you received from your employer to the front of the return.
I hope this helps. Let me know.
I’m a foreign person living in Italy. I have a trading account in US and I’ve received a 1042-s form with withholdings, am I required to do anything? Have I to file a tax return or anything else in US ?
Thank you for your answer.
If a US payer withheld money and sent you Form 1042-S, then that withheld money has been sent to the Internal Revenue Service (IRS). The IRS isn’t going to mail you a check.
You have 2 choices:
1. Do nothing. If you do this, the IRS keeps that withheld amount.
2. Submit Form 1040-NR and on that form you will see a box for the 1042-S credit. Submit that form and the 1042-S withheld amount will act as a credit toward any taxes you might have to pay to the IRS.
Its work to get the withheld money. The IRS knows this and knows that a certain percentage of 1042-S recipients each year do nothing to pursue that withheld amount.
As a side note, the state of California is the first to require and an additional 7% withheld. The IRS requires (I think) 28% to be withheld if the payee fails to provide a valid SSN. The state of California requires an additional 7%; so 28% withholding goes to the IRS and 7% additional withholding will now go to the state of California.
The state of California knows many people are just not going to pursue this withheld amount and the state acquires that money. I think it time, more states will pursue this. They talk about how easy it is attain that withheld money; but in reality, its not easy. It takes time finding the correct form(s), filling them out and you don’t actually get the money, instead the withheld amount is used as a credit against any taxes you might owe.
Thank you very much for you answer.
Last question.
Do I have to file any tax return (I’m a foreign person living in Italy
and I filed a W-8BEN form when opened the account)
about my earned stock trading revenue ?
Thank you again.
Anthony
I a a US born citizen who resides in a foreign country. I receive royalties fom Music Publishing and the company sends me a 1042-S reporting tax withheld. I’m not sure if this is correct. Am I being treated as a foreign national?
Thanks
Yes they are treating you as a non US resident. The 1042-S is for foreign individuals reporting income from a United States-based source — in other words, non-residents who conduct some form of business within the United States. Typically a foreign individual does not have a social security number and consequently the payer is withholding money from the recipient.
If you have a social security number and submit a 1040 like the rest of us, then the payer should probably send you a 1099-MISC instead. Contact the payer; otherwise, the withheld money is going to the IRS.
@Erich J. Ruth
Thank you Erich! I’ll get on it.
I am non-US and not staying in US as well. I am getting royalty income from US and getting the 1042S from the seller company. Do I need to file tax return in US? I have some extra tax withheld. How to file for the refund for the same. Please provide some pointers where I can study about this and process. I could not find clear details anywhere.
As a non-US resident, you file 1040NR or 1040NR-EZ. On the 1040NR, there is a box for 1042-S withholding. There you can apply what was withheld as a credit for any tax you might owe. You don’t get a refund in the mail; instead a credit against tax that may be owed.
Hi Erich,
I’m a non-resident alien living in Germany. I invested some money in American REIT. The capital gains of the REIT were withheld with 35%. Based on the treaty with Germany, I should be taxed with 25%. Now I would like to get the 10% difference back from IRS. My problem is, that I am using german broker to keep my stock and receive all tax related documentation in german forms. So I don’t have Form 1042-S, even I know all the information. My question is do I need the form 1042-S to be sent to IRS or can I fill the 1040NR based on the information I have from the german form and sent just only 1040NR. If I need the form 1042-S to get a refund from IRS, how can I find the withholding agent, which withheld the tax? Is it the german broker?
Thanks
Not having the form itself is not a problem. However, you then ask “how can I find the withholding agent which withheld” and that is on the form. Im not sure how I can help on this.
The US Government doesn’t mail you a refund for the money withheld. Instead, on Form 1040NR there is an option to apply the money withheld from form 1042-S toward any tax due (to the IRS). You dont need form 1042-S because the IRS can double check what you are claiming was withheld with the actual amount that was withheld.
I hope this helps.
Hi Erich,
I am in the process of abandoning my green card and live permanently in Canada. I also have a US bank account that will earn me interest more than $10.
I understand if I maintain the account and submit form W-8BEN, my bank should send me a 1042-S with my non US resident status.
1) Is my interest subject to tax withholding? is it not taxable based on my non resident status?
2) What do I have to do with the 1042-S? for informational purpose only?
Thanks for your kind help.
I’m not sure on the first question, whether interest is subject to tax withholding.
With regards to the second question, Form 1042-S is an information return. You receive Copy B in the mail. Look at the form and see how much was withheld. You may be eligible to receive that withheld amount. If you do nothing, the IRS retains that money.
