General Instructions
Use the 2002 Form 1042-S only for income paid during 2002. Do not use the 2002 Form 1042-S for income paid during 2001.
Change To Note
New transmittal form.
New Form 1042-T, Annual Summary and Transmittal of Forms 1042-S, is used to transmit paper Forms 1042-S to the Internal
Revenue Service. See Where, When, and How To File on this page.
Purpose of Form
Use Form 1042-S to report income described under Amounts Subject to Reporting on Form 1042-S on page 4 and to report amounts withheld
under Chapter 3 of the Internal Revenue Code.
Note:
Every person required to deduct and withhold any tax under Chapter 3 of the Code is liable for such tax.
Copy A is filed with the Internal Revenue Service. Copies B, C, and D are for the recipient. Copy E is for your records.
Do not use Form 1042-S to report an item required to be reported on -
- Form W-2, (i.e., wages and other compensation made to employees (other than compensation for dependent personal services for
which the benficial owner is claiming treaty benefits) including wages in the form of group-term life insurance),
- Form 1099, or
- Form 8288-A, Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests, or Form
8805, Foreign Partner's Information Statement of Section 1446 Withholding Tax. Withholding agents otherwise required to report a distribution
partly on a Form 8288-A or Form 8805 and partly on a Form 1042-S may instead report the entire amount on Form 8288-A or Form 8805.
Who Must File
Every withholding agent (defined on page 2) must file an information return on Form 1042-S to report amounts paid during the preceding calendar
year that are described under Amounts Subject to Reporting on Form 1042-S on page 4. However, withholding agents who are individuals are
not required to report a payment on Form 1042-S if they are not making the payment as part of their trade or business and no withholding is required
to be made on the payment. For example, an individual making a payment of interest that qualifies for the portfolio interest exception from
withholding is not required to report the payment if the portfolio interest is paid on a loan that is not connected to the individual's trade or
business. However, an individual paying an amount that has actually been subject to withholding (e.g., U.S. source alimony) to a nonresident alien is
required to report the payment, whether or not the individual actually withholds because the individual is required to withhold on the payment. See
Multiple Withholding Agent Rule on page 10 for exceptions to reporting when another person has reported the same payment to the recipient.
You must file a 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 Code, including
the exemption for income that is effectively connected with the conduct of a trade or business in the United States, or you released the tax withheld
to the recipient. For exceptions, see Amounts That Are Not Subject to Reporting on Form 1042-S on page 4.
Amounts paid to residents of U.S. possessions and territories are not subject to reporting on Form 1042-S if the beneficial owner of the income is
a U.S. citizen, national, or resident alien.
Note:
If you are required to file Form 1042-S, you must also file Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign
Persons. See Form 1042 for more information.
Where, When, and How To File
Forms 1042-S, whether filed on paper, on magnetic media, or electronically, must be filed with the Internal Revenue Service by March 17, 2003. You
are also required to furnish Form 1042-S to the recipient of the income on or before March 17, 2003.
Send any paper Forms 1042-S with Form 1042-T, Annual Summary and Transmittal of Forms 1042-S, to the Internal Revenue Service Center,
Philadelphia, PA 19255. You must use Form 1042-T to transmit paper Forms 1042-S. Use a separate Form 1042-T to transmit each type of Form 1042-S. See
Payments by U.S. Withholding Agents on page 5 and the Form 1042-T instructions for more information. If you have 250 or more Forms 1042-S
to file, follow the instructions under Magnetic Media/Electronic Reporting below.
Extension of time to file.
To request an extension of time to file Forms 1042-S file Form 8809, Request for Extension of Time To File Information Returns, with the
address shown on that form. 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. A request for an extension of time to file Form 1042-S is not automatically approved. If your request for an extension is
approved, you will have an additional 30 days to file Form 1042-S. If you need more time, a second Form 8809 may be submitted before the end of the
initial extended due date. See Form 8809 and Pub. 1187, Specifications for Filing Form 1042-S, Foreign Person's U.S. Source Income Subject
to Withholding, Magnetically or Electronically, for more information.
Note:
If you are a magnetic media /electronic transmitter requesting extensions of time to file for more than 50 withholding agents or payers, you must
submit the extension requests magnetically or electronically. For instructions on submitting extension requests on magnetic media, see Pub. 1187.
Magnetic Media/Electronic Reporting
You must use magnetic media if you are required to file 250 or more Forms 1042-S. Acceptable forms of magnetic media are magnetic tape, tape
cartridge, and 3½-inch diskettes.
Electronic submissions are filed using the Filing Information Returns Electronically (FIRE) System. The FIRE System operates 24 hours a day, 7 days
a week, and is accessed using your personal computer and modem at 304-262-2400 (not a toll-free number). For more information, see Pub. 1187.
