Form 1042: Annual Withholding Tax Return for U.S. Source Income of Foreign Persons (2019)

What the Form Is For

Form 1042 is the annual tax return that U.S. withholding agents use to report taxes withheld from payments made to foreign persons. Think of it as the “master summary” that accompanies individual payment reports filed on Form 1042-S (which detail each specific payment to each foreign recipient).

If your business, organization, or trust makes payments to foreign individuals or entities—such as interest, dividends, royalties, pensions, or certain services—and U.S. tax law requires you to withhold tax from those payments, you're acting as a “withholding agent.” Form 1042 is how you tell the IRS about all the withholding you did during the calendar year.

The form covers taxes withheld under several Internal Revenue Code chapters: Chapter 3 (general withholding on foreign persons), Chapter 4 (Foreign Account Tax Compliance Act or FATCA withholding), section 5000C (specified federal procurement payments to foreign contractors), and section 877A (certain payments to covered expatriates). In plain terms, if you're required to file Forms 1042-S to report payments to foreigners, you must also file Form 1042—even if no tax was actually withheld.

When You’d Use It (Late/Amended Filing)

For the 2019 tax year, Form 1042 was due by March 16, 2020. The form should be mailed to the IRS at P.O. Box 409101, Ogden, UT 84409.

Extensions

If you needed more time to prepare your return, you could file Form 7004 to request an automatic extension, giving you until September 15, 2020. However, the extension only applies to filing the form—not to paying any taxes owed. You still needed to deposit all withheld taxes on time using the Electronic Federal Tax Payment System (EFTPS).

Late Filing and Penalties

If you missed the deadline, you could still file, but penalties would apply.

Late-filing penalty: 5% of the unpaid tax for each month (or part of a month) the return is late, up to a maximum of 25%.
Late payment penalties: Generally 0.5% per month, also capped at 25%.
Interest: Accrues on unpaid taxes from the due date until paid.

Amended Returns

If you discover errors after filing—such as incorrect withholding amounts, missing Forms 1042-S, or misreported payment types—you should file an amended Form 1042. When correcting Forms 1042-S, you must also amend your Form 1042 to reflect the adjustments. The IRS doesn't have a special “amended” version of the form; you simply file a corrected Form 1042 and clearly mark it as amended.

Key Rules for 2019

Several important rules governed Form 1042 filing in 2019.

Who Must File

Every withholding agent or intermediary who received, controlled, or paid income subject to withholding must file. This includes:

U.S. businesses paying foreign vendors
Qualified intermediaries (QIs)
Withholding foreign partnerships (WPs)
Foreign financial institutions (FFIs) under FATCA
Publicly traded partnerships distributing effectively connected income
Entities paying specified federal procurement payments or expatriate compensation

Electronic Deposits Required

All tax deposits must be made electronically through EFTPS. Failing to use EFTPS can result in a 10% penalty. Paper checks are not acceptable for deposits (though small balances under $200 can be paid with the return).

Deposit Timing

The deposit schedule depends on your withholding amounts:

$2,000 or more at quarter-month end (7th, 15th, 22nd, last day): deposit within 3 business days
$200–$1,999 at month end: deposit within 15 days after month end
Under $200 at year-end: pay with Form 1042 or deposit by March 16, 2020

Coordination with Form 1042-S

Form 1042 summarizes all the individual Forms 1042-S you filed. The total tax liability shown on Form 1042 (lines 64b–64d) must match the sum of withholding reported across all your Forms 1042-S. Mismatches often trigger IRS inquiries.

Rounding

For 2019, the IRS required all amounts to be rounded to whole dollars (50 cents and up rounds up; 49 cents and down rounds down).

New for 2019

The IRS introduced Schedule Q (Form 1042) for qualified derivatives dealers (QDDs) and modified rules for section 871(m) transactions. Partnerships and trusts could also rely on proposed regulations allowing them to withhold in a subsequent year and designate deposits as attributable to the prior year.

Step-by-Step Filing (High Level)

Step 1: Gather Documentation

Collect all Forms 1042-S you filed (or will file) for 2019, deposit records, and withholding calculations.

Step 2: Complete Identification Information

Enter your name, address, Employer Identification Number (EIN), and status codes (both Chapter 3 and Chapter 4) at the top of Form 1042. If you're a QI, WP, or WT, use your specialized EIN (QI-EIN, WP-EIN, or WT-EIN).

Step 3: Complete Section 1 — Record of Federal Tax Liability (Lines 1–60)

Report your tax liability for each quarter-monthly period. This section shows when tax was owed, not when you deposited it. Enter amounts on the lines corresponding to the dates payments were made.

Step 4: Complete Section 2 — Reconciliation of Payments

Summarize total gross income paid, amount subject to withholding, and tax withheld by income type. This reconciles back to your Forms 1042-S.

Step 5: Complete Section 3 (If Applicable)

If you made payments related to section 871(m) transactions, complete this section.

Step 6: Calculate Total Liability and Deposits (Lines 64–69)

Report total Chapter 3 and Chapter 4 tax liabilities, adjustments for over/underwithholding, total deposits made, and any balance due or overpayment.

