Update to 2019 Instructions for Form 1042-S

 

The instructions provided below in this update are intended to supplement the specific sections of the 2019 Instructions for Form 1042-S noted below.

  • On December 18, 2018, the Internal Revenue Service and Department of Treasury issued proposed regulations (83 FR 64757) to reduce taxpayer burden with respect to certain requirements under Chapters 3 and 4 of the Code (FATCA). For 2019, a withholding agent may rely on the following provisions of these proposed regulations in connection with completing Form 1042-S: 
    • Withholding and reporting in a subsequent year (this supplements the box 7c instructions on page 25, which applies to partnerships, and also provides new information for trusts not contained in the 2019 instructions). A partnership or trust that is permitted to withhold in a subsequent year with respect to a foreign partner's or beneficiary's share of income for the prior year may designate the deposit of the withholding as attributable to the preceding year. In such a case, the partnership or trust will be required to report the associated income and tax withheld on Forms 1042 and 1042-S for the preceding year. The partnership or trust must also ensure that its Chapter 3 status code on such forms properly reflects its status as a partnership or trust (including as a Withholding Foreign Partnership (WP) or a Withholding Foreign Trust (WT)).
      If a partnership withholds on a foreign partner's share of income after March 15 of the subsequent year, the due date for filing and furnishing the applicable Form(s) 1042-S is September 15 of the subsequent year. For example, if a partnership withholds on April 1, 2020 with respect to a foreign partner's share of undistributed income for the 2019 calendar year, the partnership may designate the deposit as made for 2019 and report the liability and tax withheld on the 2019 Forms 1042 and the Form 1042-S for the partner. Partnerships filing Forms 1042-S according to the proposed regulations must also check box 7c on Form 1042-S to indicate that withholding occurred in the subsequent year (2020) with respect to a partnership interest. The extended deadline of September 15, 2020 is also applicable when a partnership is reporting on Form 1042-S an allocation of income made after March 15 of the subsequent year to a foreign partner for the prior year, but no withholding is required on the income.
      Note: For calendar years 2018 and 2019, if a partnership files Form 1042-S after March 15 of the subsequent year, but by September 15 of the subsequent year (in accordance with the proposed regulations), and then subsequently receives a penalty notice regarding the late filing of Forms 1042-S, the filer should respond to the notice and indicate that the Form(s) 1042-S were filed in accordance with the proposed regulations under Chapter 3 issued December 18, 2018 (83 FR 64757).
    • Box 9 instructions on page 25.  A withholding agent may make adjustments to overwithholding using either the reimbursement or set-off procedures until the extended due date for filing Form 1042-S (or, if earlier, date on which the Form 1042-S is either filed or furnished). Additionally, a withholding agent may use the extended due date for filing a Form 1042 to claim a credit for any adjustments made to overwithholding.
  • Valid Tax Rate Table on page 24. The Tax Rate Table on page 24 should also include the revised backup withholding tax rate of 24%. The Tax Cuts and Jobs Act (Public Law 115-97) resulted in reducing the backup withholding tax rate to 24% for 2019. As a result, the table should include "24.00" as a valid rate.