Who must file 1042?

IRS Form 1042 Filing Requirements

Entities responsible for filing IRS Form 1042 must adhere to the following requirements:

1. Who Must File:

- Any withholding agent who has control, receipt, custody, disposal, or payment of any item of income of a foreign person that is subject to withholding is required to file Form 1042.

2. Income Subject to Reporting:

- Form 1042 reports income paid to foreign persons, including nonresident aliens, foreign partnerships, foreign corporations, foreign estates, and foreign trusts that are subject to income tax withholding by the U.S.

3. Withholding and Reporting Obligations:

- Withholding agents must withhold tax on certain U.S. source income paid to foreign persons. The withheld tax must be reported and paid to the IRS using Form 1042.

4. Due Date for Filing:

- Form 1042 must be filed by March 15 of the year following the calendar year in which the income subject to reporting was paid. For example, for income paid during the 2022 calendar year, Form 1042 must be filed by March 15, 2023.

5. Extensions:

- If additional time is needed, a withholding agent can request an extension of time to file Form 1042 by submitting Form 7004 on or before the due date of Form 1042.

6. Depositing Withheld Taxes:

- Withholding agents must deposit the taxes withheld according to the deposit schedule (monthly or semi-weekly) and the rules in the IRS Publication 515, "Withholding of Tax on Nonresident Aliens and Foreign Entities."

7. Form 1042-S:

- Along with Form 1042, withholding agents are also required to file Form 1042-S, "Foreign Person's U.S. Source Income Subject to Withholding," for each recipient of income to whom they have made payments during the previous year and withheld taxes.

8. Recordkeeping:

- Withholding agents must keep records for as long as they may be needed for the administration of any provision of the Internal Revenue Code. Generally, this means records that support an item of income or deduction on a return must be kept for at least three years from the date the return is due or filed, whichever is later.

9. Penalties:

- Failure to file Form 1042 when due (including extensions), failure to include all required information, or including incorrect information may result in penalties. The same applies to Form 1042-S.

Please ensure that you review the latest updates and guidance provided by the IRS, as tax laws and filing requirements can change. The information provided here is based on the current understanding of IRS Form 1042 filing requirements.

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Sources:

Internal Revenue Bulletin: 2023-40 2023-10-01

Internal Revenue Bulletin: 2023-11 2023-03-12

Internal Revenue Bulletin: 2020-40 2020-09-27

Internal Revenue Bulletin: 2019-31 2019-07-28

Internal Revenue Bulletin: 2016-29 2016-07-17