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.
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.
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.
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?
> 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.
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.
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.
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.
I received a form 1042-S and there is no Federal Tax Whthheld since I’m a foreign student. Do I still have to file a tax return regarding Gross income that I received? If I have to file a form, which form should I use?
Thank you!
The most important box on the 1042-S form is Box 10 which is Total Withholding Credit. If that is $0, then there is nothing to do. The form is for informational
purposes only. If Box 10 > 0, then you can use that credit on Form 1040-NR which NR stands for non-resident. Its the personal tax returns non-residents submit.
I am a foreign student whose income is $1100 per year. Should I still file 1040-NR EZ? One of my check was tax withhold less than $20. The question is can I file form 1042-S to retrieve the tax withhold money if I were not to file 1040-NR EZ? Regarding interest, if an interest from bank account is less than $150 per year, do I have to report that income in form 1099?
Thank you
> Should I still file 1040-NR EZ?
If you have US source income, you are supposed to report it to the IRS.
> The question is can I file form 1042-S to retrieve the tax withhold money if I were not to file 1040-NR EZ?
No. Or at least, not to my knowledge. You receive Copy B of 1042-S in the mail. Box 10 shows Total Withholding
Credit. Its the most important box on that form. If Box 10 > 0, then you have a credit waiting for you. The
only way to use that credit is on Form 1040-NR where there is a field asking for the Total Withholding Credit from
Form 1042-S. If you owe tax to the IRS, the withholding credit will reduce the amount of tax you owe.
> Regarding interest, if an interest from bank account is less than $150 per year, do I have to report that income in form 1099?
I dont know. The banks do have some threshold before they even send you a 1099-INT. If you earn very little interest
from a bank account, then most banks wont report it.
So I had a few foreign vendors perform services for my business in US. Upon paying them, I checked their country, and as per tax treaty it said there should be no withholding tax, so I paid them the full amount. Would I need to provide them a 1042S?
Thanks,
Yes. You still have to provide the form. And the form will show how much you paid them, that you withheld nothing, and that
the recipient should expect $0 credit from withholding (Box 10). If you paid any foreign person US source money, you have to report it
on Form 1042-S even though nothing was withheld.
Hello, I have both a w2 and a 1042-S form.
In 1042-S form, Box 3a says Exemption code 04, while Box 4a says Exemption code 16. Boxes 7a, 8, 9 and 10 say 0. If I understand correctly, I don’t need to report any information of my 1042-S in my 1040. Is that correct?
Thanks in advance!
The 1042-S is for non-US residents. A non-US resident would receive the form in the mail and on the 1040-NR where NR stands
for non-resident, they would be able to apply the total withholding credit as a reduction for any tax due.
Hi Erich,
Thanks your blog is very helpful.
I have been in US from 2012, for tax purposes i am an alien resident (substantial residency requirement), i rented my place for 14 days in 2016 and they have issued me 1042S with income code 54 and no tax withheld. If no tax is withheld, that is informational only?
I believe i should be reporting this earning as 1099 rental income to IRS and shouldn’t use the 1042S.
I have written to the airbnb but they are very slow in responding.
Can you suggest what is the right way to file taxes?
Is it better to file with rental property income in Turbo tax. or since the income code is 54, i should put in as other income and subject it as apartment sharing?
If i do as rental property, IRS do not withhold any tax since the 15day rule applies, however if i add the income property as other, i am taxed on it. Any inputs insights on this would be helpful.
Thanks
> If no tax is withheld, that is informational only?
Yes. If Box 10, Total Withholding Credit, is $0 then the form is purely informational.
It really comes down to which 1040 form you submit. If you file IRS Form 1040-NR where NR stands for non-resident, then there is a field on that form that asks for the total withholding credit. In this case, you should receive 1042-S and use it (if possible) to file 1040-NR.
If you file IRS Form 1040 for your personal tax returns, then you are a US citizen and have a US social security number. In this case, you should have received a 1099 instead of a 1042-S.
