Specific Instructions

File only one Form 1042 consolidating all Form 1042-S recipient information, regardless of the number of different clients, branches, divisions, or types of income for which you are the withholding agent. However, if you are acting in more than one capacity (for example, you are acting as a QI for certain designated accounts and as an NQI for other accounts), file a separate Form 1042 for each capacity in which you are acting.

Rounding off to whole dollars.   You can round off cents to whole dollars. If you do round to whole dollars, you must round all amounts. To round, drop amounts under 50 cents and increase amounts from 50 to 99 cents to the next dollar. For example, $1.39 becomes $1 and $2.50 becomes $3. If you have to add two or more amounts to figure the amount to enter on a line, include cents when adding and only round off the total.

Employer identification number (EIN).   You are generally required to enter your EIN. However, if you are filing Form 1042 as a QI, withholding foreign partnership, or withholding foreign trust, enter your QI-EIN, WP-EIN, or WT-EIN. Also, be sure to check the “QI/Withholding foreign partnership or trust” box. See QI and NQI checkboxes, later.

  If you do not have an EIN, you can apply for one online at  
www.irs.gov/businesses/small. Click on "Employer ID Numbers" and then on "Apply for an EIN Online." You can apply for an EIN by telephone at 1-800-829-4933. You also can file Form SS-4, Application for Employer Identification Number, by fax or mail. File amended Forms 1042-S when you receive your EIN.

  To get a QI-EIN, WP-EIN, or WT-EIN, submit Form SS-4 with your application for that status. Do not send an application for a QI-EIN, WP-EIN, or WT-EIN to the addresses listed in the Instructions for Form SS-4. Send the application along with Form SS-4 to:

Internal Revenue Service  
LB & I: International: QI Group 1031 
290 Broadway, 12th floor 
New York, NY 10007-1867 USA

  If you are a QSL that is also a QI, enter your QI-EIN. Otherwise enter the EIN you have been assigned.

Address.   Include the suite, room, or other unit number after the street address. If your post office does not deliver mail to the street address and you have a P.O. box, show the box number instead of the street address.

QI and NQI checkboxes.   See page 1 for definitions of intermediary, qualified intermediary (QI), withholding foreign partnership (WP), withholding foreign trust (WT), and nonqualified intermediary (NQI). See the Form 1042-S instructions for definitions of U.S. branch treated as a U.S. person and flow-through entity.

  Check the “QI/Withholding foreign partnership or trust” box if you are a QI, WP, WT, or a U.S. branch treated as a U.S. person. Check the “NQI/Flow-through entity” box if you are an NQI or a flow-through entity.

Lines 1 through 60.   Except as otherwise provided in these instructions, include tax liability for the period in which the income was distributed. Do not enter any negative amounts on these lines.

Foreign partners of U.S. partnerships.   To the extent that a domestic partnership has not distributed a foreign partner's distributive share of income subject to withholding under section 1441, it should not include any tax liability on lines 1 through 60 for tax relating to the partner's distributive share in the year the partnership earns the income. For distributive shares not actually distributed, the partnership must include any tax liability on lines 1 through 60 of the Form 1042 for the following year. Include the tax liability on the line that represents the earlier of the following dates.
  • The date on which the Schedule K-1 (Form 1065) is sent or otherwise furnished to the foreign partner.

  • The due date for furnishing Schedule K-1 (Form 1065) to the partner.

  Include such tax liability for the period that includes the date the tax was required to be withheld.

Example.

In 2012, USP, a U.S. partnership, has foreign partners. The withholding tax relating to the distributive shares of the foreign partners was $120. USP made no distributions in 2012. On the 2012 Form 1042, USP did not enter any amount as tax liability on lines 1 through 60 because it did not distribute any amounts.

USP made a distribution on February 10, 2013, that related to the 2012 distributive shares of the foreign partners. USP withheld $100 at the time of the distribution. USP sent the 2012 Schedules K-1 (Form 1065) to its partners on April 2, 2013.

On the 2013 Form 1042, USP entered $100 on line 7. This is the tax liability for the period (February 8 through 15) during which it made a distribution. USP entered $20 on line 16. This is the tax liability for the period (April 1 through 7) during which it furnished the Schedules K-1 (Form 1065) to the partners.

  
Use Form 8804 to report withholding tax liability on the partnership's income effectively connected with a U.S. trade or business.

Corporate distributions.   Do not include on lines 1 through 60 any tax liability caused by adjustments of underwithheld tax on corporate distributions made in calendar year 2013 if the following apply.
  • The distributing corporation made a reasonable estimate of accumulated and current earnings and profits under Regulations section 1.1441-3(c)(2)(ii)(A); and

  • The distributing corporation or intermediary paid over the underwithheld tax by March 17, 2014.