For Gambling winnings does the 1042S follow the same reporting requirements as the W2-G? Do you know where I can find the IRS publication that tells this?
Im not sure I have a good answer. Everything you ever wanted to know about Form W-2G is in Publication 1220. Publication 1187 has information on Form 1042-S.
Hi Erich,
Thank you for your information on Form 1042-S! It is a bit confusing for a foreign nonresident to receive one of these forms and there doesn’t seem to be much information out there. You’ve been a huge help.
I just had a quick question – on your 3/25/13 comment you response you said you are not required to do anything if you receive a 1042-S, but it’s suggested to file if there was some withholding (to potentially get money back). On the 1042-S that I am looking at there is no withholding. Before I go forward with not doing anything, do you have any IRS code section or instructions that can verify this? This would help my conscience. Thanks!
Sincerely,
J.P.
Great comment. I dont have any IRS code section to you show you unfortunately. I would have to go and research and could probably find something. If you find something before me, let me know.
Hi Erich,
I am a resident of Mexico. My husband worked in US for about 23 years, he retired in 2003 and passed away the same year. In 2004 I started receiving a pension reported on a 1099R. In 2012 I was asked to fill out a W-8BEN and this year I received a letter saying that being a Mexican resident I am exempt from their mandatory 30% federal withholding and the 2009, 2010, and 2011 1099-R forms were corrected and replaced with 1042-S forms showing my pension amount in box #2.
In the past I filed using 1040A and paid taxes. I think I should report my pension using 1040NR. Do I have to changed 2009, 2010 and 2011, and is all my pension taxable?
I can use all the help you can give me. Thank you in advance, mg
@Joseph Tharappel
Joseph,
did you receive any information regarding reclaiming the additional tax withheld due to non submission of the W8 Ben form? I have the same issue so any advice would be appreciated.
thanks
BB
I don’t know. Excellent questions. Hopefully someone else can help answer these.
Hi Eric, I am an Argentine citizen and live in Argentina, I am planning on submitting a story for an american magazine, as a freelance writer. Are there any forms I must fill? and if so which one W8-BEN or 1042-S.
The payer has to send the recipient a 1042-S. The payer is the withholding agent. If you are doing business with a company in the US (submitting a story for a magazine), then its the payer’s responsibility to withhold and send you Copy B by March 15 of the following tax year.
Form W8-BEN is Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding. The company you freelance for will probably make you fill that out. On that form it says
“The beneficial owner is claiming the provisions of Article …. to claim a % rate of withholding on (specify type of income)”
If you don’t fill out and sign that form, then the payer has to withhold the maximum amount. If a tax treaty exists between Argentina and the US, its possible the payer can withhold less. You want to do some research and find out.
Thanks Erich, just one more thing, if I submit stories to several magazines they all have to send me a form? and what happens if they dont?
Form 1042-S is issued by the payer when the US payer is doing some form of business with non-residents. Each US payer needs to send you a 1042-S. If they dont, probably nothing will happen at first. But if the IRS catches wind that they should have been withholding and didnt, the payer gets fined.
I have been developing software that communicates with various IRS reporting systems for 8+ years now. I look back at the past 5 years and the IRS has become alot more sophisticated. They also, in my opinion, send out more letters with “potential fines” to payers. Payers call us more often now saying ‘we got this letter saying that we should have withheld and a fine’. Its the payers responsibility to know their employees and contractors.
Hi Erich I found you page googleing what to do with my 1042S and I am going literally crazy about this. I can’t understand what should I do. I have only one from 2012 and my university (UTEP) said I should not worry about it yet this year… now I found out that maybe I should have? I was with a exchange program (ISEP) for 2 semesters (2012/2013) at UTEP. They never gave me the 2013 1042s yet. I need to get a ITIN number for other purposes so I was trying to return this 1042S I hve from 2012. I am from SPAIN so there’s a tax treaty and it clearly says exemption code 4. what should I do and what else do I need to submit along with the w7? would I fall under the catgory 2b?
I currently started to do business with call centers in Philippines and Mexico. If They charge my card for services rendered. This does not go under this form right?
One of the centers has local office in the US,a n actual business entity here.
The Mexico one does not.
I don’t understand the question. Try re-phrasing and post again. The 1042-S form is for withholding. The US payer is withholding payment from a non-US recipient and sending that withheld amount to the IRS. Form 1042-S reports that withholding.
I am an non-resident alien. My bank withheld 28% of my interest in my account for 3 months. The total amount withheld was $63.49. Now I have provided the bank with a W-8 and they stopped withholding my interest payments. Should I receive a 1042S or a 1099INT at the end of the year?