Thanks a lot, since box 7 and 10 on 1042S is $0, it is informational only and the withholding agent need not report to IRS? is that a correct inference
I received a 1042-S form from an old online shop I forgot about that operates out of the US. I am in Canada, a Canadian citizen living in Canada.
My gross income is only 20$. Do I really need to file with the IRS? I believe my income counts as royalty payments.
You received Copy B of the 1042-S in the mail. Look at Box 10 which is Total Withholding Credit. If that
box is $0, then there is nothing to do. If its greater than $0, then you have to decide how large of a value
it is to motivate you to seek the credit.
@Erich J. Ruth
I appreciate your reply so much.
The amount in box 10 is only 4.84. I just want to know if I can get in any kind of trouble with the iRS if I don’t file…it isn’t worth it to me to get a tiny credit.
@Bee
There is no problem with doing nothing in this case. You essentially donated $4.84
to the IRS. Thank for you for contribution.
The IRS knows many people have no desire to chase these low credits and so they
get the money/credit that is unclaimed. As a side note, the state of California created a 7% withholding on top of the federal withholding and the state of Illinois
is considering the same. They see this as free money.
Hi Erich,
Thanks for the blog. I am a US Citizen, who married a nonresident (now she is a resident alien). I filed the IRS form 1040 as married filing jointly, and already received a refund from IRS. I got a 1042-S just a couple days ago, since she did Airbnb last year.
The 1042-S has
– 1, Income Code: 54
– 2, Gross Income > 0
– 7a, Federal tax withheld: 0
– 8, Tax withheld by other agents: 0
– 9, Tax paid by withholding agent: 0
– 10, Total withholding credit: 0
Questions:
1. Is this for informational purposes only?
2. Do I have to amend my already filed 1040?
3. If yes above, how can I properly include the 1042-S in there? (there is no 1042-S for 1040)
Thanks!
Total Withholding Credit is $0 which means this is just for informational purposes. There is nothing to amend.
Hi Erich,
I’m trying to file my taxes via taxact.com. I”m on a F1 visa, has been earning for the past 1 year through internship. I filled all the information on 1040-NR. However, after submitting the application gets rejected with the following reason
Rule Number: F1040NR-SOI-150
Rule Number Description: When exempt income is reported on Schedule OI, Form 1042-S must be completed. Follow the instructions below to complete Form 1042-S. 1) Go to the Federal tab 2) Select the Credits tab 3) On the Credits Examiner screen, review Federal income tax withheld (Form(s) 1042-S) 4) On the next screen add Form 1042-S After making corrections, repeat the Filing steps to resubmit your return.
I have no idea what this form is and did not receive/ file/ use this form in previous years.
I would really appreciate if you could help me sort out the issue.
If you are a non-US resident (which it sounds like you were), then the business that hired and paid you should have sent you a 1042-S which is a withholding statement. Did you get
anything in the mail like a W-2 or 1099 from your employer?
Thank you very much and Yes, Erich. I did get a W-2 from my employer. I am a non-resident.
I’m on F1 visa since 2013 and I live in MA. Am I a resident or non-resident of MA?
A W-2 and/or a 1099 should only go to residents. Lets consider the 1099 first. A US resident receives a 1099 in the mail and that reports
money paid to them. The resident lists that income on their 1040 and the IRS has a program which double checks that what the payer paid
equals what the recipient says their received on their 1040s.
A non-US resident receives a 1042-S and they can file a 1040-NR. The IRS can and does double check that the credit claimed on the 1040-NR
equals the credit listed by the withholding agent on Form 1042-S.
Your a non-resident and you received a W-2. So your employer thinks your a resident. I dont know the answer. You would want to talk to
your employer or whoever issued you the W-2 and see if they can issue you a 1042-S instead.
I received a 1042-s, but I am now a US resident….my son claimed me as his dependent since I live with them and cover my expenses. What do I need to do?
How much Total Withholding Credit is in Box 10? You have to figure how much time and effort it is to pursue that Withholding Credit or just let it go.
I prepare taxes and have a client who receives a 1042S but is an American citizen residing in ITALY. I believe that she should be getting a 1099MISC instead.
