What Form 1042-S (2011) is for
Form 1042-S (2011) reports a foreign person’s U.S. source income subject to withholding. It applies to foreign corporations, foreign partnerships, and nonresident aliens who received U.S.-source income during the 2011 calendar year. The form displays the gross income paid, the federal tax withheld, and whether any tax treaty benefits are applicable. Withholding agents, such as universities, payroll offices, or financial institutions, are responsible for filing and reporting payments using this form.
When you’d use Form 1042-S (2011)
Foreign persons and foreign corporations use this form when income from U.S. sources—like dividends, interest, rents, scholarships, or independent personal services—is paid, and tax withholding occurs. The withholding agent must report amounts withheld to the IRS by the due date of March 15, 2012. Foreign nationals or nonresident aliens receiving scholarship or fellowship grants also obtain this form to reflect income tax withholding for tax purposes.
Key rules or details for 2011
- Electronic filing requirement: Withholding agents filing 250 or more forms were required to file electronically using the Filing Information Returns Electronically (FIRE) system. This ensured accurate recordkeeping and faster processing of all federal taxes withheld.
- Income codes: Each type of payment was assigned an income code. For example, interest, royalties, or payments to independent contractors had specific income codes to identify their source of income subject to U.S. taxation.
- Withholding rate: The general tax rate was 30 percent of the entire amount paid unless a lower rate applied under a tax treaty between the United States and the recipient’s country.
- Multiple form requirement: A separate Form 1042-S was required for each foreign person and for each income code or tax rate category.
- Amended returns: If errors occurred, withholding agents were required to file an amended return marked “AMENDED” and submit it through the FIRE system or by paper, depending on the volume.
- Record retention: Withholding agents were required to maintain records for at least three years to document income tax withholding and any adjustments to the tax withheld.
- Penalties: The IRS could impose penalties for incorrect or late filings, and agents were responsible for interest on unpaid or under-withheld taxes.
Browse more tax form instructions and filing guides in our Forms Hub.
Step-by-step (High-level)
Step 1: Payment and withholding
During the 2011 tax year, withholding agents determined the proper tax rate for each payment to a foreign person or corporation. They reviewed documentation, such as Form W-8BEN or Form W-8ECI, to determine whether the income was effectively connected or subject to withholding under U.S. tax laws.
Step 2: Form preparation
After year-end, the agent completed Form 1042-S using the correct income code, country code, and tax rate. Each form listed gross income, federal tax withheld, and any applicable tax treaty benefits.
Step 3: Filing with the IRS
Withholding agents filed electronically through the IRS FIRE system or submitted paper forms along with Form 1042, the annual withholding tax return, by March 15, 2012. Both the form and the yearly return ensured the IRS received accurate totals of federal procurement payments paid and income tax withholding.
Step 4: Providing recipient copies
By the due date, the withholding agent furnished copies to recipients. Each foreign person or corporation used these forms for their own tax return, reporting the gross amount paid, total withholding credit, and any state income tax withheld.
Step 5: Recipient filing
Foreign recipients, including nonresident aliens and foreign nationals, used the information from Form 1042-S to file Form 1040NR or Form 1120-F. These forms allowed them to report income, claim refunds for over-withholding, and comply with both U.S. and their country’s tax laws.
Learn more about federal tax filing through our IRS Form Help Center.
Common mistakes and how to avoid them
- Combining multiple recipients: Withholding agents sometimes list more than one foreign person on a single form. Each form must report one recipient. To avoid this, prepare a separate form for every foreign person’s payment.
- Using incorrect income codes: Selecting the wrong income code caused confusion and misreporting. Verify each code against the IRS list to ensure it corresponds to the correct type of income subject to withholding.
- Missing or inaccurate TINs: Failing to obtain or verify tax identification numbers delays IRS processing. Always collect updated forms from foreign persons before reporting.
- Forgetting amended filings: When errors occur, withholding agents must correct them promptly. File amended forms using the AMENDED checkbox and provide recipients with revised copies.
- Neglecting state reporting: Some states required the separate filing of income tax withheld. Agents should always check state tax laws to ensure full compliance.
- Filing late: Missing the March 15 due date triggered penalties. Mark calendar reminders and use electronic filing to meet deadlines.
Learn more about how to avoid business tax problems in our guide on How to File and Avoid Penalties.
What happens after you file
After submitting Form 1042-S, the IRS reviews filings for completeness. If discrepancies arise between the gross income reported and the total tax withheld, the IRS may request clarification or additional documentation. Withholding agents remain responsible for any unpaid tax or incorrect filings. Foreign recipients use the form to prepare tax returns, report income taxes, and claim treaty benefits. The information helps verify their total withholding credit and ensures compliance with both U.S. and foreign tax laws.
FAQs
Do foreign corporations report income tax withholding on Form 1042-S (2011)?
Yes, foreign corporations must report income tax withholding on Form 1042-S (2011) when they receive U.S.-source income subject to withholding.
How does a foreign national report gross income from Form 1042-S (2011)?
A foreign national uses the gross income amount listed on Form 1042-S when filing Form 1040NR or Form 1120-F to calculate net income for tax purposes.
What income code should I use for a foreign person’s U.S. source payment?
You must select the income code that matches the payment type. The IRS provides a comprehensive list to help identify certain income that is subject to withholding.
When is the due date for filing Form 1042-S (2011)?
The due date for Form 1042-S (2011) was March 15, 2012. Filing electronically through the FIRE system ensured accurate reporting and timely submission.
How should non-resident aliens report income subject to withholding?
Nonresident aliens use information from Form 1042-S to report income subject to withholding and claim tax treaty benefits on their U.S. tax returns.
How does a foreign person’s U.S. income affect tax treaty benefits?
A foreign person’s U.S. income may qualify for reduced tax rates or exemptions through a tax treaty. Proper documentation must support the claim of treaty benefits.
What country code should I enter for a foreign corporation?
The country code on Form 1042-S identifies the recipient’s country of residence for tax purposes. Use the code corresponding to the country listed on Form W-8.
