Table of Contents
- Purpose of Form
- Who Must File
- Withholding Agent
- Where and When To File
- Additional Information
- Need Assistance?
- Income Tax Withholding on Wages, Pensions, Annuities, and Certain Other Deferred Income
- Election To Withhold Under Section 3406
- Deposit Requirements
- Interest and Penalties
- Avoid Common Errors
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.
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.
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.
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.
Regularly engaged in the business of borrowing securities of U.S. corporations and lending such securities to unrelated customers; and
Subject to audit by the IRS under section 7602 or, in the case of a QI, an external auditor.
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.
For details on the withholding of tax, see Pub. 515. You can get Pub. 515 by downloading it from IRS.gov. Click on “Forms and Pubs” and then on “Publication Number.”
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
Philadelphia, PA 19255-0725
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.
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.
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).
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.
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.
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.
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.
www.eftps.gov/eftps. Information is also available at www.irs.gov/e-pay.
All payments should be made in U.S. dollars.
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.
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.
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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