1. Purpose This software program provides a no-cost standalone tool to withholding agents that will assist them in complying with their reporting and withholding responsibilities with respect to IRS Form 1042-S (Foreign Person’s U.S. Source Income Subject to Withholding). The tool performs a quality review of data before submission to the IRS. Use of the tool does not change a withholding agent’s obligations to file Forms 1042-S with the IRS and furnish a copy of the Form 1042-S to the payee. The use of this tool, or any other tools available in the market, or in-house, that review information returns for errors prior to submitting [the file] to the Service will receive the same level of consideration for any penalty abatement request(s). 2. Background In general, withholding agents, such as banks, insurance companies, universities, entertainment venues and resorts, or other financial institutions must file an information return on Form 1042-S to report amounts paid from U.S. sources to foreign persons. The definition of a withholding agent is very broad and includes any person, U.S. or foreign, that has control, receipt, or custody of amounts that are subject to the rules under Internal Revenue Code Chapter 3 (Withholding of Tax on Nonresident Aliens and Foreign Corporations) or Chapter 4 (Taxes to Enforce Reporting on Certain Foreign Accounts, i.e., FATCA or the Foreign Account Tax Compliance Act). A tutorial on how to use the tool can be viewed online or downloaded. To use this tool, the withholding agent (i.e., the user) needs to: Register at quick modules online Input Form 1042-S information in the Form 1042-S Data Integrity Tool Receive a notification when the error-checking results file is ready for download. Small files are processed in less than a minute and can be downloaded from the same screen. In step 2, Form 1042-S data can be input by: (1) uploading a file in the format required by the IRS’s FIRE (Filing Information Returns Electronically) system, (2) uploading a comma separated values (CSV) spreadsheet using the template available in the tool, (3) uploading a single-page or 8-page version of Form 1042-S in PDF form, or (4) manually entering individual Form 1042-S data in a substitute form provided by the tool. In step 3, the downloadable list of errors will reference the Form’s “unique identifier” and the “Record No.” that had the problem and provide a short explanation of data elements (1042-S Box numbers) and data combinations (multiple Boxes) for which an error or caution was identified. The tool also allows interactive input and error reporting for an individual Form 1042-S. Even though the tool may identify data errors, the withholding agent remains responsible for making any necessary changes to the data on the agent’s system of record before submission to the IRS. The list of resources below will help you understand and correct errors before submitting the Forms 1042-S. The tool can be used as many times as necessary on new or revised data. The IRS has no access to an individual user’s data. The IRS tracks only summary statistics on the types of errors uncovered by the tool. The user can access its data for 90 days, after which time it is purged. Resources: Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities Publication 1187, Specifications for Electronic Filing of Form 1042-S, Foreign Person's U.S. Source Income Subject to WithholdingPDF Treas. Regs. § 1.1441-1 Treas. Regs. § 1.1471-1 Feedback: please send us your comments and/or suggestions related to the on the Form 1042-S Data Integrity Tool by accessing the “Feedback” section on the main menu of the tool. Supported browsers Microsoft Edge Google Chrome Mozilla Firefox Safari Note: This page contains one or more references to the Internal Revenue Code (IRC), Treasury Regulations, court cases, or other official tax guidance. References to these legal authorities are included for the convenience of those who would like to read the technical reference material. To access the applicable IRC sections, Treasury Regulations, or other official tax guidance, visit the tax code, regulations, and official guidance page. To access any tax court cases filed on or after May 1, 1986, visit the opinions search page of the United States Tax Court.
