Form 1042-S Instructions: A 2025 Action Plan for Payers

If your business has ever paid US-sourced income to a foreign person or an entity, you might be aware of the Form 1042-S.

This tax form applies to various types of non-resident aliens including foreign partnerships, corporations, estates, and trusts that are subject to income tax withholding.

However, Form 1042-S has various fields and codes that may confuse the payers.

This guide details the step-by-step Form 1042-S instructions along with the important codes. In this 1042-s filing guide, we've also talked about the mistakes that you should avoid and why missed filing can be bothersome.

What is Form 1042-S?

Form 1042-S or Foreign Person’s US Source Income Subject to Withholding is a tax return that reports the amount paid to the foreign person by a US based business or institution.

This amount can be any US sourced money such as dividends, royalties, rents, research prizes, scholarships, and capital-gain distributions.

Form 1042-S capture three major information in one place, namely:

• Total amount paid: Gross amount paid in dollars.
• Withheld tax: Percentage of amount withheld by the payer for tax.
• Reason codes: These short codes indicate the tax rate that implies. (30%, reduced treaty rate or zero.)

Who Files Form 1042-S?

Any withholding agent who’s a US-based business, such as an LLC, partnership, corporation, school, or foundation, should file Form 1042-S. Even if the tax rate is 0% because of the exemption or treaty claim, businesses should necessarily file it.

The payers must keep two copies of the form, each of which goes to IRS and the foreign recipient.

Filing Type	Due Date
Copy B	Foreign recipient
Copy A	IRS (attach with Form 1042-T if mailing)

Note: When paper-filing, bundle all Forms 1042-S of the same type under a single Form 1042-T. You do not file one 1042-T per 1042-S form.

What is the deadline for filing Form 1042-S?

Form 1042-S must be filed by March 15 of the year following the year for which income is reported. If March 15 falls on Saturday, Sunday or a public holiday, the due date shifts to the next working day.

For the year 2025, the due date for filing is March 16, 2026 (Monday). Since March 15 falls on a Sunday, the due date has shifted to Monday.

You can also file Form 8809 to get a 30-day automatic extension for sending the filed copy A to the IRS. Similarly, you need to submit Form 15397 via fax to get a one-time 30-day extension to furnish Copy B to recipients.

Are there any penalties for missed filing?

Yes. If you miss a deadline or forget to send a copy to the payee, the IRS attaches heavy penalty. Penalties may initially seem small, but they may add up to $600 per form.

If you file within 30 days after the due date, the penalty is $60 per form. Any filing from the 31st day of due date till August 1 levies $130 per form. Any filing after August 1 attaches a penalty up to $330 per form.

For intentional disregard, the penalty goes up to $660 per form or 10% of the amount reported. Similarly, a late tax deposit also incurs penalties. For a 1-to-5-day delay, the penalty is 2% whereas a

How To File Form 1042-S?

Here are the quick step by step instructions to file form 1042S:

1. Gather documents: Collect valid forms like Form W-8BEN, W-8BEN-E from the foreign payee.

2. Check for any claims: Using the information from W-8 Ben form to check for treaty claims. The US has treaties with various foreign countries. Under this treaty, the foreign payee is subject to reduced claim (under 30%) or even exempt from the tax.

3. Fill in the right codes: You need to furnish the right code in the form. Boxes 1, 3a/3b (Chapter 3 exemption & tax rate), 4a/4b (Chapter 4 exemption & tax rate), and 13f/13g (recipient status codes) require payer/ withholding agent to enter the income, exemption, status codes, and tax rates.

4. Calculate and withhold tax: Run through the tax treaty table and use these codes to determine the statutory rate. Calculate the amount of tax to withhold from total income. If the total income is $2,500 and tax rate is 2%, the withholding amount will be $50.

5. Complete the filing: Once you have completed the form, you can mail it or e-file it. For paper filing, send Copy A (or all paper Forms 1042-S) with Form 1042-T, annual summary and transmittal of Forms 1042-S. For each 1042-S form, you will need to submit one form 1042-T.

If you've more than ten or more information returns during the year or have a partnership with more than 100 partners, you will need to e-file the return via FIRE. The completed copies of Form 1042-S must reach IRS by March 16,2026.

6. Store the copies: Store the confirmation pages and receipts for at least three years.

How to correct the Form 1042-S mistakes?

If you have filled in incorrect information in form 1042-S, you must fix the errors quickly. After fixing the error, tick mark “AMENDED” on the form and enter the Amendment number and UIF number.

Once done, resubmit the form promptly. To minimize the penalties, submit the form within 30 days of spotting the mistake.

Important 1042-S Boxes Payer Must Know

There are four important boxes on Form 1042-S that every payer must know. Think of these boxes as the answer to “what, why, rate, who” related to form 1042-S.

Box 1: Income code

1042-S Income code is a two-digit numerical code that indicates the type of payment paid by the payer. This code indicates the type of income (wages, scholarships, or deposits) paid to the foreign person.

There are 61 types of income codes, each of which are categorized. The most popular codes are:

• 06- Dividends
• 12- Royalties
• 16- Scholarship/Fellowship
• 29- Deposit interest
• 54- Others.

Note to payers: You should use only one income code per form. If you've more than one income to report, use another form to report this code.

Box 3a/4a: Exemption codes (Chapter 3/4)

Box 3a and 4a are the two important codes that indicate whether the recipient qualifies for an exemption from withholding under Chapter 3 or Chapter 4.

While Chapter 3 covers the withholding rules that apply to U.S.-sourced income paid to non-U.S. persons, Chapter 4 reports withholding under FATCA rules. Box 3a reports why payment is exempt from Chapter 3 while Box 4a reports why payment is exempt from Chapter 4.

Box 3b/4b: Tax rates

Boxes 3b and 4b report the withholding tax rate in accordance with Chapter 3 and Chapter 4. This is the actual tax rate applied after exemptions or treaty reductions. If the payee had a valid treaty claim, this box reflects the reduced rate (like 0%, 15%, etc.)

Box 13f/13g: Recipient status codes

Boxes 13f and 13g indicate the recipient's status under distinct withholding regimes for chapter 3 and 4 withholding. Under Box 13f, chapter 3 represents non-resident aliens such as foreign individuals, foreign corporations, and exempt org.

Box 13g reports the status code based on FATCA classification under Form W-8.

Common Mistakes in Form 1042-S & How to Fix Them?

With various codes and fields to fill out, payers can make mistakes while filing the form. Even a minute error can lead to rejections and fines.

Based on our experience, we have tabulated these mistakes and common fixes.

All these mistakes can be because of improper validation, or an unreviewed W-8 form. Or it could also be result of rushing through the FIRE validation.

Our recommendation is to take time and review the information in W-8 forms before filing Form 1042-S.

How to File 1042-S with Tax1099?

Tax1099 is an IRS-authorized e-file provider, simplifies the 1042-S filing process by offering features like bulk e-filing, return validation and print & mail.

Here is how you can file 1042-S using Tax1099:

• Sign up or Tax1099 and collect W-8 document before proceeding with the filing.
• Select Form 1042-S from the dashboard and choose the tax year you want to file for.
• Enter all the relevant information, such as TIN, income codes, exemption codes, and other fields.
• Verify the UIF number and ensure that the record count matches the totals.
• Once reviewed, submit the form.

You can send copy A to IRS and copy B to the payee through print or mail using Tax1099.

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