global Tax Understanding Form 1042-S: Guide for Foreign Nationals on U.S. Tax Withholding March 11, 2025 Are you confused about Form 1042-S and its implications for your U.S. tax obligations? Here’s what you need to know about what income is reported, how tax treaties affect withholding rates, and how to properly report this information on your tax return. Are you a non-resident receiving U.S.-sourced income? Here’s what you should know about Form 1042-S and your filing requirements. What is Form 1042-S? Form 1042-S is utilized by withholding agents to properly allocate and report payments of certain types of U.S.-sourced gross income, as well as any required withholding to the recipients of such payments. What types of income are reported on Form 1042-S? Types of income reported are typically passive in nature, such as Interest Dividends Rents Royalties Pensions Capital gains Certain active nature payments like consulting income, sports prizes, and earnings from artistic endeavors. Who receives Form 1042-S? Copies of Forms 1042-S are provided to the recipient and also to IRS, so their matching programs can ensure taxpayers are accurate in their reporting. Withholding agents should obtain your personal information from the documentation provided at the start of the investment or contract. The withholding agent, which can be a bank, investment house, broker, employer, etc, should document your foreign status by requesting a Form W-8. What is the withholding rate? For documented non-residents, there is a default, statutory withholding rate of 30% applied to the payments in this discussion. There are, however, always exceptions. For instance, portfolio interest is exempted from tax by statute. Depending on your location and how your Form W-8 was completed, other types of income may be subject to reduced rates of withholding, or may be excluded from withholding altogether, if you qualify for benefits under one of the roughly 70 joint income tax treaties that the United States maintains with other countries. Can you receive multiple forms? Forms 1042-S are issued according to the type of income paid out, so it is possible to receive multiple forms from the same withholding agent. Even payments that may be excluded from withholding, or in which a treaty rate reduces withholding to zero, are still reportable. When do the IRS and recipients receive Form 1042-S? Forms 1042-S are due to be provided to IRS and recipients by March 15th each year, though a 30-day extension can be granted to the withholding agent, if needed. If you receive Form 1042-S, does that mean you have U.S. tax obligations? No, this does not trigger automatic U.S. filing requirements. As mentioned above, certain types of income received are passive in nature and are subject to a flat tax corresponding to the statutory 30% withholding. If that constitutes the entirety of your US-sourced income, you likely do not have a filing requirement, since IRS already has their money. Other types, such as independent personal services (consulting income) would be subject to graduated income rates, same as a U.S. resident. In such cases, filing a return would likely garner a refund of over-withholdings. In order to file a U.S. return, you must have either a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN). SSNs are applicable to U.S. citizens, green card holders, and anyone else entitled to work in the United States. Anyone who does not qualify for an SSN, but will owe taxes to the U.S. should apply for an ITIN. By default, Form W-7, Application for IRS Individual Taxpayer Identification Number, gets attached to the initial filing of Form 1040NR, U.S. Nonresident Alien Income Tax Return and is filed on paper. However, there are certain situations in which a Form W-7 can be filed without an accompanying tax return. In these instances, other additional documentation is required. Applying for an ITIN Non-residents needing an ITIN must submit Form W-7 with their tax return. Supporting documents, such as a certified passport copy, are required but should not be submitted in original form. ITINs are typically issued within 6–8 weeks. Tax Filing Deadlines for Non-Residents April 15th – For those residing in the U.S. June 15th – For non-residents outside the U.S. without U.S. wages October 15th – Extended deadline (filing only; payments are still due by April 15th) Understanding Form 1042-S and its implications can help non-residents stay compliant with U.S. tax laws and avoid unnecessary penalties. Make sure you’re in compliance!
