Form 1042-S
Updated on April 12, 2025
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Table of Contents
Form 1042-S, or the “Foreign Person’s US Source Income Subject to Withholding,” is an IRS document for reporting US-source income subject to withholding and paid to foreign individuals and entities.
This form is important in ensuring that all income generated in the US such as wages, scholarships, and investments that are for foreign individuals or entities are duly reported and taxed accordingly.
Who should receive Form 1042-S?
Typically, recipients of Form 1042-S include foreign individuals, non-resident aliens, partnerships, corporations, and estates. Through this form, foreign recipients can fulfill their tax obligations with the IRS and can ensure that the proper amount of tax is withheld.
The circumstances leading to a Form 1042-S being dispatched can be as varied as the people receiving them. Generally speaking, if a US-sourced payment made to a foreign person ticks the boxes for being subject to either withholding or reporting, then the chances are high that a Form 1042-S will be on its way.
Is a resident alien a foreign person?
No, for tax purposes, a resident alien is not considered a “foreign person”. This means that a resident alien or a Green Card holder will be taxed the same way as a US citizen and should file Form W-2 or 1099 if applicable.
On the other hand, a non-resident alien (NRA) is someone that the IRS recognizes as a “foreign person” and therefore, filing Form 1042-S applies to them if they earned US-sourced income.
What is inside Form 1042-S?
Form 1042-S outlines the income and withholding details related to foreign individuals and entities that receive US-sourced income. Here are the specific details that are included on the Form 1042-S:
- Income code: This indicates the type of income being reported. It could range from dividends to interest, royalties, and wages.
- Recipient’s name and address: This highlights the identity of the income of the foreign recipient.
- Gross income: This denotes the sum total of the income prior to subtracting any deductions or exemptions. Consider it your ‘pre-deduction’ income.
- Federal tax withheld: This section reflects the amount of US federal tax that has been extracted from the income.
- Country of residence: This part identifies the recipient’s tax residency, which has a direct bearing on the taxation norms applied to the income.
One crucial point to remember is that a single Form 1042-S only reports one kind of income. This means that if a foreign individual rakes in different types of income, they might end up with multiple Forms 1042-S in their hands.
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What types of income are reported on Form 1042-S?
Form 1042-S covers a wide range of income types, reflecting the many ways a foreign person might earn US-sourced income. Here are some examples of income types commonly reported on this form:
- US dividends, interest, and royalties paid to foreign investors
- Scholarships, grants, and fellowships for non-resident students
- Payments to foreign independent contractors
- Prizes and awards received by non-US persons
Each type of income is assigned a unique code to classify the category that is being reported. For instance, dividends have one designated code, while interest income is identified with a different code.
How can tax treaties affect filing Form 1042-S?
Tax treaty benefits can help reduce taxes on specific types of US-source income. These benefits that are reported will not be automatically granted but will then be based on agreements between the US and the recipient’s country of tax residence.
To claim these benefits, recipients must complete certain documentation, such as providing a Taxpayer Identification Number (TIN) and submitting Form W-8BEN or W-8BEN-E to confirm their foreign status.
How can I obtain a Form 1042-S?
Typically, you should receive Form 1042-S from the US withholding agents, such as employers providing wages, banks doling out interest, or companies disbursing dividends.
The duty of preparing and filing Form 1042-S also rests with US withholding agents. Not only do they file the form with the IRS, but they also need to get copies into the hands of the income recipients by the same date. So, if you did not receive your Form 1042-S or lost it, you can request a reprint from the entity that issued it.
How much tax is withheld on Form 1042-S?
If there is no existing tax treaty between the US and the country of your residence, the general withholding tax rate is 30%. But, if a tax treaty is present, it may be reduced or even eliminated.
It’s good to check tax treaty agreements with the US and the recipient’s country of residence to learn more about the amount that will be withheld from their US-sourced income.
When is Form 1042-S due?
It must be submitted to the IRS by March 15 of the year following the calendar year in which the income was paid. If March 15 happens to be a weekend or legal holiday, you get a slight reprieve until the following business day.
