Form 1042-S (2022)
2022 Purpose and Reporting Requirements
Form 1042-S reports U.S.-source income paid to foreign persons subject to Chapter 3 and Chapter 4 withholding. Withholding agents must report all payments under both regimes for 2022, including dormant account escrow procedures under Regulations section 1.1471-4(b)(6) and the use of Global Intermediary Identification Numbers for qualifying foreign financial institutions. The form requires separate reporting by account for U.S. financial institutions maintaining accounts within the United States.
Step-by-Step Compliance (2022)
1. Determine Chapter Indicator (Box 3)
Enter “3” for Chapter 3 withholding on nonresident aliens and foreign corporations. Enter “4” for Chapter 4 FATCA withholding on foreign account holders. Dormant account treatment under Chapter 4 requires box 7b notation if tax is escrowed pending account activation verification.
2. Classify Income Code (Box 1)
Select from the 51 income codes available for 2022. Income Code 57 applies to amounts realized subject to section 1446(f) on transfers of publicly traded partnership interests, including distributions made by PTPs. Brokers use this code when reporting or withholding on PTP interest transfers.
3. Report Gross Income (Box 2)
Enter the total amount before any deductions or withholding. Include all substitute payments at their full notional value if the withholding agent is responsible for withholding under Regulations section 1.1441-2. Substitute payment codes include 33, 34, 35, 54, and 56.
4. Apply Exemption Code (Boxes 3a/4a)
You must enter the exemption authority when the tax rate is 00.00%.
● Code 19 (Exempt from Withholding Under IGA) applies to U.S. reportable accounts and nonconsenting U.S. accounts.
● Code 20 (Dormant Account) applies only when the escrow procedure under Regulations section 1.1471-4(b)(6) is used, and box 7b is checked.
● Code 20 requires that the payment be made to a participating FFI or registered deemed-compliant FFI that represented on its withholding statement that the payment is allocable to a dormant account holder.
5. Enter Tax Rate (Boxes 3b/4b)
Apply the treaty-reduced or statutory 30 percent rate for Chapter 3 withholding. Apply the 30 percent withholding rate for Chapter 4 unless an exemption code applies. Rates must reflect the applicable treaty in effect as of January 1, 2022.
6. Record Federal Tax Withheld (Box 7a)
Enter the amount of Chapter 3 or Chapter 4 tax actually withheld and deposited. Check box 7b if the tax was not deposited in the current year under escrow procedures. The escrow procedure applies to Chapter 4 dormant accounts or prior-year escrow reversions under Regulations sections 1.1471-2(a)(5)(ii) and 1.1441-3(d).
7. Complete Withholding Agent Identification (Boxes 12)
● Enter the EIN in box 12d.
● Enter the GIIN in box 12e if you are required to collect a GIIN for the recipient under Chapter 4 documentation requirements.
● Enter the country code in box 12f (use “US” for U.S. persons or foreign branches of U.S. persons).
● Enter Chapter 3 and Chapter 4 status codes in boxes 12b and 12c that match the withholding agent's actual status.
A U.S. branch of a foreign financial institution uses Code 05 (treated as U.S. Person) or 06 (not treated as U.S. Person) only if no ECI presumption applies.
8. Identify Recipient and Apply LOB (Boxes 13)
Enter the recipient name, country code, and U.S. TIN if available. Enter Chapter 3 and Chapter 4 status codes that correspond to the recipient's classification. Enter the GIIN in box 13h if the recipient is a participating FFI, registered deemed-compliant FFI, sponsored FFI, direct reporting NFFE, or sponsored direct reporting NFFE. Enter the LOB code in box 13j if treaty benefits are claimed.
9. Report Intermediary or Flow-Through Entity (Boxes 15)
Enter the intermediary's EIN, GIIN, Chapter 3, and Chapter 4 status codes, name, and address if payment flows through a QI, WFP, WFT, or other intermediary. The GIIN is required in box 15e if the intermediary is a participating FFI, registered deemed-compliant FFI, sponsored FFI, direct reporting NFFE, or sponsored direct reporting NFFE. The Chapter 4 status code must reflect whether the intermediary is a participating FFI, deemed-compliant FFI, or nonparticipating FFI as of the withholding date.
10. Complete Payer Identification (Boxes 16)
Enter the ultimate payer's name, TIN, GIIN, and Chapter 3 and Chapter 4 status codes. The status code must indicate whether a foreign corporation payer operates a U.S. trade or business. Code 38 applies to payments to or from a publicly traded partnership.
11. Report State Tax Withheld (Box 17)
Enter any state income tax withheld, the state's tax identification number, and the state name. State tax withholding is not subject to federal escrow procedures. The report states withholding separately on each applicable state return.
12. Verify Copy Distribution and Assembly
● Copy A: File with the IRS.
● Copy B: Provide to the recipient.
● Copy C: Attach to federal return.
● Copy D: Attach to state return.
● Copy E: Retain for withholding agent records.
All copies must display identical information. File all copies by March 15, 2023, for 2022 tax year payments.
2022 Year-Specific Updates
GIIN Requirement for Qualifying Entities
Participating FFIs, registered deemed-compliant FFIs, sponsored FFIs, direct reporting NFFEs, and sponsored direct reporting NFFEs must enter a GIIN in boxes 12e, 15e, and 16c. The absence of a valid GIIN triggers Chapter 4 withholding on accounts held by those entities at participating FFIs.
Dormant Account Escrow Procedure (Code 20)
The 2022 guidance under Regulations section 1.1471-4(b)(6) allows withholding agents to escrow Chapter 4 tax on accounts with no account-holder documentation and no prior transactions. You must check box 7b and show “4” in box 3 with exemption code 20. The withholding agent deposits the tax in the subsequent year upon account activation or account holder cure.
Section 1446(f) Withholding (Code 57)
Brokers use Code 57 to report amounts realized subject to section 1446(f) on transfers of PTP interests. Section 1446(f) requires the transferee to withhold 10 percent of the amount realized on disposition of a partnership interest unless an exception applies. The code also applies to distributions made by PTPs.
Income Code 56 for Combined Section 871(m) Transactions
Code 56 addresses section 871(m) transactions resulting from combining transactions under Regulations section 1.871-15(n). Withholding agents must use this code for any dividend equivalent pursuant to a transaction that is a section 871(m) transaction as a result of combining transactions.
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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.
