Form 1042 is the IRS Annual Withholding Tax Return for U.S. Source Income of Foreign Persons. A withholding agent files one Form 1042 each year to report and reconcile the tax it withheld under chapters 3 and 4 of the Internal Revenue Code on US-source income paid to foreign persons.
Form 1042 is the IRS Annual Withholding Tax Return for U.S. Source Income of Foreign Persons. A US withholding agent files one Form 1042 per year to report and reconcile the tax it withheld on US-source income paid to foreign persons. The IRS states that Form 1042 reports “the tax withheld under chapter 3 on certain income of foreign persons” and “the tax withheld under chapter 4 on withholdable payments,” plus payments reported on Form 1042-S. For a US company paying foreign contractors, it is the year-end return that ties together everything the company withheld and reported during the year.
These two forms get confused constantly, so it is worth being precise. They are not the same document and they do different jobs.
A useful way to hold it: 1042-S is the line item, 1042 is the cover return that sums the line items. If you issue ten 1042-S forms, you still file just one Form 1042.
The filer is the withholding agent. Per the IRS, that is the person responsible for withholding tax on payments to foreign persons, including nonresident aliens, foreign partnerships, foreign corporations, foreign estates, and foreign trusts. A US company that pays US-source income to a foreign contractor is the withholding agent for that payment, which means it owns both the 1042-S statements and the Form 1042 return.
This obligation is tied to NRA withholding, the chapter 3 regime that requires withholding on US-source FDAP income paid to foreign persons. If a payment triggered chapter 3 or chapter 4 withholding, it flows onto a 1042-S and then onto the annual Form 1042.
The return is broader than chapter 3 alone. The IRS lists what Form 1042 reports:
In practice, most US companies paying foreign contractors deal with the chapter 3 piece. The company determines whether each payment is US-source, applies the correct statutory or treaty rate, deposits the tax during the year, issues a 1042-S to each recipient, and files one Form 1042 to reconcile it all.
Form 1042 is due March 15 of the year after the income was paid. The 1042-S statements share that March 15 deadline to recipients and to the IRS. Always confirm the current-year deadlines, extension options, and any electronic filing requirements in the live IRS instructions, since filing rules change.
This page is educational, not tax advice. For a specific filing position, work with a qualified tax advisor. Omnivoo Contract Management tracks each foreign contractor payment by source and documentation, applies the right rate, and produces the 1042-S records a withholding agent needs to assemble its annual Form 1042.
Form 1042-S is the IRS information return a US withholding agent files to report US-source income paid to a foreign person and the tax withheld under chapters 3 and 4 of the Internal Revenue Code.
NRA withholding is the chapter 3 regime under Internal Revenue Code sections 1441 through 1443 that requires a US withholding agent to deduct tax, generally at a 30 percent statutory rate, from US-source FDAP income paid to a nonresident alien or foreign entity, unless a treaty or other exemption reduces the rate.
A withholding agent is any US or foreign person that has control, receipt, custody, disposal, or payment of US-source income to a foreign person, and is required to deduct, withhold, and pay over the tax under chapters 3 and 4 of the Internal Revenue Code, with personal liability for any tax not withheld.
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