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General Instructions

Purpose of Form

Use Form 1042 to report the following.

  • The tax withheld under chapter 3 (excluding withholding under sections 1445 and 1446 except as indicated below) on certain income of foreign persons, including nonresident aliens, foreign partnerships, foreign corporations, foreign estates, and foreign trusts.

  • The tax withheld under chapter 4 on withholdable payments. For the withholding requirements of chapter 4, see Regulations sections 1.1471-2(a), 1.1471-4(b), and 1.1472-1(a).

  • The tax withheld pursuant to section 5000C on specified federal procurement payments.

  • The tax withheld under section 877A on payments of eligible deferred compensation items or distributions from nongrantor trusts to a covered expatriate.

  • Payments that are reported on Form 1042-S under chapter 3 or 4. See Regulations section 1.1474-1(d)(2)(i) for the definition of a chapter 4 reportable amount (which are amounts required to be reported on Form 1042-S for chapter 4 purposes) and Regulations section 1.1461-1(c)(2) for amounts subject to reporting for chapter 3 purposes.

Certain distributions subject to section 1445 withholding tax.   Publicly traded trusts, real estate investment trusts, and regulated investment companies that are qualified investment entities (as defined under section 897(h)(4)) must withhold section 1445 tax on certain distributions and report such amounts on Form 1042. For more information, see Regulations section 1.1445-8 and the instructions for Form 1042-S.

Publicly traded partnerships (section 1446 withholding tax).   For purposes of reporting on Form 1042, a publicly traded partnership (PTP) must withhold section 1446 tax on distributions of effectively connected income (ECI) to its foreign partners. A nominee that receives a distribution of ECI from a PTP and is treated as the withholding agent must use Form 1042 to report the tax withheld. For this purpose, a nominee is a domestic person holding an interest in the PTP on behalf of one or more foreign partners. For more information, see Regulations section 1.1446-4 and Pub. 515, Withholding of Tax on Nonresident Aliens and Foreign Entities.

Who Must File

Every withholding agent or intermediary who receives, controls, has custody of, disposes of, or pays a withholdable payment (to which chapter 4 withholding applies) or an amount subject to withholding, must file an annual return for the preceding calendar year on Form 1042 unless an exception to filing applies. Also, any PTP or nominee making a distribution of ECI under section 1446, or any entity required to report a distribution on Form 1042-S that is subject to withholding under section 1445, must file Form 1042 for the preceding calendar year.

You must file Form 1042 if any of the following applies.

  • You are required to file or otherwise file Form(s) 1042-S for purposes of either chapter 3 or 4 (whether or not any tax was withheld or was required to be withheld to the extent reporting is required). File Form 1042 even if you file Form(s) 1042-S electronically.

  • You file Form(s) 1042-S to report to a recipient tax withheld by your withholding agent.

  • You pay gross investment income to foreign private foundations that are subject to tax under section 4948(a).

  • You pay any foreign person specified federal procurement payments that are subject to withholding under section 5000C.

  • You pay an eligible deferred compensation item to a covered expatriate or you are a trustee making a distribution from a nongrantor trust to a covered expatriate.

  • You are a qualified intermediary (QI), withholding foreign partnership (WP), withholding foreign trust (WT), participating foreign financial institution (FFI), or reporting Model 1 FFI making a claim for a collective refund under your respective agreement with the IRS. See Regulations section 1.1471-1(b)(114) for the definition of a reporting Model 1 FFI.

Withholding Agent

Any person required to withhold tax is a withholding agent. A withholding agent may be an individual, trust, estate, partnership, corporation, nominee, government agency, association, or tax-exempt foundation, whether domestic or foreign. For purposes of chapter 4, a withholding agent includes a participating FFI or registered deemed-compliant FFI to the extent such FFI is required to withhold tax. See Regulations section 1.1473-1(d) for the definition of a withholding agent for purposes of chapter 4.

Liability for tax.   As a withholding agent, you are personally liable for any tax required to be withheld as well as interest and any applicable penalties. A withholding agent acting through an agent is liable for any failure of the agent to deposit any tax required to be withheld and deposited even if the agent is also a withholding agent and is itself separately liable for the failure to comply with the provisions of chapter 3 or 4.

