by Josh RikerMarch 8, 2024

IRS Issues Guidance for Taxpayers Filing Form 1042-S

As taxpayers and tax preparers ramp up for the 2023 tax season, the IRS released a bulletin containing guidance on the correct filing of Form 1042-S, which attempts to help correct common errors made by taxpayers and tax preparers before the upcoming filing deadlines.

This guideline is especially relevant in the current tax climate, as the IRS’s Large Business & International division has increased its scrutiny of these tax forms.

At a Glance: the 1042 Trio

For the uninitiated, Forms 1042, 1042-S, and 1042-T are used for withholding agents to report amounts paid to foreign persons. To summarize:

  • Form 1042 is filed by withholding agents to report amounts withheld under Chapter 3 and Chapter 4.
  • Form 1042-S is filed to report amounts withheld that are subject to a lower tax rate under a tax treaty or otherwise exempt from US taxation.
  • Form 1042-T is an annual summary and transmittal of Form 1042-S.
  • Forms 1042-S and 1042-T are required to be filed jointly.

You can read more about best practices for filing Form 1042 here.

IRS Tips for Preparing Form 1042-S

The IRS’s chief advice is that taxpayers report only income, status, exemption, and limitation of benefits codes specifically listed in the Form 1042-S Instructions. The relevant codes can be found in Appendices A and B.

Additional tips include avoiding using ISO Country Codes in favor of the IRS’ country code listing, a reminder on TIN and FTIN reporting rules, and guidelines for treaty country reporting on line 13b. As always, the IRS denotes that this list is not comprehensive, and further research may be needed for some individuals. Before filling out international forms, it’s critical to review the instructions provided by the IRS.

A Team You Can Count On

As the IRS focuses more on international taxation and reporting, staying informed on reporting guidelines for international compliance is more imperative than ever. Inaccurate and incorrect reporting can impede planning endeavors, lead to severe penalties, and hinder regular business operations.

If you have questions about Form 1042-S or need guidance on any of our international tax services, please contact our Global Business Services team.

Josh Riker, is a Consultant in the firm’s Global Business Services practice and is responsible for assisting clients and adding depth in all areas of the firm’s international tax consulting services including preparing client calculations, international forms, IC-DISC tax returns, and transfer pricing documentation.

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