Form 1042-S, titled "Foreign Person's U.S. Source Income Subject to Withholding," is a document used by the U.S. Internal Revenue Service (IRS). This form is designed to report income paid to foreign persons, including nonresident aliens, foreign partnerships, and foreign corporations, which might be subject to income tax withholding.
This form ensures that the U.S. can tax certain kinds of income earned within its borders by foreign entities. It ensures that foreign persons report and pay taxes on U.S. sourced income, maintaining tax compliance and fairness in the system.
Any U.S. or foreign entity that withholds tax on U.S.-sourced income paid to a foreign individual or entity must file this form. Typical filers include:
Form 1042-S covers various types of U.S.-sourced income, such as:
The withholding rate varies based on the type of income and the tax treaty between the U.S. and the recipient's country. For instance, while the default withholding rate on U.S.-source fixed or determinable, annual or periodical (FDAP) income is 30%, a tax treaty may reduce this rate.
The deadline for furnishing Form 1042-S to income recipients is March 15 of the year following payment. The same date applies for filing with the IRS, although extensions may be requested.
Yes, failing to provide a correct Form 1042-S by the deadline can result in penalties. The amount varies based on the delay and the size of the entity.
For further and time-to-time updated information, please visit IRS official website.