Note:
Filing electronically will satisfy the magnetic media filing requirements. Any reference to magnetic media in these instructions includes
electronic filing.
The magnetic media/electronic filing requirement applies separately to originals and corrections.
Any person, including a corporation, partnership, individual, estate, and trust, that is required to file 250 or more Forms 1042-S must file such
returns magnetically /electronically. The filing requirement applies individually to each reporting entity as defined by its separate taxpayer
identification number (TIN). This requirement applies separately to original and corrected returns. For example, if you have 300 original Forms
1042-S, they must be filed magnetically/electronically. However, if 200 of those forms contained erroneous information, the corrections may be filed
on paper forms because the number of corrected Forms 1042-S is less than the 250-or-more filing requirement. If you are filing 250 or more Form 1042-S
corrections, they must be filed magnetically/electronically.
If you file on magnetic media, do not file the same returns on paper. Duplicate filing may cause penalty notices to be generated.
Note:
Even though as many as 249 Forms 1042-S may be submitted on paper to the IRS, the IRS encourages filers to transmit forms magnetically
/electronically.
Hardship waiver.
To receive a hardship waiver from the required filing of Forms 1042-S on magnetic media, submit Form 8508, Request for Waiver From
Filing Information Returns on Magnetic Media. Waiver requests should be filed at least 45 days before the due date of the returns. See Form 8508 for
more information.
For additional information and instructions on filing Forms 1042-S on magnetic media, extensions of time to file (Form 8809), and hardship waivers
(Form 8508), see Pub. 1187. You may also call the Martinsburg Computing Center Information Reporting Program at 304-263-8700 (not a toll-free number)
Monday through Friday from 8:30 a.m. to 4:30 p.m. Eastern time. The Martinsburg Computing Center Information Reporting Program may also be reached by
e-mail at [email protected].
Additional Information
For details on withholding of tax, see Pub. 515, Withholding of Tax on Nonresident Aliens and Foreign Entities. To order this
publication and other publications and forms, call 1-800-TAX-FORM (1-800-829-3676). You can also download forms and publications from the IRS Web Site
at www.irs.gov.
Need assistance?
The IRS operates a centralized call site to answer questions related to the filing of information returns on magnetic media. Among the topics
covered are Forms 1042-S, questionable Forms W-4, Forms 8027, and backup withholding due to missing or incorrect TINs. For assistance, you may call
304-263-8700 (not a toll-free number) Monday through Friday from 8:30 a.m. to 4:30 p.m. Eastern time, or fax 304-264-5602. You may also reach the Call
Site via e-mail at [email protected].
Note:
This call site does not answer tax law questions concerning the requirements for withholding of tax on payments of U.S. source income to foreign
persons under Chapter 3 of the Code. If you need such assistance, you may call 215-516-2000 (not a toll-free number) from 6:00 a.m. to 2:00 a.m.
Eastern time or write to: Internal Revenue Service, International Section, P.O. Box 920, Bensalem, PA 19020-8518.
Record Retention
Withholding agents should retain a copy of the information returns filed with the IRS, or have the ability to reconstruct the data, for at least 3
years after the reporting due date. See Pub. 1187.
Substitute Forms
The official Form 1042-S is the standard for substitute forms. Because a substitute form is a variation from the official form, you should know the
requirements of the official form for the year of use before you modify it to meet your needs. The IRS provides several means of obtaining the most
frequently used tax forms. These include the Internet, fax-on-demand, CD-ROM, and an electronic forms bulletin board. For details on the requirements
of substitute forms, see Pub. 1179, Rules and Specifications for Private Printing of Substitute Forms 1096, 1098, 1099, 5498, and W-2G (and
1042-S).
Note:
You are permitted to use substitute payee copies of Form 1042-S (i.e., copies B, C, and D) that contain more than one income line for
boxes 1 through 8. This will reduce the number of Forms 1042-S you send to the recipient. Under no circumstances, however, may the copy of the
form filed with the IRS (copy A) contain more than one income line.
Deposit Requirements
For information and rules concerning Federal tax deposits, see Depositing Withheld Taxes in Pub. 515, or the Form 1042 instructions.
Definitions
Withholding agent.
A withholding agent is any person, U.S. or foreign, that has control, receipt, or custody of an amount subject to withholding or who can disburse
or make payments of an amount subject to withholding. The withholding agent may be an individual, corporation, partnership, trust, association, or any
other entity. The term withholding agent also includes, but is not limited to, a qualified intermediary (QI), a nonqualified intermediary (NQI), a
withholding foreign partnership, a withholding foreign trust, a flow-through entity, a U.S. branch of a foreign insurance company or foreign bank that
is treated as a U.S. person, and an authorized foreign agent. A person may be a withholding agent even if there is no requirement to withhold from a
payment or even if another person has already withheld the required amount from a payment.
