What Form 1042-S (2014) Is For
Form 1042-S (2014) is an IRS form used by every withholding agent to report U.S. source income paid to any foreign person or foreign corporation. It covers gross income, federal tax withheld, and amounts paid under a tax treaty. The form documents all payments subject to U.S. income tax and provides detailed information on federal and state tax matters, including scholarship or fellowship grants, dividends, and interest payments.
When You’d Use Form 1042-S (2014)
Withholding agents use this form when reporting income paid during the 2014 calendar year. It applies to foreign partnerships, foreign corporations, and nonresident alien individuals receiving income subject to U.S. withholding tax. Filers must submit Form 1042-S by the due date of March 16, 2015. Late or amended filings require the withholding agent to file electronically and issue corrected forms promptly.
Key Rules or Details for 2014
- Electronic filing required: All financial institutions and withholding agents filing 250 or more forms must use the IRS FIRE System for electronic submission.
- FATCA and treaty compliance: The 2014 version introduced chapter 4 reporting for FATCA, requiring foreign tax identification numbers and status codes for each foreign person.
- Accurate reporting is required: Each income code must match the income subject to withholding, including dividends, interest, and dependent personal services.
- Form completion standards: Withholding agent’s name, taxpayer identification number, and recipient’s account number must be accurately listed to ensure tax compliance.
- Presumption rules: If a foreign person’s status cannot be verified, withholding agents must apply the highest tax rate allowed under tax laws.
- State income tax withheld: Any state income tax withheld must also be included, along with federal procurement payments paid or reported.
Browse more tax form instructions and filing guides in our Forms Hub.
Step-by-Step (High Level)
Step 1: Determine your filing obligation
A withholding agent must file Form 1042-S if income paid to a foreign person or foreign corporation is U.S. source income subject to withholding tax. This includes gross income paid for services or investments.
Step 2: Gather required documentation
Collect W-8 forms, payment records, and income codes. You must confirm each recipient’s foreign tax identification number, foreign postal code, and foreign person’s residency information for proper reporting.
Step 3: Complete the form
Enter each income code, the gross amount paid, federal tax withheld, and applicable tax rate. Accurately include information for any foreign partnerships or flow-through entity structures to report payments correctly.
Step 4: File with the IRS
Withholding agents must submit all forms by March 16, 2015. Filing information returns electronically through the IRS FIRE System is required for large filers and financial institutions.
Step 5: Furnish copies to recipients
Copies of the form must be provided to each foreign person or foreign corporation by the same due date. Include details such as the recipient’s account number, foreign postal code, and amounts paid.
Step 6: File Form 1042
Withholding agents must file Form 1042, the annual withholding tax return, summarizing all income paid and tax withheld. This includes data for both effectively connected income and fixed or determinable yearly income.
Learn more about federal tax filing through our IRS Form Help Center.
Common Mistakes and How to Avoid Them
- Missing Electronic Filing: Many withholding agents fail to utilize the IRS FIRE System. Complete the penalties and set up the electronic filing at least 30 days before the due date.
- Incorrect income codes: Using the wrong income code causes rejections. Verify all the following income codes with the IRS instructions for each income subject to withholding.
- Incomplete identification details: Failing to list the recipient’s foreign tax identification number or foreign postal code results in processing delays. Always confirm these details before filing.
- Reporting zero gross income: Never report zero in the gross income box. The gross amount must always reflect actual income paid for tax purposes.
- Late recipient copies: Copies for each foreign person or foreign corporation must be furnished in a timely manner. Set internal deadlines to ensure accurate reporting and delivery.
- Improper tax rate application: Always use the correct tax rate when claiming treaty benefits or calculating overwithheld tax repaid to maintain compliance.
- Ignoring presumption rules: When information is missing, apply the default withholding rate. This prevents underreporting and protects the primary withholding agent’s compliance status.
Learn more about how to avoid business tax problems in our guide on How to File and Avoid Penalties.
What Happens After You File
The IRS matches Form 1042-S data with Form 1042 and the recipient’s tax return to confirm tax compliance. If errors or discrepancies exist, the IRS may contact the designated withholding agent for clarification. Withholding agents must retain copies of all forms for at least three years. Recipients use this form to prepare their U.S. federal tax return or to claim treaty benefits on tax paid.
FAQs
Do I need to file Form 1042-S if no federal tax was withheld on the income?
Yes, withholding agents must file the IRS form even if no tax was withheld. The form reports income paid and ensures that treaty benefits and accurate federal tax reporting are provided for each foreign person.
How do I correct Form 1042-S errors for a foreign corporation?
If an error is found, file an amended Form 1042-S. Mark the amended box, correct income codes, and submit electronically. Also, provide corrected copies to each foreign corporation or recipient.
What income codes apply to Form 1042-S (2014)?
The form includes income codes for dividends paid, interest paid, dependent personal services, and other income subject to withholding tax. Accurate coding helps ensure the correct reporting of gross income and tax withheld.
When is the due date for Form 1042-S filing?
The due date for the 2014 filing year is March 16, 2015. Extensions can be requested with Form 8809 before this date. Amended filings must be submitted as soon as errors are found.
How is gross income calculated for Form 1042-S?
Gross income represents the total amounts paid before tax withholding. It includes all reportable income subject to U.S. source withholding tax, whether effectively connected or fixed annual income.
What should be included in a foreign person’s information section?
Each section for a foreign person must list the foreign tax identification number, foreign postal code, and the recipient’s account number to support accurate reporting and ensure proper tax withholding.
Can non-US citizens or independent contractors use a Form 1042-S?
Yes, non-US citizens, independent contractors, and foreign corporations can all receive income reported on Form 1042-S if they were paid income subject to U.S. withholding tax.