The client previously entered it as a 1099, and wondering if the IRS will contact them. Since the form has no place on a 1040!
ty
This happens often. If they are a US citizen with a US SSN who files a 1040 (and not a 1040-NR), theyshould get a 1099 form and not a 1042-S. The 1042-S is a withholding statement for non-US residents. But employers see the non-US address and get confused. The client should contact the company that sent them the 1042-S and ask them to void and issue a 1099.
I’m a U.S. citizen living in Belize. I rolled over a 401K with a partial distribution to me. I received 1042-s on the amounts. Is this correct?
A US citizen should not receive the 1042-S. US citizens, even those who live outside of the US, are still US citizens and subject to 1099s.
Do you file a 1040 for your personal tax returns or a 1040-NR where NR stands for non-resident?
@Erich J. Ruth
Thanks Erich, I file a 1040.
If you file a 1040, then you should receive 1099 forms. On the 1040-NR, there is a box where the person can type in the total withholding credit which is Box 10 on Form 1042-S. The non-resident can apply that withholding credit to reduce any tax due to the IRS. A US resident doesnt have that option on the 1040.
With all of this said, how much is in Box 10 on your Form 1042-S? If its a small amount, there is not much to get worked up over. Contact the agent that distributed this form to you and make sure they dont make this error again. If Box 10 is a large value, then make the effort.
So my cousin won 20,000 in gamblin and 6,000 was withheld and his a resident of California. he received a 1042-s instead of a W2G. can he file his 1040 to get money back from the 6,000 or no. what would happen if he doesnt report 1042-s
Does your cousin have a valid US Social Security Number? If yes, then he should have received a W-2G and nothing should have been withheld. If no and he is not a US resident, then the payer needs to withhold 30% and he gets a 1042-S.
If its a mistake and he is a US resident with a US SSN, then he needs to contact the payer and get this corrected. As a personal note, I won a diamond necklace which was valued at $1000 from a Church raffle in Wisconsin. When I went to get the necklace (which had a diamond which was the same size as a ballpoint pen tip … extremely small), the Church accountant whipped out his laptop and double checked that I had a valid US SSN while I waited. When my name/SSN matched, they issued me a W-2G on the spot. The point of the story is, even a small time Church raffle from a small town in Wisconsin was sophisticated enough to double check the name/SSN with the IRS before issuing a form and the prize. And they would have withheld 30% of the cash value or withheld the prize if something wasn’t making sense. Where did your cousin win $20,000? My guess is your cousin won the money from a large enough organization that they did some background checking before issuing the prize money. If they made a mistake, contact the payer and clear it up.
If your cousin files a 1040 and not a 1040-NR, then the 1042-S does nothing and he can make no claim for the withheld money. The 1040-NR, where NR stands for non-resident, has a field which asks for the Total Withholding Credit (Box 10) from Form 1042-S and the foreign recipient can apply that withheld money toward any tax that was due. You get tax credit from that withheld money. You dont actually get a refund check from the IRS for withheld money.
If your cousin does nothing, the IRS keeps the $6000 withholding. The IRS knows its work on your part to get this withheld money and many people walk away from the withholding credit.
Hi Erich,
I’ve been going through your replies and it’s helped a lot! Thanks for taking the time to patiently reply to each and every query.
I am a foreign national who has received a 1042-S from my broker and my country has a double taxation avoidance treaty with US. I have already mentioned the total withholding credit in my 1040NR.
I have 2 questions:
1. Should I report the gross income(Box 2 in 1042-S) in Box number 22 of 1040NR and also in Schedule OI?
2. Also, I only received Copy-B of 1042-S from my Broker. Should I mail it along with my 1040NR to IRS?
Thanks,
Chris
Im not sure on the 1st question. The most important box on Form 1042-S is Box 10 which is the Total Withholding Credit. I know on Form 1040-NR there exists a field that asks for this withholding credit.
I dont think the IRS requires a copy of the 1042-S to be included with the 1040-NR. But if you do plan on including it, I would send a photocopy of Copy B and retain the original.