Its probable you will receive a 1042-S. You are a non-US resident and are receiving income from a US source, namely the bank in the form on interest. The first box on Form 1042-S asks the payer to identify the income code which for you would be one of the following:
01 Interest paid by U.S. obligors—general
02 Interest paid on real property mortgages
03 Interest paid to controlling foreign corporations
04 Interest paid by foreign corporations
05 Interest on tax-free covenant bonds
29 Deposit interest
30 Original issue discount (OID)
31 Short-term OID
33 Substitute payment—interest
My guess is the bank will use the ’29’ income code for the 1042-S.
The 1099 forms, such as the 1099-INT, are used for US recipients.
I hope this helps. Email any time.
Hi Erich,
I am a US resident/citizen and want to borrow money from a family member who is a citizen/resident from a foreign country. Amount is roughly 50k, used for business purposes. The relative is not charging any interest. However, it is my understanding that the IRS demands that there is an interest on the borrowed amount and it is also taxed. Im guessing that I use form 1042 to report this foreign loan when making the (IRS required) interest payments to my relative. Is that the correct understanding? If so, does my relative have to file anything on his part or can I just pay withholding tax. Or, since it’s an interest free loan from a family member does anything need to be reported? Any help or advice would be greatly appreciated.
Thank You
This is a really confusing set of questions and I dont think Im the best person to answer them.
Form 1042-S is for US source income paid to a non-US resident. We work with a lot of book publishers in the US. The US company or payer pays a foreign recipient royalty on sales of a book. The recipient, or writer in this case, will probably have money withheld. The US payer or book company withholds 30% and sends that money to the IRS and sends the writer or recipient Form 1042-S. The writer might have an opportunity to get that withheld money that the IRS is holding. But most of the time, they forfeit the withheld amount because its too much work for very little money. We work with lots of other businesses other than book publishers.
For your situation, the recipient is a US resident and the payer is a non-US citizen. The US resident is receiving non-US money. The 1042-S doesnt apply at all. In fact, this is the opposite scenario in which Form 1042-S would apply.
You had other questions, namely:
“However, it is my understanding that the IRS demands that there is an interest on the borrowed amount and it is also taxed.”
I never heard of that. I could be wrong, but I don’t think the IRS demands interest on borrowed money from relatives.
“Im guessing that I use form 1042 to report this foreign loan when making the (IRS required) interest payments to my relative. Is that the correct understanding?”
Form 1042-S doesnt apply on a loan from a foreigner.
“Or, since it’s an interest free loan from a family member does anything need to be reported?”
If its an interest free loan from one family member to another, why would you want to involve the Internal Revenue Service?
I hope this helps. Email anytime.
Hi,
My company has been paying the rents for our office in London. Do we still need to issue 1042S to the recipient in London?
I dont know. The 1042-S is typically for a US company that is paying income to a non-US resident. The title of Form 1042-S is
Foreign Person’s U.S. Source Income Subject to Withholding
I have never seen the 1042-S used to report rent paid. Only income.
I understand who needs to submit a 1042 S but what I don’t understand is how to complete one. I have read the information the IRS publishes but it’s so confusing and they no longer have a support line. They told me to read and do my best. I’m looking for someone who has received a 1042 S because they live in a foreign country and have received the exception. I am hoping they will share their completed 1042 S with their personal information blocked out. At least then I know how to fill in this form.
Thanks.
It is confusing. The website http://www.1099fire.com has a software program for preparing and efiling 1042-S. And their technical support can help. The
software is at this link
http://www.1099fire.com/software/1042s.htm
Hi,
We deal with Canadians carriers. They have submitted to us the W-8BEN to certify they are foreign persons, and some of them have submitted the Form 8233 to request an exemption from Withholding, some others haven’t. We have been on business for 2 years and have never filled out Forms 1042 and 1042-S. We’ve always issued 1099 to US individuals but had failed to do Forms 1042 and 1042-S because we did not know. We have not withheld any tax because of ignorance. Now, I have two questions:
1) Can we be fined for not have filled out those forms even though no tax withholding had to be done?
2) What happens with the carriers that have not submitted the form 8233? Were we supposed to withhold the 30 % rate? What do we do now that we did not do it?
Thanks in advance for your help.
You ask
1) Can we be fined for not have filled out those forms even though no tax withholding had to be done?
Im not sure. Your still supposed to report the transaction even if there is no withholding. If you doing business with someone outside of the US and your sending them US source income, you may need to withhold.
Im not sure on your second question.