Instead, include these payments of underwithheld tax on line 63b.

Excise tax on specified Federal procurement payments.   Include on lines 1 through 60 any liability for the 2% excise tax imposed by section 5000C on foreign persons who receive one or more specified Federal procurement payments. Report the amount on the line that corresponds with the date the payment was made.

Specified Federal procurement payment.

A specified Federal procurement payment means any payment made pursuant to a contract with the United States Government entered into after January 1, 2011, for the provision of goods, if such goods are manufactured or produced in any country which is not a party to an international procurement agreement with the United States, or the provision of services, if such services are provided in any country which is not a party to an international procurement agreement with the United States.

Qualified intermediaries with no primary withholding responsibility.   If you are a QI that did not assume primary withholding responsibility, enter the total amount withheld by the U.S. withholding agent(s) on line 59. Report all other amounts (that is, amounts you actually withheld) on the line that corresponds with the date the liability was incurred.

Overwithholding.   If you repaid the recipient for an amount overwithheld by reducing the amount withheld on a later payment, report the reduced amount on these lines. If you used the reimbursement procedure for overwithheld amounts, see Adjustment for Overwithholding, later.

Line 61.   Enter the number of Forms 1042-S filed on paper and electronically.

If you file 250 or more Forms 1042-S, you must submit them electronically.

Lines 62a and 62b.   Enter the amounts requested for all Forms 1042-S (regardless of whether the form was filed electronically or on paper) and for all Forms 1000, Ownership Certificate.

  
Be sure to reconcile amounts on Form 1042 with amounts on Forms 1042-S (including Forms 1042-S filed electronically), to avoid unnecessary correspondence with the IRS.

Line 62a.   The amount on line 62a should equal the sum of all amounts shown on Forms 1042-S, box 2, and all amounts shown as gross interest paid on Forms 1000.

Line 62b.   The amount on line 62b should equal:
  • The sum of all Forms 1042-S, box 9 (box 7 plus box 8), less

  • The sum of all Forms 1042-S, box 10, plus

  • The tax assumed from Forms 1000.

    If it does not, attach a statement to Form 1042 explaining the difference.

Line 63a.   The amount on line 63a must equal the sum of the monthly totals as listed on the Record of Federal Tax Liability. Do not make any adjustments on this line. Except for adjustments described in the instructions for line 63b, you may only make adjustments on the appropriate entry line of the Record of Federal Tax Liability.

Line 63b.   Include on line 63b any tax liability resulting from adjustments of underwithheld tax on corporate distributions made in calendar year 2013 if:
  • The distributing corporation made a reasonable estimate of accumulated and current earnings and profits under Regulations section 1.1441-3(c)(2)(ii)(A), and

  • The distributing corporation or intermediary paid over the underwithheld tax by March 17, 2014.

  If you are a regulated investment company (RIC), real estate investment trust (REIT), or personal holding company (PHC) that paid a dividend subject to section 852(b)(7), section 857(b)(9), or section 563(b) (relating to certain dividends declared in the preceding October, November, or December), enter your additional tax liability on those dividends declared in 2013 but paid no later than March 17, 2014, less any additional tax liability on those dividends declared in 2012 but paid no later than March 15, 2013. Show any negative amount in brackets. Attach a statement showing your calculation.

Line 64.   Enter the total tax deposits you made (including amounts paid with an extension of time to file).

Line 66.   You are permitted to take a credit for amounts withheld by other withholding agents that relate to the total net tax liability reported on line 63c. For example, you are a QI and the amount you entered on line 63c includes amounts withheld by a U.S. withholding agent. You may take a credit on line 66 for the amounts that were withheld by the U.S. withholding agent. The amount on line 66 should equal the sum of all Forms 1042-S, box 8, that you file for the year.

Note.

All withholding agents (QIs and NQIs) must verify entries on Line 66 by attaching supporting Form(s) 1042-S, issued to you, to verify the credit amounts claimed.

  
If you are a QI requesting a refund, you must attach the corresponding Form(s) 1042-S received to support the amount claimed on line 66. Failure to do so will result in the denial of the refund or credit being claimed. If you are a PTP or a nominee withholding under section 1446, the tax paid for a payee may only be claimed as a credit by the payee.

QSL claiming a credit forward.   If you are a QSL or other withholding agent claiming a credit forward of prior withholding on substitute dividends as determined under Notice 2010-46, you should attach Form(s) 1042-S issued to you to support such credits. If a credit is claimed with respect to any U.S. source substitute dividends paid to you from a withholding agent that has not issued a Form 1042-S to you for such payments, attach a supporting statement to Form 1042 indicating the following:

  
  • The withholding agent's name, address, and EIN (if known);

  • The amount of U.S. source substitute dividends received from the withholding agent; and

  • The amount of credit forward you included on line 66 in connection with these substitute dividends.

