Taxation

Form 1042-S

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.

Form 1042-S, the Foreign Person’s US Source Income Subject to Withholding, is the year-end information return a US withholding agent uses to report payments of US-source income to non-US persons and the tax withheld on those payments under chapter 3 and chapter 4 of the Internal Revenue Code. It is the foreign-payee counterpart of Form 1099-NEC and Form 1099-MISC, and is required regardless of whether any tax was actually withheld. The 2026 instructions are published on the IRS Instructions for Form 1042-S page, and the form itself is available from the IRS About Form 1042-S page.

How Form 1042-S Works

A US withholding agent that pays US-source FDAP income to a foreign person generally must:

  1. Collect a valid Form W-8BEN (foreign individuals), Form W-8BEN-E (foreign entities) or Form 8233 (foreign individuals performing personal services in the US claiming treaty exemption) at or before the first payment.
  2. Determine the correct withholding rate, starting from the default 30% under IRC section 1441 for individuals and section 1442 for entities, and applying any treaty reduction or exemption documented on the W-8 or Form 8233.
  3. Withhold the tax on the gross payment and deposit it through EFTPS on the schedule required (typically monthly or quarter-monthly, depending on amounts).
  4. At year-end, prepare a Form 1042-S for each foreign recipient, file Copy A with the IRS, and furnish Copy B to the recipient. The aggregate of all 1042-S filings is summarized on Form 1042, the annual return.

Form 1042-S captures: income code (the category of payment, such as code 17 for independent personal services or code 16 for scholarships), gross income paid, withholding allowance and net income, tax rate, federal tax withheld, chapter indicator (3 or 4), recipient name, country of residence, US TIN (if any), foreign TIN, and the recipient’s chapter 3 and chapter 4 status codes.

Who Needs It

Any US person that acts as a withholding agent files Form 1042-S. The recipients are non-US persons receiving US-source income. Common scenarios for US payers:

  • A US company pays a Canadian individual contractor who flew to the US for a one-week onsite engagement. Services performed in the US are US-source income, reported in income code 17. The payer must withhold 30%, or a treaty rate if Form 8233 is on file.
  • A US software company pays a quarterly royalty to a UK author for a US-published title. Royalties on US-source intangibles are reported in income code 12.
  • A US bank pays interest to a non-US account holder. Reported in income code 01.
  • A US financial institution pays a dividend to a foreign shareholder. Reported in income code 06.

Payments to foreign contractors for services performed entirely outside the US are not US-source and are not reportable on Form 1042-S, provided the payer has a valid W-8 documenting foreign status.

Filing Deadlines

The 1042-S calendar is one of the tighter information-return schedules, with a single deadline for both paper and electronic filers.

  • Form 1042-S to recipient and to IRS. Due March 15 of the year following payment, regardless of paper or electronic filing, per the Instructions for Form 1042-S.
  • Form 1042 (annual return). Also due March 15, summarizing all 1042-S filings.
  • Form 1042-T. Paper transmittal that accompanies paper Forms 1042-S, also due March 15.
  • Deposits. Withheld tax must be deposited via EFTPS through the year. Quarter-monthly deposit rules apply when undeposited tax exceeds $2,000 at the end of a quarter-monthly period.
  • E-file threshold. A filer with 10 or more information returns in aggregate must file 1042-S electronically. Partnerships with more than 100 partners and all financial institutions must file electronically regardless of return count, per the Instructions for Form 1042-S.
  • Extensions. A 30-day extension to file with the IRS can be requested on Form 8809. A separate written application is required for an extension of the recipient-furnishing date.

Common Mistakes

  • Skipping 1042-S because no tax was withheld. The form is required for reportable US-source payments regardless of whether withholding applied. A treaty rate of 0% still requires a 1042-S.
  • Using the wrong income code. Income code 16 (scholarships and fellowships) is not the same as code 17 (independent personal services) or code 20 (compensation for personal services as an employee, when used with chapter 3). The wrong code produces the wrong tax treatment.
  • Issuing 1099-NEC to a foreign contractor. A non-US contractor receives a 1042-S for US-source income, never a 1099-NEC. Crossing the streams is a common audit finding.
  • Forgetting recipient chapter 4 status. FATCA chapter 4 status codes must appear on the form. Missing them defaults to chapter 4 withholding at 30%.
  • Missing March 15. Unlike 1099-MISC, there is no later electronic-filing deadline. March 15 is hard.
  • Form W-8BEN and Form W-8BEN-E: documentation that supports the chapter 3 and chapter 4 codes used on Form 1042-S.
  • Form 8233: used by a nonresident alien performing personal services in the US to claim a treaty exemption, in lieu of (or alongside) W-8BEN for the services component.
  • Form 1099-NEC and Form 1099-MISC: the equivalent information returns for US-person recipients.
  • Form 1042: the annual return that consolidates all 1042-S filings.
  • TIN (Taxpayer Identification Number): the US TIN appearing on Form 1042-S where required.

Omnivoo Contract Management keeps US-source and foreign-source contractor payments separated by underlying W-8 documentation, so withholding agents have audit-ready records for every Form 1042-S they file by March 15.

Frequently asked questions

Who files Form 1042-S?
Any US withholding agent that pays US-source FDAP income (fixed, determinable, annual, periodical) to a foreign person files a Form 1042-S for each recipient. This includes US companies paying non-US contractors for services performed in the United States, paying royalties to foreign rights holders, or paying interest or dividends to foreign account holders.
When is Form 1042-S due?
Form 1042-S must be filed with the IRS and furnished to the recipient by March 15 of the year following payment, whether filed on paper or electronically, per the Instructions for Form 1042-S. The companion annual return Form 1042 is due on the same date.
What is the e-file threshold for Form 1042-S?
A filer must file Form 1042-S electronically if it is required to file 10 or more information returns in aggregate during the year, if it is a partnership with more than 100 partners, or if it is a financial institution regardless of return volume. The 10-return aggregate threshold is from Treasury Decision 9972.
What is the default withholding rate on US-source income to a foreign person?
The default rate is 30% under IRC sections 1441 and 1442, applied to gross US-source FDAP income. A valid Form W-8BEN, W-8BEN-E or Form 8233 documenting treaty benefits can reduce this to a lower treaty rate or to zero. Effectively connected income (ECI) is reported on a different schedule and taxed at graduated rates.
Do I issue Form 1042-S to a non-US contractor working outside the US?
No. Services performed by a foreign person entirely outside the United States are generally foreign-source and not US-source. They are not subject to US withholding and are not reportable on Form 1042-S, provided the payer has a valid Form W-8BEN or W-8BEN-E on file documenting the foreign status.

How Omnivoo handles Form 1042-S

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Related Terms

Taxation

Form 1099-NEC

Form 1099-NEC is the IRS information return a US business files to report $600 or more of nonemployee compensation paid to a US independent contractor during a calendar year.
Taxation

Form 8233

Form 8233 is the IRS form a nonresident alien individual gives a US withholding agent to claim a tax treaty exemption from withholding on compensation for personal services performed in the United States.
Taxation

Form W-8BEN

Form W-8BEN is the IRS certificate a non-US individual gives a US payer to establish foreign status and claim any reduced withholding under an income tax treaty.
Taxation

Form W-8BEN-E

Form W-8BEN-E is the IRS certificate a foreign entity gives a US payer to document non-US status, FATCA classification, and any treaty claim on US-source income.

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