Hi Eric,
I received 1042s gambling winning with 30% tax withheld. I also received my w2. Which form should I file to report tax? Should I include the 1042s in my ‘income section’ if I file using 1040? Is it necessary to include the gross income from 1042s? I read your earlier comment that sometime you don’t do anything since the tax has already withheld.
Hi Eric,
I was in the US from Jan 2006 until mid 2012 on a H1B visa and was filing taxes regularly. I returned to India and also withdrew my 401K in 2013. I still own a house and a mortgage in NY.
Should I get a 1099-R or a 1042-S? I think I will be considered a resident for tax purposes and should file normally…please advise. I will consult someone professionally based on your advice.
Thanks
I honestly dont know. The 1042-S is sent to non-US residents who receive income from some business in the US. If you are a non-US resident and were getting paid by a company in the US, then you would receive the 1042-S.
The 1099 forms apply to US residents.
Hi Eric,
I am recently moved to USA on temp work visa. I have opened new bank account, for that i have received opening bonus gift voucher. When i opened bank account that time i have not received SSN, but now i have it. Now in January 2014 i have received 1042-s copy B,C,D from bank for the bonus amount . Could you please let me know how to file this 1042-s details along with W2 form? Under which section or form i need to fill to show this income?
Thanks you in advance.
Im not sure I understand. You received Copy B of Form 1042-S. How much did they withhold? Copy B will say. If the bank withheld $0, then there is nothing to do. You received a notice that nothing was withheld. If something was withheld, then you may have a chance at getting that withheld amount.
Form W-2 is for payroll. I’m not sure what question you have regarding Form W-2.
@Erich J. Ruth
Hi Erich,
Thanks for the response.
I am not expecting any withholding amount from bank. Confusion is regarding, do i need to pay any tax for the received gift amount?
Let me put my question in detail. I moved to USA, 3 months back on temp work visa. Here, i have opened bank account for my salary deposits. When i opened account with the bank i have received $200 gift voucher from bank as joining bonus. For this gift paid amount, bank has send me 1042-S (which includes Copy B,Copy C, Copy D). Following are the figures in this form
Income code : 29
Gross income : 200$
withholding allowance : Not mentioned anything
Net Income : Not mentioned anything
Tax rate: .00
Exemption code :02
Federal tax withheld: $0
Withholding by other agent: Not mentioned anything
Total withholding credit: $0
Now i want to file Online tax return for my W2 received from employer( for 2 months income in 2013). Along with that i had to show this extra amount ($200 gift) in income… I am not sure about this. do i need to mention this amount in my total income, if yes under which section i need to put this amount and which form i need to fill while filing tax online ?
Any help will be appreciated. Thank you.
> I am not expecting any withholding amount from bank.
Since nothing was withheld, Form 1042-S is merely informational. You don’t need to do anything with that form.
> do i need to pay any tax for the received gift amount?
You need to declare it as income. The bank, by sending you that form, is saying that they are reporting to the IRS that the $200 was paid to you. In turn, the IRS can double check that you are reporting it as income.
Typically though the bank sends a 1099-MISC. They sent you a 1042-S because your a non-US resident.
> if yes under which section i need to put this amount and which form i need to fill while
> filing tax online ?
I dont know.
If a foreign person was paid and tax was not withheld, but should have been, how do I submit the payment to the IRS? What form(s) should be sent with the payment?
I understand that the 1042S needs to be completed, but I don’t see where it indicates payment should be sent with it.
As stated earlier the IRS does not have a help line related to this topic.
Thank you in advance for your help.
> If a foreign person was paid and tax was not withheld, but should have been, how do I submit
> the payment to the IRS? What form(s) should be sent with the payment?
If you received Form 1042-S and the form shows that $0 was withheld but you feel this was an
error, then contact the withholding agent and explain the situation and ask that they withhold
money and reissue the 1042-S.
> I understand that the 1042S needs to be completed, but I don’t see where it indicates payment
> should be sent with it.
Its the payer or withholding agent that sends the money to the IRS. Not the recipient of the
1042-S form.
> As stated earlier the IRS does not have a help line related to this topic.
There are various help lines at the IRS. At this phone number
1-267-941-1000
I have always been able to ask tough 1042-S questions and they have provided clear answers.
Try it.
Erich,
I am a non resident. I finished my graduate degree last May and then started a job in June. Whike as a studnet I received taxable stipend from the university in alabama. Now my employer is in Arkansas. Will i file two separate state taxes?
The federal tax return will be one showing combined income from student period and post employment period?
Will i need a W2 from the University? They sent me a 1042S.
Thanks