What Form 1042 (2012) Is For
IRS Form 1042 (2012) is the annual withholding tax return that withholding agents use to report tax withheld on U.S. source income paid to foreign persons. It covers certain income paid to nonresident aliens, foreign corporations, foreign partnerships, foreign estates, and foreign trusts. The Internal Revenue Service requires this form to ensure that all income subject to withholding and federal tax liability for the calendar year is accurately reported and paid.
This form applies to any withholding agent, financial institution, or qualified intermediary responsible for managing withholdable payments and income of foreign persons. It must be filed even if an administrative exemption or tax treaty reduces or eliminates tax withholding. Form 1042 reports total income paid, tax deposited, and tax withheld, ensuring compliance with the withholding requirements under the Internal Revenue Code.
For a detailed breakdown of filing requirements, eligibility rules, and step-by-step instructions, see our comprehensive Form 1042 (2012) Instructions: Guide for Withholding Agents.
When You’d Use Form 1042
Withholding agents must file IRS Form 1042 (2012) when they pay certain income of foreign persons, including nonresident aliens, foreign corporations, foreign partnerships, and foreign trusts, that is subject to withholding. The annual withholding tax return is used to report tax withheld and federal tax liability for all U.S. source income paid during the calendar year. If the due date falls on a Saturday, Sunday, or legal holiday, the next business day becomes the deadline for filing. Filing as soon as possible helps avoid penalties for late filing or late payment.
Key Rules or Details for 2012
For tax year 2012, withholding agents were required to report all income subject to withholding and ensure that the tax deposited matched the reported liability. Electronic filing was mandatory for those submitting 250 or more paper forms. Qualified intermediaries and financial institutions had specific withholding obligations under the withholding agent’s chapter of the Internal Revenue Code. Agents could request an extension of time to file, but not to pay. Reasonable cause could reduce penalties if errors occurred without willful neglect.
Special Rules
Certain entities, such as regulated investment companies and real estate investment trusts, must adjust their withholding for dividends declared in one tax year but paid in the subsequent calendar year. Publicly traded partnerships may have additional section 1446 reporting obligations for withholdable payments.
For complete details on wage reporting, withholdings, and unemployment tax filings, see our guide for the Annual Withholding Tax Return for U.S. Source Income.
Step-by-Step (High Level)
Step 1: Gather Required Documents
Collect all Forms 1042-S for the year, whether paper or electronic. Include records of taxes withheld, taxes deposited, and proof of any overpayments or prior-year credits applied. Have the employer identification number (EIN) or the qualified intermediary's EIN ready.
Step 2: Complete the Identification Section
Enter the name, address, and EIN of the withholding agent. Indicate whether filing as a qualified intermediary, withholding partnership, or withholding trust. Use the appropriate EIN assigned for that role.
Step 3: Record Federal Tax Liability
Complete lines 1 through 60 to show federal tax liability by period. Report the liability for the time the income was paid, not when the tax was deposited. This ensures that income subject to withholding aligns with the correct reporting period.
Step 4: Fill in Summary Information
Enter the number of Forms 1042-S filed, the total income paid, and the total tax withheld. Reconcile these figures with all submitted 1042-S forms.
Step 5: Calculate Payment Balances
Add all deposits made during the tax year. Determine whether there is an unpaid tax balance or an overpayment. If there is an overpayment, indicate whether it should be refunded or applied to the next tax year.
Step 6: Sign and Submit
Sign the return under penalty of perjury. Mail the completed form to the Ogden Service Center, P.O. Box 409101, Ogden, UT 84409. Ensure that any paper Forms 1042-S are accompanied by Form 1042-T.
Common Mistakes and How to Avoid Them
Common filing errors can result in penalties or correspondence from the IRS. The following are frequent problems and their solutions:
- Failing to meet electronic filing requirements: Withholding agents filing 250 or more Forms 1042-S must submit electronically; verify the submission method before filing.
- Reporting mismatched totals: Ensure totals reported on Form 1042 match the combined amounts on all Forms 1042-S. Maintaining a reconciliation spreadsheet can help prevent discrepancies and ensure accurate financial records.
- Confusing tax liability with deposit dates: Report tax liability based on when income was paid, not when deposits were made through EFTPS.
- Using incorrect EINs or missing QI identifiers: Confirm that the correct Employer Identification Number and any required Qualified Intermediary identifiers appear on every submission.
- Missing EFTPS payment deadlines: Schedule deposits by 8 p.m. Eastern Time the day before they are due to ensure timely payment.
Verifying filing methods, reconciling totals, and meeting electronic and payment deadlines help withholding agents avoid costly errors and IRS penalties.
What Happens After You File
After Form 1042 is filed, the Internal Revenue Service reviews the annual withholding tax return and compares it to related Forms 1042-S. Any discrepancies in income subject to withholding or tax withheld may lead to correspondence or penalties. Interest accrues on unpaid taxes until they are paid in full. Withholding agents should keep records of income paid, taxes withheld, and tax deposited for at least four years following the calendar year of filing.
FAQs
Who must file IRS Form 1042 (2012)?
Any withholding agent who made payments of U.S. source income subject to withholding to foreign persons, including foreign corporations, foreign partnerships, and foreign trusts, must file Form 1042. The Internal Revenue Service requires this annual withholding tax return to report tax withheld and income paid.
What is considered income subject to withholding under Form 1042?
Income subject to withholding includes certain types of income from foreign persons, such as dividends, royalties, rents, and compensation paid to nonresident aliens. Withholding agents must report all withholdable payments on IRS Form 1042 and ensure taxes are properly withheld and deposited.
What is the due date for filing Form 1042?
The due date to file Form 1042 for each tax year is March 15 following the calendar year in which the income was paid. If the due date falls on a Saturday, Sunday, or legal holiday, the next business day becomes the filing deadline.
What happens if a withholding agent files late or fails to pay?
If Form 1042 is filed late or taxes remain unpaid, the IRS may impose penalties and interest. The late filing penalty is 5 percent per month of the unpaid tax. Penalties may be waived if there is reasonable cause and not willful neglect.
Can Form 1042 be filed electronically?
Yes, Form 1042 can be filed electronically using IRS-approved e-file systems. Electronic filing ensures timely submission and accuracy. Withholding agents who file 250 or more paper forms must use electronic filing methods for compliance with withholding requirements.
What is the difference between Form 1042 and Form 1042-S?
Form 1042 summarizes total annual tax liability and tax withheld by withholding agents, while Form 1042-S provides detailed information for each foreign person’s income subject to withholding. Both forms must align to accurately report source income and taxes withheld to the Internal Revenue Service.
For more resources on filing or understanding prior-year IRS forms, visit our Form Summaries and Guides Library or see our IRS assistance guide.
