As the industry leader in 1099 reporting, we hear regularly that many organizations remain unsure about when they must file Form 1042-S and Form 1042, what the deadlines are, how the process works, and how this differs from more familiar forms (like the W-2 or 1099 series).
Form 1042-S is complex and without proper knowledge and guidance on how to file the form, you could be subject to IRS notices and penalties. Let’s take a detailed look at everything you need to know about Forms 1042-S and 1042 so you can have a compliant filing season.
What is Form 1042-S?
Form 1042-S: Foreign Person’s U.S. Source Income Subject to Withholding is an information return that reports the income of foreign persons, including non-resident aliens and foreign entities. Reporting includes income and withholding amounts paid over the course of a given calendar year.
Who must file Form 1042-S?
All withholding agents that make payments to foreign persons throughout the calendar year must file Form 1042-S with the IRS.
Withholding agent: In simple terms, a withholding agent includes all businesses, organizations, universities, or other corporations that make payments to foreign individuals or entities. Under IRS rules, a withholding agent is any person (or entity) that receives, controls, has custody of, disposes of, or pays U.S. source income to a foreign person which is subject to withholding under Chapter 3 or Chapter 4 of the Internal Revenue Code.
Specifically, the IRS states: “Every withholding agent must file an information return, Form 1042-S … to report amounts paid to foreign persons that are described under Amounts Subject to NRA Withholding and Reporting.”
That means you likely must file a Form 1042-S if you made any of the following kinds of payments to a foreign individual or entity:
- U.S.‐source interest, dividends, rents, royalties, or other “fixed or determinable annual or periodical” (FDAP) income to a foreign person.
- Scholarships, fellowships, or grants to foreign students or researchers when such amounts are U.S.‐source.
- Compensation for services performed in the U.S. by a non-resident alien (where the payment is U.S.‐source).
- Other payments subject to sections of the tax code requiring withholding on foreign persons (for example, Chapter 4/ FATCA related or certain foreign trust/partnership distributions).
Important: Even if no taxes were withheld, you still must file Form 1042-S if the payment is subject to withholding or reporting. The instructions emphasize that a withholding or not doesn’t eliminate the reporting obligation.
Also: If you are required to file Form 1042-S, then you must also file Form 1042 (we’ll cover that in the next section.)
What is the difference between Form 1042-S and Form 1042?
Understanding the distinct roles of these two forms is critical. Think of them as connected but serve different purposes.
Form 1042-S (Foreign Person’s U.S. Source Income Subject to Withholding): This is the form used to report each payment to a foreign person (or entity) of U.S.‐source income, as well as the amount of tax withheld (if any). You must furnish a copy of Form 1042-S to the foreign payee (recipient) and file with the IRS.
Form 1042 (Annual Withholding Tax Return for U.S. Source Income of Foreign Persons): This is the summary return that the withholding agent files with the IRS reporting the total tax withheld (or reportable) under the foreign person withholding regime (Chapter 3/Chapter 4). It doesn’t go to the payee, only to the IRS. In short: If you issued one or more Forms 1042-S, you must also file Form 1042.
Here’s a quick table for clarity:
| Form | Purpose | Goes to Recipient? | Goes to IRS? |
| 1042-S | Report each U.S. source payment to a foreign person + tax withheld (if any) | Yes | Yes |
| 1042 | Summary annual report of withholding agent’s foreign person tax obligations | No | Yes |
Also note: This regime is separate from domestic forms like the W-2 or 1099 series. For example, a U.S. citizen or resident employee receives a W-2 for wages. Foreign persons (nonresident aliens, foreign entities) could trigger 1042-S instead if the payment is U.S.-source and subject to withholding/reporting.
When are these forms due?
Timing is critical for 1042-S and 1042 Compliance.
- Both Form 1042-S (to IRS and furnished to recipient) and Form 1042 (to IRS) are due March 15 of the year following the calendar year in which the income was paid.
- If March 15 falls on a Saturday, Sunday, or legal holiday, the due date is the next business day.
- Extensions: For Form 1042-S you can request an extension with Form 8809. For Form 1042 you can request extension with Form 7004. But note: The extension of time to file is separate from the extension of time to pay any withheld tax.