Note:
Generally, the U.S. person who pays (or causes to be paid) the item of U.S. source income to a foreign person (or to its agent) must withhold.
However, other persons may be required to withhold. For example, if a payment is made by a QI (whether or not it assumes primary withholding
responsibility) that knows that withholding was not done by the person from which it received the payment, that QI is required to do the appropriate
withholding. In addition, withholding must be done by any QI that assumes primary withholding responsibility under Chapter 3 of the Code, a
withholding foreign partnership, a withholding foreign trust, a U.S. branch of a foreign insurance company or foreign bank that agrees to be treated
as a U.S. person, or an authorized foreign agent. Finally, if a payment is made by an NQI or a flow-through entity that knows, or has reason to know,
that withholding was not done, that NQI or flow-through entity is required to withhold since it also falls within the definition of a withholding
agent.
Beneficial owner.
For payments other than those for which a reduced rate of withholding is claimed under an income tax treaty, the beneficial owner of income is,
generally, the person who is required under U.S. tax principles to include the income in gross income on a tax return. A person is not a beneficial
owner of income, however, to the extent that person is receiving the income as a nominee, agent, or custodian, or to the extent the person is a
conduit whose participation in a transaction is disregarded. In the case of amounts paid that do not constitute income, beneficial ownership is
determined as if the payment were income.
Foreign partnerships, foreign simple trusts, and foreign grantor trusts are not the beneficial owners of income paid to the partnership or trust.
The beneficial owners of income paid to a foreign partnership are generally the partners in the partnership, provided that the partner is not itself a
partnership, foreign simple or grantor trust, nominee, or other agent. The beneficial owner of income paid to a foreign simple trust (i.e., a foreign
trust that is described in section 651(a)) is generally the beneficiary of the trust, if the beneficiary is not a foreign partnership, foreign simple
or grantor trust, nominee or other agent. The beneficial owner of a foreign grantor trust (i.e., a foreign trust to the extent that all or a portion
of the income of the trust is treated as owned by the grantor or another person under sections 671 through 679) is the person treated as the owner of
the trust. The beneficial owner of income paid to a foreign complex trust (i.e., a foreign trust that is not a foreign simple trust or foreign grantor
trust) is the trust itself.
The beneficial owner of income paid to a foreign estate is the estate itself.
Note:
A payment to a U.S. partnership, U.S. trust, or U.S. estate is treated as a payment to a U.S. payee that is not subject to 30% foreign-person
withholding. A U.S. partnership, trust, or estate should provide the withholding agent with a Form W-9, Request for Taxpayer Identification
Number and Certification.
Foreign person.
A foreign person includes a nonresident alien individual, a foreign corporation, a foreign partnership, a foreign trust, a foreign estate, and any
other person that is not a U.S. person. The term also includes a foreign branch or office of a U.S. financial institution or U.S. clearing
organization if the foreign branch is a QI. Generally, a payment to a U.S. branch of a foreign person is a payment to a foreign person.
Nonresident alien individual.
Any individual who is not a citizen or resident of the United States is a nonresident alien individual. An alien individual meeting either the
green card test or the substantial presence test for the calendar year is a resident alien. Any person not meeting either test is a
nonresident alien individual. Additionally, an alien individual who is a resident of a foreign country under the residence article of an income tax
treaty, or an alien individual who is a resident of Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, the U.S. Virgin Islands, or
American Samoa, is a nonresident alien individual. See Pub. 519, U.S. Tax Guide for Aliens, for more information on resident and
nonresident alien status.
Note:
Even though a nonresident alien individual married to a U.S. citizen or resident alien may choose to be treated as a resident alien for certain
purposes (e.g., filing a joint income tax return), such individual is still treated as a nonresident alien for withholding tax purposes on all income
except wages.
Withholding certificate.
The term withholding certificate generally refers to Form W-8 or Form W-9.
Note:
Throughout these instructions, a reference to or mention of Form W-8 is a reference to Forms W-8BEN, W-8ECI, W-8EXP, and/or W-8IMY.
Intermediary.
An intermediary is a person that acts as a custodian, broker, nominee, or otherwise as an agent for another person, regardless of whether that
other person is the beneficial owner of the amount paid, a flow-through entity, or another intermediary.
Qualified intermediary (QI).
A QI is an intermediary that is a party to a withholding agreement with the IRS. An entity must indicate its status as a QI on a Form W-8IMY
submitted to a withholding agent.
Nonqualified intermediary (NQI).
An NQI is any intermediary that is not a U.S. person and that is not a QI.
Private arrangement intermediary (PAI).
A QI may enter into a private arrangement with another intermediary under which the other intermediary generally agrees to perform all of the
obligations of the QI. See Section 4 of Rev. Proc. 2000-12 for details. You can find Rev. Proc. 2000-12 on page 387 of Internal Revenue Bulletin
2000-4 at www.irs.gov.