  For purposes of chapter 3, if you fail to withhold and the foreign payee fails to satisfy its U.S. tax liability, then both you and the foreign person are liable for tax, as well as interest and any applicable penalties. The applicable tax will be collected only once. If the foreign person satisfies its U.S. tax liability, you are not liable for the tax but remain liable for any interest and penalties for failure to withhold.


An intermediary is a person who acts as a custodian, broker, nominee, or otherwise as an agent for another person, regardless of whether that other person is the beneficial owner of the amount paid, a flow-through entity, or another intermediary.

Qualified intermediary.   A QI is an intermediary that is a party to a QI agreement with the IRS described in Regulations section 1.1441-1(e)(5)(iii). For information on the QI agreement, see

Withholding foreign partnership or withholding foreign trust.   A WP or WT is a foreign partnership or trust that has entered into a withholding agreement with the IRS described in Regulations section 1.1441-5(c)(2) and (e)(5) in which it agrees to assume primary withholding responsibility under chapters 3 and 4 for all payments that are made to it for its partners, beneficiaries, or owners.


Nonqualified intermediary.   A nonqualified intermediary (NQI) is any intermediary that is not a U.S. person and that is not a QI.

Nonwithholding foreign partnership.    A nonwithholding foreign partnership (NWP) is a foreign partnership that is not a withholding foreign partnership.

Nonwithholding foreign trust.    A nonwithholding foreign trust (NWT) is a foreign trust that is not a withholding foreign trust.

Qualified securities lender.   A qualified securities lender (QSL) is a foreign financial institution that is a bank, custodian, broker-dealer, or clearing organization subject to regulatory supervision in its home jurisdiction and that is:
  1. Regularly engaged in the business of borrowing securities of U.S. corporations and lending such securities to unrelated customers; and

  2. Subject to audit by the IRS under section 7602 or, in the case of a QI, an external auditor.

  For further information about requirements for QSL status and the withholding requirements for substitute dividend payments, see Notice 2010-46, 2010-24 I.R.B. 757, available at

Foreign financial institution.   A foreign financial institution (FFI) is a foreign entity described in Regulations section 1.1471-5(d).

Registered deemed-compliant FFI.   A registered deemed-compliant FFI is a foreign financial institution (as defined in Regulations section 1.1471-5(f)(1)) that is deemed to satisfy the requirements of section 1471(b) of the Code. This includes a reporting Model 1 FFI (see Regulations section 1.1471-1(b)(114) for the definition of reporting Model 1 FFI).

Participating FFI.   A participating FFI is a foreign financial institution that has agreed to satisfy the obligations of an FFI agreement under chapter 4. This includes an FFI described in a Model 2 inter-governmental agreement (IGA) that has agreed to comply with the requirements of an FFI agreement (that is, reporting Model 2 FFI).

Nonparticipating FFI.   A nonparticipating FFI is a foreign financial institution that is not a participating FFI, deemed-compliant FFI, or exempt beneficial owner.

Recalcitrant account holder.   Generally, a recalcitrant account holder is an account holder of a participating or deemed-compliant FFI that failed to provide the documentation required under chapter 4 to determine the account holder’s status or to enable the FFI to report the account as a U.S. account. See Regulations section 1.1471-5(g).

Passive non-financial foreign entity (NFFE).   A passive NFFE is a nonfinancial foreign entity other than an excepted NFFE, including a WP, WT, QI, or direct reporting NFFE. See Regulations sections 1.1471-1(b)(80) and 1.1472-1(b).

For chapter 4 purposes an intermediary must provide its chapter 4 status to a withholding agent to determine whether withholding applies to the payment. Thus, a chapter 4 status must be provided for a withholdable payment made to a foreign entity.

Where and When To File

Mail Form 1042 by March 15, 2017, to:

Ogden Service Center 
P.O. Box 409101 
Ogden, UT 84409 

Use Form 1042-T to transmit paper Forms 1042-S.

Extension of time to file.   If you need more time to file Form 1042, you may submit Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns.

  Form 7004 does not extend the time for payment of tax.

Additional Information

For details on the withholding of tax, see Pub. 515. You can get Pub. 515 by downloading it from Click on “Forms and Pubs” and then on “Publication Number.

Need Assistance?