How do I apply to receive a refund of withheld taxes? I am a Canadian citizen. I have form 1042S. Require mailing address. Thank you.a
You cant just mail in a form requesting the refund. Instead if you file Form 1040-NR where NR stands for non-resident, there
is a box on that form that asks for Total Withholding Credit (Box 10) from the 1042-S. You can enter the withholding credit
and that will reduce any tax you owe.
Hi, I received the form 1042-S last week about the 2016, and has some value into box 10, This is my first time I’m doing some business with USA, as non-resident, I’m from Brazil, and I don’t know to request this refund, could somebody help me by telling me how to submit this form?
Thanks!
Form 1040-NR where NR stands for non-resident has a field where you can enter the withholding credit from
Box 10 and that will reduce any tax owed. That is how you apply the refund.
Hi Erich,
For some background – I’m a non-resident for tax purposes and I filed my 2016 tax return using the W-2 issued from my employer. However I received a letter from IRS asking for additional information in particular these are the forms they are requesting from me:
• Form W-2, Wage and Tax Statement
• Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding
• Form 8805, Foreign Partner’s Information Statement of Section 146 Withholding Tax
• Form 8288-A, Statement of Withholding on Disposition by Foreign Persons of U.S. Real Property Interests
• Any other U.S. withholding document
Out of all the forms requested, the only one I have is the W-2. Also, in 2015 I filed my taxes using my W-2 while I was in F-1 status and I received my return without any issue.
My question is should I have received a Form 1042-S from my employer?
My country is not under any tax treaty with the US but does this mean that the Form 1042-S should be submitted regardless of a treaty exemption or not?
Also – how do you recommend responding to this letter? Since all my income is on the W-2? Should I ask my employer for a Form 1042-S now OR is it too late to get one after I have already filed my return?
Oh and just for more color – for 2016 I moved from F1 status to H1B status which is considered resident alien for tax purposes.
Hope you can advise me on this confusing tax situation! Thank you so much.
> I’m a non-resident for tax purposes and I filed my 2016 tax
> return using the W-2 issued from my employer.
Im getting confused. You are not a US resident and do not have a SSN. If you are non-resident, you should have received a 1042-S and filed a 1040-NR where NR stands for non-resident. Did you efile a 1040 or 1040-NR?
> My question is should I have received a Form 1042-S from my
> employer?
If you a non-resident, yes. US citizens receive 1099 and W-2 forms while non-residents receive the 1042-S and withholding.
> My country is not under any tax treaty with the US but does
> this mean that the Form 1042-S should be submitted regardless
> of a treaty exemption or not?
I dont know the answer to this question.
> Also – how do you recommend responding to this letter? Since
> all my income is on the W-2? Should I ask my employer for a
> Form 1042-S now OR is it too late to get one after I have
> already filed my return?
There are 2 paths you can take. One is do nothing and I dont recommend that path. I cant begin to tell you stories about working with clients who filed something incorrect or didnt file something and the client has “hope” that somehow the IRS would just let this go. But the IRS eventually catches up and when they do, they really drop the hammer. If you made a mistake, contact a tax preparer in your area and take the steps to file the correct data. I have always found the IRS to be reasonable. The IRS wants the correct data more than anything.
Hi Erich,
Background: I am a Non-Resident Music Composer and I quarterly receive my license money from a US Music Publishing LTD company. I have my ITIN and my Country is under Tax-Treaty.
My question is should I receive 1099misc or 1042-S. Currently I receive a copy of 1099misc every year.
Also, do I need to file any return with IRS, Since I am paying taxes outside US.
A non-US resident will receive a 1042-S while a US resident will receive a 1099 form.
A non-US resident submits Form 1040-NR (where NR stands for non resident) while a US resident
submits Form 1040 which is your personal income tax return.
If you received a 1099-MISC and your not a US resident and dont file Form 1040, then you want
to contact the payer and have them correct this.
@Erich J. Ruth
When Do I need to file 1040-NR? Since I am an Indian Resident with tax treaty and doesn’t withhold Tax.
Typically you file Form 1040-NR by mid-June.