Withholding foreign partnership or withholding foreign trust.
A withholding foreign partnership or trust is a foreign partnership or trust that has entered into a withholding agreement with the IRS in which it
agrees to assume primary withholding responsibility for all payments that are made to it for its partners, beneficiaries, or owners.
Authorized foreign agent.
An agent is an authorized foreign agent only if all four of the following apply.
- There is a written agreement between the withholding agent and the foreign person acting as agent.
- The IRS International Section (see address at the end of the Note under Additional Information on page 2) has been
notified of the appointment of the agent before the first payment for which the authorized agent acts on behalf of the withholding agent.
- The books and records and relevant personnel of the foreign agent are available to the IRS so that the IRS may evaluate the withholding
agent's compliance with its withholding and reporting obligations.
- The U.S. withholding agent remains fully liable for the acts of its agent and does not assert any of the defenses that may otherwise be
available.
For further details, see Regulations section 1.1441-7(c)(2).
Payer.
A payer is the person for whom the withholding agent acts as a paying agent pursuant to an agreement whereby the withholding agent agrees to
withhold and report a payment.
Presumption rules.
The presumption rules are those rules prescribed under Chapter 3 and Chapter 61 of the Code that a withholding agent must follow to determine the
status of a beneficial owner (e.g., as a U.S. person or a foreign person) when it cannot reliably associate a payment with valid documentation. See,
for example, Regulations sections 1.1441-1(b)(3), 1.1441-4(a), 1.1441-5(d) and (e), 1.1441-9(b)(3), and 1.6049-5(d). Also see Pub. 515.
U.S. branch treated as a U.S. person.
The following types of U.S. branches (of foreign entities) may reach an agreement with the withholding agent to treat the branch as a U.S. person:
(a) a U.S. branch of a foreign bank subject to regulatory supervision by the Federal Reserve Board or (b) a U.S. branch of a
foreign insurance company required to file an annual statement on a form approved by the National Association of Insurance Commissioners with the
Insurance Department of a State, Territory, or the District of Columbia.
The U.S. branch must provide a Form W-8IMY evidencing the agreement with the withholding agent.
Note:
A U.S. branch that is treated as a U.S. person is treated as such solely for purposes of determining whether a payment is subject to withholding.
The branch is, for purposes of information reporting, a foreign person and payments to such a branch must be reported on Form 1042-S.
Recipient.
A recipient is any of the following:
- A beneficial owner of income.
- A QI.
- A withholding foreign partnership or withholding foreign trust.
- An authorized foreign agent.
- A U.S. branch of certain foreign banks or insurance companies that is treated as a U.S. person.
- A foreign partnership or a foreign trust (other than a withholding foreign partnership or withholding foreign trust), but only to the extent
the income is effectively connected with its conduct of a trade or business in the United States.
- A payee who is not known to be the beneficial owner, but who is presumed to be a foreign person under the presumption rules.
- A PAI.
A recipient does not include any of the following:
- An NQI.
- A nonwithholding foreign partnership, if the income is not effectively connected with its conduct of a trade or business in the United
States.
- A disregarded entity.
- A foreign trust that is described in section 651(a) (a foreign simple trust) if the income is not effectively connected with the conduct of
a trade or business in the United States.
- A foreign trust to the extent that all or a portion of the trust is treated as owned by the grantor or other person under sections 671
through 679 (a foreign grantor trust).
- A U.S. branch that is not treated as a U.S. person unless the income is, or is treated as, effectively connected with the conduct of a trade
or business in the United States.
Flow-through entity.
A flow-through entity is a foreign partnership (other than a withholding foreign partnership), a foreign simple or grantor trust (other than a
withholding foreign trust), or, for any payments for which a reduced rate of withholding under an income tax treaty is claimed, any entity to the
extent the entity is considered to be fiscally transparent under section 894 with respect to the payment by an interest holder's jurisdiction.
Fiscally transparent entity.
An entity is treated as fiscally transparent with respect to an item of income for which treaty benefits are claimed to the extent that the
interest holders in the entity must, on a current basis, take into account separately their shares of an item of income paid to the entity, whether or
not distributed, and must determine the character of the items of income as if they were realized directly from the sources from which realized by the
entity. For example, partnerships, common trust funds, and simple trusts or grantor trusts are generally considered to be fiscally transparent with
respect to items of income received by them.
Disregarded entity.
A business entity that has a single owner and is not a corporation under Regulations section 301.7701-2(b) is disregarded as an entity separate
from its owner.
Exempt recipient.
Generally, an exempt recipient is any payee that is not required to provide Form W-9 and is exempt from the Form 1099 reporting requirements. See
the Instructions for the Requester of Form W-9 for a list of exempt recipients.
Non-exempt recipient.
A non-exempt recipient is any person who is not an exempt recipient.
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