Form 1042-S (2010) Year-Specific Checklist
Purpose of This Guide
Form 1042-S reports U.S.-source income paid to foreign persons and certifies federal withholding. Withholding agents must file this form for calendar year 2010 to report amounts paid during that period. Every person required to deduct and withhold tax under Chapter 3 of the Internal Revenue Code remains liable for such tax.
Preparation Steps
1. Verify Recipient Code and Income Code Alignment
You must confirm whether the recipient's primary occupation qualifies as an artist or athlete when reporting compensation subject to Income Codes 16–19 (independent services, dependent services, teaching, studying, or training). If the answer is yes, use Income Code 20 and Recipient Code 09 instead. This substitution rule applies uniformly in 2010 and affects withholding rate determination.
2. Determine Exemption Code Based on 2010 Tax Law
Enter Exemption Code 01 when income is effectively connected with a U.S. trade or business (0% federal withholding). Treaty-exempt income requires Code 04 and reference to the applicable tax treaty country listed in Publication 515. Portfolio interest under IRC §871(h) qualifies for Code 05 only if interest meets all statutory safe-harbor requirements (registered form, proper documentation on file).
3. Complete Withholding Agent Identity Block (Boxes 11 and 12a–d)
- Enter the withholding agent's EIN in Box 11.
- If the withholding agent is a Qualified Intermediary (QI), also enter the QI-EIN.
- For non-QI withholding agents, Box 11 shows only the standard EIN.
- Verify all address lines match IRS records; incomplete or mismatched names and addresses delay recipient processing.
4. Report Recipient Information and U.S. TIN (Boxes 13a–14)
Enter the recipient's full legal name in Box 13a and select the appropriate Recipient Code in Box 13b. In Box 14, enter the recipient's SSN, ITIN, EIN, or QI-EIN if available. If the recipient has no U.S. TIN, leave Box 14 blank and enter the foreign tax identifying number in Box 15 and the country code in Box 16.
5. Complete NQI/Flow-Through Entity Details (Boxes 17–20)
When the income flows through a Non-Qualified Intermediary or flow-through entity, enter the entity's name in Box 17, country code in Box 18, full address in Boxes 19a–c, and U.S. TIN (if any) in Box 20. If the entity has no U.S. TIN, enter its foreign identifying number separately. This section is required only when income does not pass directly to the ultimate beneficial recipient.
6. Enter Gross Income and Withholding Amounts (Boxes 2, 7–9)
- Report the actual gross income paid in Box 2.
- In Box 7, enter federal tax withheld at source.
- In Box 8, report withholding applied by other agents (including state withholding agents or foreign tax authorities).
- Box 9 (Total withholding credit) should equal the sum of Boxes 7 and 8, unless partial repayment occurred (see Box 10).
7. Report State Income Tax Withheld (Boxes 23–25)
Enter state income tax withheld in Box 23. In Box 24, enter the payer's state tax identification number (if different from the withholding agent). In Box 25, enter the two-letter state abbreviation or identify if multiple states withheld tax. Leave blank if no state withholding applied.
2010 Tax Year-Specific Updates
Substitute Payment Codes
Income Codes 33 (substitute payment—interest), 34 (substitute payment—dividends), and 35 (substitute payment—other) apply to payments made under securities lending arrangements. Correct code selection affects treaty eligibility and withholding rate determination.
IRC §877A Expatriate Reporting Codes
Income Codes 38 and 39 apply to expatriate income reporting for certain U.S. citizens who renounced citizenship after June 16, 2008, and certain long-term residents who terminated residence after June 16, 2008. Code 38 reports eligible deferred compensation items subject to IRC §877A(d)(1). Code 39 reports distributions from a nongrantor trust subject to IRC §877A(f)(1).
Exemption Code 10 (Qualified Securities Lender)
Qualified securities lenders assuming primary withholding responsibility for substitute dividends (under IRC §861(a)(1)(D)) are listed in Box 6 as Exemption Code 10. Withholding rate and documentation requirements differ from standard dividend withholding.
Publication 515 Treaty Reference (2010 Edition)
Exemption Code 04 (treaty-exempt) and Gambling Winnings (Income Code 28) references require the use of the 2010 edition of Publication 515 to verify country-specific treaty rates. Prior-year publications showed different treaty benefit countries and rates.
Assembly and Submission
- Prepare five copies: Copy A for IRS, Copy B for the recipient, Copy C for the recipient's federal return, Copy D for the recipient's state return, and Copy E for withholding agent records.
- Do not reproduce or alter the form structure.
- Attach Copy C to the recipient's federal income tax return (Form 1040NR, 1040NR-EZ, or 1120-F) when filing.
- Attach Copy D to the state tax return if the state withheld income tax.
- Report all copies to the IRS by March 15, 2011, with the annual transmittal Form 1042-T.
- Failure to timely file Form 1042-S results in penalties as outlined in the Form 1042-S instructions.
Extension Requests
Requests for extensions to provide statements to more than 10 recipients must be submitted electronically. File Form 8809, Application for Extension of Time To File Information Returns, to request an extension of time to file Forms 1042-S. You should request an extension as soon as you are aware that an extension is necessary, but no later than the due date for filing Form 1042-S.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