If you need help completing Form 1042, call 267-941-1000 (not a toll-free number) from 6:00 a.m. to 11:00 p.m. Eastern time or write to:  

Internal Revenue Service  
International Section  
Philadelphia, PA 19255-0725

Income Tax Withholding on Wages, Pensions, Annuities, and Certain Other Deferred Income

Use Form 941, Employer’s QUARTERLY Federal Tax Return, to report income tax withheld and social security and Medicare taxes on wages paid to a nonresident alien employee.

Payments of pensions, annuities, and certain other deferred income paid to a foreign person are subject to withholding under section 1441 (rather than section 3405). Report these payments on Forms 1042 and 1042-S.

Use Schedule H (Form 1040), Household Employment Taxes, to report income tax withheld and social security and Medicare taxes on wages paid to a nonresident alien household employee.

Election To Withhold Under Section 3406

If you are a Participating FFI that has made an election to withhold under section 3406 instead of withholding under chapter 4, use Form 945 to report tax withheld on a withholdable payment that is also a reportable payment made to any of your recalcitrant account holders that are also U.S. nonexempt recipients subject to backup withholding. Also, use Form 945 to report tax withheld on a withholdable payment that is also a reportable payment made to recalcitrant account holders of a participating or registered deemed-compliant FFI that is an NQI, NWP, or NWT or a QI that elects to be withheld upon under section 1471(b)(3), and from whom you received a withholding statement that indicates that such FFI has elected for withholding under section 3406 to apply instead of withholding under chapter 4 with respect to one or more recalcitrant account holders. See Regulations section 1.1471-4(b) and 1.1474‐1(d)(4)(i)(B). A withholding QI, WP, or WT that is an FFI should also use Form 945 if it elects to withhold under section 3406 on withholdable payments made to certain recalcitrant account holders.

Deposit Requirements

You are required to use the Electronic Federal Tax Payment System (EFTPS), discussed later, to deposit the tax withheld and required to be shown on Form 1042 (regardless of whether withholding was applied under chapter 3 or 4 or with respect to a specified federal procurement payment).

To avoid a penalty, do not mail your deposits directly to the IRS.

The amount of tax you are required to withhold determines the frequency of your deposits. The following rules explain how often deposits must be made.


If you are requesting an extension of time to file using Form 7004, follow these rules to see if you must make a deposit of any balance due or if you can pay it with Form 7004. See Form 7004 and its instructions for more information.

  1. If at the end of any quarter-monthly period the total amount of undeposited taxes is $2,000 or more, you must deposit the taxes within 3 business days after the end of the quarter-monthly period. (A quarter-monthly period ends on the 7th, 15th, 22nd, and last day of the month.) A business day is any day other than a Saturday, Sunday, or legal holiday in the District of Columbia.

  2. If at the end of any month the total amount of undeposited taxes is at least $200 but less than $2,000, you must deposit the taxes within 15 days after the end of the month. If you make a deposit of $2,000 or more during any month except December under rule 1, earlier, carry over any end-of-the-month balance of less than $2,000 to the next month. If you make a deposit of $2,000 or more during December, any end-of-December balance of less than $2,000 should be remitted with your Form 1042 by March 15, 2017.

  3. If at the end of a calendar year the total amount of undeposited taxes is less than $200, you may either pay the taxes with your Form 1042 or deposit the entire amount by March 15, 2017.

Electronic deposit requirement.   You must make electronic deposits of all depository tax liabilities using EFTPS. If you fail to use EFTPS, you may be subject to a 10% penalty. To enroll in or get more information about EFTPS, call 1-800-555-4477 or visit Information is also available at

Depositing on time.

For deposits made by EFTPS to be on time, you must initiate the deposit by 8 p.m. Eastern time the day before the date the deposit is due. If you use a third party to make deposits on your behalf, they may have different cut-off times.

Same-day wire payment option.   If you fail to initiate a deposit transaction on EFTPS by 8 p.m. Eastern time the day before the date a deposit is due, you still can make your deposit on time by using the Federal Tax Collection Service (FTCS). If you ever need the same-day wire payment method, you will need to make arrangements with your financial institution ahead of time. Check with your financial institution regarding availability, deadlines, and costs. Your financial institution may charge you a fee for payments made this way. To learn more about the information you will need to provide to your financial institution to make a same-day wire payment, visit to download the Same-Day Payment Worksheet.