Line 69.   You may claim an overpayment shown on line 69 as a refund or a credit. Check the applicable box on line 70 to show which you are claiming. If you claim a credit, it can reduce your required deposits of withheld tax for 2014.

Line 71.   Enter on line 71 the total amount of specified federal procurement payments multiplied by 2% (.02).

Adjustment For Overwithholding

What to do if you overwithheld tax depends on when you discover the overwithholding.

Overwithholding discovered by March 15 of the following calendar year.   If you discover that you overwithheld tax by March 15 of the following calendar year, you may use any undeposited amount of tax to make any necessary adjustments between you and the recipient of the income. Repay the recipient and reduce the amount of your total deposit. Report the reduced tax liability on lines 1 through 60 for the period(s) for which you repaid the overwithheld tax.

  If the undeposited amount is not enough to make any adjustments, or if you discover the overwithholding after the entire amount of tax has been deposited, you can use either the reimbursement or the set-off procedure to adjust the overwithholding.

  
If March 15 is a Saturday, Sunday, or legal holiday, the next business day is the final date for these actions.

Reimbursement procedure.

Under the reimbursement procedure, you repay the beneficial owner or payee the amount overwithheld. You use your own funds for this repayment. You must make the repayment by March 15 of the year after the calendar year in which the amount was overwithheld. For example, if you overwithhold tax in 2013, you must repay the beneficial owner by March 17, 2014. You must keep a receipt showing the date and amount of the repayment and provide a copy of the receipt to the beneficial owner.

You may reimburse yourself by reducing any subsequent deposits you make before the end of the year after the calendar year in which the amount was overwithheld. The reduction cannot be more than the amount you actually repaid.

Report the reduced tax liability on lines 1 through 60 for the period for which you reimbursed the overwithheld tax. Report the total tax withheld as your total deposits. Indicate on line 70 whether you want a refund or a credit.

Set-off procedure.

Under the set-off procedure, you repay the beneficial owner or payee the amount overwithheld by reducing the amount you would have been required to withhold on later payments you make to that person. These later payments must be made before the earlier of:

  • The date you actually file Form 1042-S for the calendar year in which the amount was overwithheld, or

  • March 15 of the year after the calendar year in which the amount was overwithheld.

Report the reduced tax liability on lines 1 through 60.

Overwithholding discovered at a later date.   If you discover after March 15 of the following calendar year that you overwithheld tax for the prior year, do not adjust the amount of tax liability reported on Form 1042 or on any deposit or payment for that prior year. Do not repay the beneficial owner or payee the amount overwithheld.

  In this situation, the recipient will have to file a U.S. income tax return (Form 1040NR, Form 1040NR-EZ, or Form 1120-F) or, if a tax return has already been filed, a claim for refund (Form 1040X or amended Form 1120-F) to recover the amount overwithheld.

Third Party Designee

If you want to allow any individual, corporation, firm, organization, or partnership to discuss your 2013 Form 1042 with the IRS, check the “Yes” box in the Third Party Designee section of the return. Also, enter the designee's name, phone number, and any five digits the designee chooses as his or her personal identification number (PIN). The authorization applies only to the tax form upon which it appears.

If you check the “Yes” box, you are authorizing the IRS to call the designee to answer any questions relating to the information reported on your tax return. You also are authorizing the designee to:

  • Exchange information concerning your tax return with the IRS, and

  • Request and receive written tax return information relating to your tax return, including copies of specific notices, correspondence, and account transcripts.

    You are not authorizing the designee to receive any refund check, bind you to anything (including additional tax liability), or otherwise represent you before the IRS. If you want to expand the designee’s authorization, see Pub. 947, Practice Before the IRS and Power of Attorney.

The authorization automatically expires one year from the due date (without any extensions) for filing your 2013 Form 1042. If you or your designee desires to terminate the authorization, a written statement conveying your wish to revoke the authorization should be submitted to the IRS service center where the return was processed.

Amended Return

If you have to make changes to your Form 1042 after you submit it, file an amended Form 1042. Use a Form 1042 for the year you are amending. Check the “Amended Return” box at the top of the form. You must complete the entire form, including all filing information for the calendar year, and sign the return. Attach a statement explaining why you are filing an amended return (for example, you are filing because the tax liability for May was incorrectly reported due to a mathematical error).

If you also are amending Form(s) 1042-S, see Amended Returns in the Form 1042-S instructions.

Do not amend Form 1042 to recover taxes overwithheld in the prior year. For more information, see Adjustment for Overwithholding, earlier.


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