1042-S Reporting Services

1042-S Outsourcing Services

Are you struggling with the 1042-S instructions? Let SPS/GZ help your organization process its 1042-S forms. IRS Form 1042-S is one of the more complicated tax forms that need to be mailed and filed by withholding agents who made payments from U.S. sourced income to a non-U.S. citizen. A withholding agent may be an individual, corporation, partnership, trust, association, or any other entity, including any foreign intermediary, foreign partnership, or U.S. branch of certain foreign banks and insurance companies.

What is Form 1042-S?

Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, is the IRS form that reports amounts paid to non-citizens who are subject to income tax withholding. The 1042-S form needs to be provided even if no amount is required to be withheld from the payment. Some income types paid to a Foreign Person that need to be reported on Form 1042-S:  
  • Royalties
  • Scholarships
  • Types of interest payments
  • Dividends paid by U.S. corporations
  • Income for services performed in U.S.
  • Pension income
  • Gambling winnings
  • Board of directors’ payments

What is the filing and mailing deadline for Form 1042-S?

The deadline to file and mail Form 1042-S is March 15th. A 30-day extension can be requested by completing Form 8809, Application for Extension of Time to File Information Returns, but the deadline to file for an extension is March 15th. SPS/GZ offers a comprehensive solution for 1042-S reporting services, including a thorough review of data for completeness and accuracy, creation of forms, printing, mailing and filing with the IRS. Our Form 1042-S clients will have a dedicated SPS/GZ representative who will assist them through the 1042-S reporting process. SPS/GZ’s professional representatives perform an in-depth examination of client’s data to identify potential errors and missing information and ensures that data is formatted correctly to meet the IRS specific reporting requirements.  This review process reduces exposure to possible penalties by the IRS.

What are some “gotchas” related to the Form 1042-S?

    • Box 1 must be completed and is critical for Form 1042-S. This is the income code and it informs the IRS what type of income is being reported. Unlike the 1099-MISC form that has fields for different income types, Form 1042-S has an income code box (Box 1) and a gross income box (Box 2). It is imperative to get this code correct!
    • Filers must indicate a “3” or “4” in the Chapter Indicator Box (Box 3).
    • Box 3 indicates Chapter 3 or 4. “Chapter 3” is for withholdings that apply to foreign persons, while “Chapter 4” is for entities that are foreign financial institutions.
    • Many filers think that they only need to complete Box 3a and 3b IF they enter a “3” in Box 3 OR they need to complete Box 4a and 4b IF they enter a “4” in Box 3. However, this is not the case. All four of these boxes (3a, 3b, 4a, and 4b) are required fields. A rule of thumb for completing these fields is: If the tax rate in Box 3b is greater than “00,” then the Exemption Code in Box 3a is “00.” If the rate in Box 3b is “00,” then the Exemption Code in Box 3a would be between “01-24.” Similarly, either Box 4a or 4b will have “00” and the other box will have a code value or tax rate greater than “00.”
    • Tax rates must be shown as four digits  (e.g., 00.00 or 20.00) and should be listed as one of the rates listed in the valid tax rate table in the 1042-S instructions.
    • Boxes 7 and 10 are both required fields, even if the values are “0.”

Why should you consider Outsourcing the Form 1042-S process?

Form 1042-S is a complex and highly scrutinized form by the IRS. Most entities do not fully understand how to correctly complete and file the forms with the IRS. Outsourcing Form 1042-S reporting not only saves companies valuable time and money, but it also lends peace of mind to clients knowing that certified and experienced professionals are providing support and advice for the complicated Form 1042-S.

1042-S Printing & Mailing

As part of our 1042-S outsourcing solution, we handle all of your printing and mailing needs regardless of volume. Our system prints Copies B, C and D of the 1042-S forms.  Our pricing includes all postage and handling, plus 1042-S filing service, electronic archiving, and unlimited corrections of forms.  We partner with you to ensure that you meet all of your 1042-S filing requirements.

1042-S Filing Service

As part of our complete 1042-S outsourcing package, we electronically file your 1042-S forms with the IRS by the designated deadlines. Our 1042-S filing service is robust and includes confirmation of transmission for clients. We make sure that all your 1042-S filing requirements are met in order to minimize penalties. Withholding agents with more than 250 forms and financial institutions must file electronically.

Organizations & Accolades

Contact us to learn how SPS/GZ can be your company’s trusted partner for stock plan administration and tax form reporting services.