All payments should be made in U.S. dollars.

Escrow procedure.   See instructions for lines 1 through 60, later, if you are using the escrow procedure under Regulations section 1.1471-2(a)(5)(ii) or 1.1441-3(d) (and are not depositing the amount of tax withheld with the IRS during the year).

Deposits made during subsequent year.   If you are making a deposit of tax withheld in the year following the calendar year in which the related payment was made (to the extent permitted under an applicable regulation section in chapter 3 or 4), you must designate the deposit at the time that it is made as attributable to the calendar year in which the payment was made. In such a case, you should report the tax paid on line 65b.

  For example, if a real estate investment trust (REIT) declares a dividend to shareholders of record in October, November, or December of 2016, but pays the dividend in January of 2017, under section 857(b)(9) the dividend is treated as having been paid by the REIT and received by each shareholder on December 31, 2016. If the REIT chooses to withhold when it pays the dividend in January of 2017 (pursuant to the procedures for adjusting underwithholding in section 1.1461-2(b) or 1.1474-2(b)), it should report the liability with respect to the distribution on its 2016 Form 1042, and should designate the deposit of such tax as being made for 2016 (if the deposit is made by March 15, 2017).

Interest and Penalties

If you file Form 1042 late, or fail to pay or deposit the tax when due, you may be liable for penalties and interest unless you can show that the failure to file or pay was due to reasonable cause and not willful neglect.

You do not have to figure the amount of any interest or penalties you may owe. Because figuring these amounts can be complicated, the IRS will do it for you and send you a bill for any amount due.

If you include interest or penalties with your payment, identify and enter the amount in the bottom margin of Form 1042. Do not include interest or penalties in the balance due on line 69.

Interest.   Interest is charged on taxes not paid by the due date, even if an extension of time to file is granted. Interest is also charged on penalties imposed for failure to file, negligence, fraud, and substantial understatements of tax from the due date (including extensions) to the date of payment. Interest is figured at a rate determined under section 6621.

Late filing of Form 1042.   The penalty for not filing Form 1042 when due (including extensions) is 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax.

Late payment of tax.   The penalty for not paying tax when due is usually ½ of 1% of the unpaid tax for each month or part of a month the tax is unpaid. The penalty cannot exceed 25% of the unpaid tax.

Other penalties.   Penalties may be imposed for negligence, substantial understatement of tax, and fraud. See sections 6662 and 6663.

Avoid Common Errors

To ensure that your Form 1042 can be correctly processed, be sure that you:

  • Carefully read the information provided in Pub. 515 and these instructions.

  • Complete all required information for the withholding agent including the withholding agent’s name, address, chapter 3 and chapter 4 status codes, and the EIN, QI‐EIN, WP‐EIN or WT-EIN. Note that you must include the withholding agent’s chapter 3 and chapter 4 status codes regardless of the types of payments being reported on Form 1042.

  • Ensure that the correct EIN is provided. If you are filing Form 1042 as a QI, WP, or WT, enter your QI‐EIN, WP‐EIN or WT‐EIN.

  • Lines 1‐60, Record of Federal Tax Liability, must show the federal tax liability for payments made during the applicable quarter‐monthly period. This section reports the tax liability, NOT the tax deposited by the withholding agent.

  • The sum of the monthly totals in Section 1 (lines 5, 10, 15, 20, 25, 30, 35, 40, 45, 50, 55, and 60) must match the amount of total tax liability reported on lines 64b and 64c.

  • Do not include amounts reported as adjustments on line 64a in the Record of Federal Tax Liability (lines 1‐60).

  • You must designate the tax liability as either a chapter 3 tax liability or a chapter 4 tax liability. Report the portion of the tax liability for the calendar year that is a chapter 3 tax liability on line 64b. Report the portion of the tax liability for the calendar year that is a chapter 4 tax liability on line 64c.

  • You must complete Section 2, Reconciliation of Payments of U.S. Source FDAP Income. This section was an optional field for 2014, but it is mandatory as of January 1, 2015. Section 2 must be completed even if you have not withheld any amounts under chapter 4.

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