Amounts subject to reporting on Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, are amounts paid to foreign persons (including persons presumed to be foreign) that are subject to withholding, even if no amount is deducted and withheld from the payment.
There is a difference between a "withholding requirement" and a "reporting requirement" under NRA withholding.
A withholding requirement relates to an amount required to be deducted and withheld from the payment of income paid to a foreign person. Withheld amounts must be deposited with the IRS.
A reporting requirement involves the filing of an information return, Form 1042-S, reporting the amounts paid, and any that are withheld and deposited. Amounts subject to reporting on Form 1042-S are amounts paid to foreign persons even if the withholding agent did not withhold tax because the income was exempt from tax under a U.S. tax treaty or the IRC, including the exemption for income that is effectively connected with the conduct of a trade or business in the United States.
For additional information, refer to
- Who Must File Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding
- Amounts Subject to NRA Withholding and Reporting
- Amounts Not Subject to NRA Withholding and Reporting
- "Withholding of Tax, Withholding Agent, Chapter 4 Withholding Requirements" in Publication 515
Source of Income
Generally only U.S. source income is subject to NRA withholding and if an item of income is foreign source, it is not subject to NRA withholding. Refer to Source of Income for an explanation of U.S. source income.
Fixed or Determinable, Annual or Periodical Income (FDAP)
With a few exceptions for specified gains, generally, NRA withholding applies to fixed or determinable annual or periodical income (FDAP). Refer to Fixed or Determinable, Annual or Periodical Income (FDAP) for a description.
Withholding on Specific Income
For withholding requirement on common types of income, refer to Withholding on Specific Income.