Step 7: Sign and Date

An authorized person must sign under penalty of perjury.

Step 8: Mail by the Deadline

Send to the Ogden, UT address by March 16, 2020 (or extended due date).

Common Mistakes and How to Avoid Them

Mistake #1: Using the Wrong EIN

Many filers enter their general business EIN when they should use their QI-EIN, WP-EIN, or WT-EIN. Double-check which capacity you're filing in.

Mistake #2: Mismatched Totals

The sum of your monthly tax liabilities (lines 5, 10, 15, etc.) must equal the total on lines 64b–64d, and must match the total withholding on all your Forms 1042-S. Use a spreadsheet to verify before filing.

Mistake #3: Forgetting Both Status Codes

You must provide both Chapter 3 and Chapter 4 status codes, regardless of which types of payments you made. Missing codes can delay processing.

Mistake #4: Reporting Deposits Instead of Liability

Lines 1–60 show when tax was owed (liability), not when you deposited money. Line 65 is where you report deposits made.

Mistake #5: Missing the EFTPS Requirement

Some filers still try to send checks. All deposits must be electronic; failure to use EFTPS triggers an automatic 10% penalty.

Mistake #6: Not Filing When No Tax Was Withheld

Even if zero tax was withheld, you must file Form 1042 if you filed Forms 1042-S. The form is required whenever reporting is required.

How to Avoid These Mistakes

Read IRS Publication 515 and the Form 1042 instructions carefully, use tax software designed for international withholding, maintain detailed records throughout the year, and consider consulting a tax professional experienced with international payments.

What Happens After You File

After you mail Form 1042, the IRS processes it at their Ogden, UT campus. Here's what typically happens:

Processing Timeline

The IRS generally processes Forms 1042 within several weeks to a few months. Complex returns or those with discrepancies may take longer.

Matching Program

The IRS matches your Form 1042 against the Forms 1042-S you filed. If totals don't reconcile, you'll receive a notice asking for an explanation or correction.

Refunds

If you overpaid (line 69 shows a credit), you can request a refund or apply it to the next year. Refunds typically arrive within 6–12 weeks if there are no issues.

Balance Due

If you owe additional tax, pay immediately to minimize penalties and interest. The IRS will send a bill if you didn't pay with your return.

Audits and Examinations

The IRS may select your return for examination, especially if you're a large withholding agent or if patterns suggest under-withholding. Keep all supporting documentation for at least three years (longer for certain issues).

Interest and Penalty Notices

If the IRS assesses additional interest or penalties, they'll calculate the amounts and send you a bill. You don't need to figure these yourself.

No News Is Usually Good News

If weeks pass without IRS contact, your return was likely accepted and processed without issues.

FAQs

Q1: Do I Need to File Form 1042 if I Didn't Withhold Any Tax?

Yes. If you're required to file Forms 1042-S (because you made reportable payments to foreign persons), you must file Form 1042 even if no tax was withheld. The form documents that withholding wasn't required, not just that it was performed.

Q2: What's the Difference Between Form 1042 and Form 1042-S?

Form 1042-S is an information return for each recipient showing specific payment details (like a W-2 for foreign payments). Form 1042 is the tax return that summarizes all your Forms 1042-S and reports your total withholding tax liability. Think of Form 1042 as the cover sheet and Form 1042-S as the detailed attachments.

Q3: Can I File Form 1042 Electronically?

For 2019, electronic filing of Form 1042 was available but not mandatory for most filers. (It became required for financial institutions in later years.) Even if you e-file Forms 1042-S, you could mail paper Form 1042.

Q4: I Made a Mistake on My 2019 Form 1042. How Do I Fix It?

File a corrected Form 1042 as soon as you discover the error. Mark it clearly as “Amended” and include an explanation of changes. If the error affects Forms 1042-S, correct those first, then amend Form 1042 to match.

Q5: What if I File Late?

File as soon as possible. The late-filing penalty (5% per month, up to 25%) stops accruing once you file. Include full payment to minimize late-payment penalties (0.5% per month). If you have reasonable cause for the delay (serious illness, natural disaster, etc.), explain it in writing when you file—the IRS may waive penalties.

Q6: Do Payments to Canadians or Mexicans Require Form 1042?

It depends. If you're paying U.S.-source income subject to withholding to Canadian or Mexican residents (or any foreign person), and reporting requirements apply, you must file Forms 1042-S and Form 1042. Tax treaties may reduce or eliminate withholding rates, but reporting is still required.

Q7: I'm a Partnership with Foreign Partners. Do I Use Form 1042 for Effectively Connected Income (ECI)?

Generally, no. For withholding on ECI allocated to foreign partners, use Form 8804 and Form 8805 (section 1446 withholding). However, if you're a publicly traded partnership distributing ECI or have other U.S.-source income not effectively connected, you'd use Form 1042 for those payments.

For More Information

IRS Form 1042 page
2019 Form 1042 Instructions (PDF)
Publication 515 — Withholding of Tax on Nonresident Aliens and Foreign Entities
IRS Discussion of Form 1042, Form 1042-S and Form 1042-T
IRS International Section: 267-941-1000 (6 a.m.–11 p.m. ET)