Electronic Filing Form 1042 & 1042-S
Form 1042-S: A withholding agent that is not a financial institution must file electronically if it is required to file 10 or more information returns during the year (or is a partnership with over 100 partners). A financial institution must always file electronically. IRS
Form 1042: Starting with tax year 2023, the IRS is requiring Form 1042 to be filed electronically via its modernized eFile (MeF) system
How to File: Step-by-Step
- Identify whether you are a withholding agent and whether you paid U.S. source income to a foreign person that requires withholding or reporting.
- Gather data on each payment: Payee name, address, foreign status, type of income (income code), amount paid, tax withheld (if any), treaty exemptions, withholding rate, tax classification (Chapter 3/Chapter 4). The instructions for 1042-S contain a lot of detail on required codes.
- Prepare Form 1042-S: For each foreign recipient and for each income type and withholding rate, you must file a separate Form 1042-S.
- Furnish recipient copy: Provide the foreign person with their copy of Form 1042-S by March 15.
- Prepare Form 1042: Summarize your annual withholding responsibility (whether tax was withheld or simply reportable) for the foreign-payee regime.
- File electronically (where required): Use the IRS Modernized e-File (MeF) system for Form 1042, and the FIRE system or other e-file gateway for Form 1042-S when required. Paper filing is still possible for smaller filers in some cases but confirm the rules.
- Keep records: You should retain copies of filing, recipient statements, withholding documentation, treaty claim forms (e.g., Form W-8BEN, W-8BEN-E, etc.), supporting calculations, and acknowledgement from IRS eFile.
- Correct errors if needed: If you must amend a Form 1042-S, you must do so electronically if your original was electronic. The instructions speak to correction procedures.
Reminders for Filing 1042-S & 1042
- Failing to file a required Form 1042-S or Form 1042 can lead to penalties and interest
- Because the U.S. imposes tax-withholding obligations on U.S. source payments to foreign persons, compliance is critical for withholding agents
- The form has high complexity: For example, one commentary notes that Form 1042-S has “429 applicable codes” and is among the most complex information returns
- Misclassification (treating a foreign person as U.S. resident or using the wrong form such as a 1099 instead of 1042-S) can trigger review, audit, or re-filing. The IRS also explicitly excludes certain payments from the 1042 regime (e.g., those reportable on W-2, 1099, 8805).
How 1099Pro Cloud Helps
If you’re looking for a compliant, streamlined solution, you’ll be glad to know that 1099Pro Cloud enables you to handle both Form 1042-S and Form 1042 filings through the IRS Modernized eFile (MeF) system, a requirement for Form 1042. 1099Pro Cloud makes filing your 1042-S and 1042 forms easy, with built-in validations and IRS-Approved Modernized eFiler, we help businesses stay compliant and streamline information reporting.
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Frequently Asked Questions
What is Form 1042 and how does it differ from Form 1042-S?
Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, is a summary return filed with the IRS by the withholding agent. It reports the total tax withheld (or reportable) on such payments during the year.
The difference in simple terms: Form 1042-S reports each payment to a foreign person + tax withheld; Form 1042 reports the total tax liability of the withholding agent.
And: If you file one or more Forms 1042-S, you must also file Form 1042.
Who is considered a “withholding agent” for these forms?
A withholding agent is any person (including an entity) that receives, controls, has custody of, disposes of, or pays a U.S. source payment to a foreign person and is required to deduct and withhold tax under Chapter 3 or Chapter 4.
Put simply: if your organization makes U.S. source payments to foreign individuals/entities that fall into the withholding/reporting regime, you are likely the withholding agent.
This includes payers of interest, dividends, rents, royalties, scholarships/fellowships, certain services, etc.
What kinds of payments trigger Form 1042-S reporting?
- U.S. source interest, dividends, rents, royalties or other FDAP (fixed or determinable annual or periodical) income paid to foreign persons
- Scholarships, fellowships or grants to nonresident aliens (foreign students or researchers) that originate in U.S. sources
- Compensation for services performed in the U.S. by nonresident aliens (if U.S. source)
- Payments that fall under the withholding regime of Chapter 4 (FATCA) or other specific rules for foreign persons
Important: These are separate from typical domestic employee wage reporting (W-2) or U.S. resident contractor reporting (1099).
Is electronic filing required for Form 1042?
Yes. Starting with tax year 2023 (for many filers), the IRS requires filing via its Modernized eFile (MeF) system.
Do I always need to file a Form 1042 if I file one or more Forms 1042-S?
Yes. If you are a withholding agent who issued or are required to issue a Form 1042-S, you must also file Form 1042 (the summary return) with the IRS