Form 1042-S Checklist for Tax Year 2013
Purpose
Form 1042-S reports U.S.-source income paid to foreign persons subject to withholding under Chapter 3 of the Internal Revenue Code. Withholding agents must report all payments of amounts subject to withholding made during the 2013 calendar year. The form documents income paid to foreign persons and tax withheld under Chapter 3, which addresses tax treaties and withholding on fixed or determinable annual or periodical income from U.S. sources.
Completion Steps
Verify Withholding Agent Status and Identification
Determine whether the withholding agent qualifies as a U.S. withholding agent under Chapter 3. Enter the withholding agent's employer identification number in Box 11 and complete the name and address fields in Boxes 12a through 12d. You must complete all required fields at a minimum, including boxes 1, 2, 5, 6, 7, 9, 11, 12a through 12d, 13a, 13b, and 16.
Classify the Recipient Under the Chapter 3 Status Code
Select the recipient code in Box 13b that describes the recipient's classification under Chapter 3 rules. Common codes include 01 for individuals, 02 for corporations, 03 for partnerships, 04 for withholding foreign partnerships or withholding foreign trusts, and other codes as appropriate. The recipient code reflects the Chapter 3 treaty eligibility rules and withholding classification that applies to the payment recipient.
Report Gross Income and Income Code
- Enter gross income before any deductions or withholding allowances in Box 2.
- Select the appropriate income code from the 2013 list in Box 1.
- Use Code 01 for interest paid by U.S. obligors (general).
- Use Code 06 for dividends paid by U.S. corporations (general).
- Use Code 16 for independent personal services.
- Use Code 29 for other income.
- Match the income code to the actual nature of the payment being reported.
Confirm Tax Rate and Withholding Calculation
Enter the applicable Chapter 3 tax rate in Box 5. The statutory withholding rate typically equals 30 percent for dividends and interest unless a treaty rate applies.
Calculate total federal tax withheld and enter the amount in Box 7 based on the tax rate applied to the payment. Enter any applicable exemption code in Box 6 to indicate treaty benefits, effectively connected income treatment, or other exemptions from withholding.
Identify Intermediary or Flow-Through Entity
Complete Boxes 15a through 15f if income passes through a partnership, trust, or qualified intermediary before reaching the recipient. Enter the intermediary's employer identification number in Box 15a and the intermediary's name in Box 15b.
Provide the country code and complete address for the intermediary in the remaining fields. Assign the appropriate recipient code that reflects the intermediary's withholding responsibility under Chapter 3.
Determine the Recipient's Country Code and Address
- Enter the recipient's country code in Box 14b using the two-letter ISO format.
- Complete the recipient's full address in Boxes 14c and 14d.
- Include the foreign postal code if applicable to the recipient's country.
- Link the payment to the recipient's tax residency for treaty claim verification.
Complete Payer Information
Enter the payer's name in Box 21 and the payer's taxpayer identification number in Box 22. The payer represents the person for whom the withholding agent acts as a paying agent pursuant to an agreement. This information identifies the entity making the reportable payment for 2013 withholding documentation purposes.
2013 Year-Specific Requirements
Interest on Deposits
Beginning January 1, 2013, deposit interest described in section 871(i)(2)(A) aggregating $10 or more requires reporting on Form 1042-S. You must report this interest if paid to certain nonresident alien individuals with respect to deposits maintained at an office within the United States. The nonresident alien individual must reside in a country identified in Revenue Procedure 2012-24 as having an income tax or other convention relating to information exchange with the United States.
Filing Deadlines and Methods
- File all Forms 1042-S with the Internal Revenue Service by March 15, 2014.
- Furnish Form 1042-S to the recipient of the income by March 15, 2014.
- Submit 250 or more Forms 1042-S electronically through the Filing Information Returns Electronically system.
- Transmit paper Forms 1042-S using Form 1042-T as the transmittal document.
Mandatory Reporting Requirements
You must file Form 1042-S even if you did not withhold tax because the income was exempt from tax under a U.S. tax treaty or the Internal Revenue Code. Report payments when the income qualifies as effectively connected with the conduct of a trade or business in the United States. File the form when you release previously withheld tax to the recipient.
Chapter 3: Withholding Standards
The 2013 Form 1042-S reports only amounts subject to withholding under Chapter 3 of the Internal Revenue Code. Chapter 3 addresses withholding on payments to foreign persons based on tax treaties and Code provisions. Every withholding agent must deduct and withhold the required tax under Chapter 3 and remains liable for that tax regardless of whether another person has already withheld from the payment.
Forms and Documentation
Withholding agents must also file Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, in addition to Forms 1042-S. The recipient should provide appropriate documentation, such as Form W-8BEN, Form W-8ECI, Form W-8EXP, or Form W-8IMY, to establish foreign status and eligibility for treaty benefits or exemptions. Withholding agents should retain copies of information returns filed with the Internal Revenue Service for at least three years after the reporting due date.
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.
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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.
