Penalties Related to Form 1042-S
The following penalties apply to the person required to file Form 1042-S. The penalties apply to both paper filers and to electronic/magnetic media filers.
Late Filing of Correct Form 1042-S with IRS
A penalty may be imposed for failure to file each correct and complete Form 1042-S when due (including extensions), unless you can show that the failure was due to reasonable cause and not willful neglect. The penalty, based on when you file a correct Form 1042-S, is:
- $30 per Form 1042-S if you correctly file within 30 days; maximum penalty $250,000 per year ($75,000 for a small business). A small business, for this purpose, is defined as having average annual gross receipts of $5 million or less for the 3 most recent tax years (or for the period of its existence, if shorter) ending before the calendar year in which the Forms 1042-S are due.
- $60 per Form 1042-S if you correctly file more than 30 days after the due date but by August 1; maximum penalty $500,000 per year ($200,000 for a small business).
- $100 per Form 1042-S if you file after August 1 or you do not file correct Forms 1042-S; maximum penalty $1,500,000 per year ($500,000 for a small business).
If you intentionally disregard the requirement to report correct information, the penalty per Form 1042-S is increased to $250 or, if greater, 10% of the total amount of items required to be reported, with no maximum penalty.
Note: On June 29, 2015, the Trade Preferences Extension Act of 2015 (P.L. 114-27) increased the penalty amounts for failures to file information returns and furnish payee statements. Revenue Procedure 2016-11, 2016-2 I.R.B 274, provides inflation-adjusted amounts for the increased penalty amounts. The new amounts apply to returns and statements required to be filed after December 31, 2015.
Failure to Furnish Correct Form 1042-S to Recipient
If you fail to provide correct statements to recipients and cannot show reasonable cause, a penalty of $50 may be imposed for each failure to furnish Form 1042-S to the recipient when due. The penalty may also be imposed for failure to include all required information or for furnishing incorrect information on Form 1042-S. The maximum penalty is $1,500,000 for all failures to furnish correct recipient statements during a calendar year. If you intentionally disregard the requirement to report correct information, each potential $100 penalty is increased to $250 or, if greater, 10% of the total amount of items required to be reported, and the $1,500,000 maximum does not apply.
Failure to File on Electronic/Magnetic Media
If you are required to file Form 1042-S electronically but fail to do so, and you do not have an approved waiver on record, penalties may apply unless you establish reasonable cause. The penalty applies separately to original returns and corrected returns.