If a non U.S. person, such as a nonresident alien, foreign corporation, or foreign partnership was paid a U.S. sourced income, then that transaction has to be reported to the IRS using Form 1042-S. This form covers a wide source of income such as dividends, interest, royalties, rents, scholarships, and other FDAP income.
Since Form 1042-S filing requirements follows its own set of IRS rules, deadlines, and withholding obligations. In this e-filing guide, we’ll break down the what, when, and how of Form 1042-S filing.
Understanding The Importance Of Form 1042-S
Each Form 1042-S tells the IRS who paid, who got paid, what type of income it was, and how much tax you withheld under Chapter 3 or Chapter 4 (FATCA). Accurate Form 1042-S filings protect your cash flow, your relationships with payees, and your audit profile.
The IRS uses the information reported in Form 1042-S and cross-checks it with the withholding deposits on Forms 1042 and matches what foreign recipients report for their own tax or credit claims.
Any missing, miscoded, or late forms trigger penalties of $60, $130, or $340 per form depending on how late you file. For intentional disregard, it is $680 per form (or 10% of the amount required to be reported, if greater). Under FATCA rules, an incorrect recipient status may even result in 30% withholding.
Who Files Form 1042-S?
Form 1042-S is filed only by withholding agents, meaning any U.S. or foreign person or business that controls or pays U.S.-source FDAP income to foreign person. That includes individuals, C-corps, LLCs, partnerships, trusts, estates, associations, universities, and other intermediaries.
Form 1042-S Reporting Threshold
Unlike 1099, Form 1042-S does not have a $600 threshold. Any amount that was or should have been subject to withholding under Chapter 3 or Chapter 4 must be reported. Even if there is a treaty that reduces withholding by 0%, you still must file 1042-S and show 0% tax with the correct exemption or treaty code.
Common exceptions
Bank-deposit interest paid to nonresident aliens, some short-term OID not subject to Chapter 3 or Chapter 4 withholding, and one-off personal payments made outside a trade or business are not reportable. Section 5000C federal procurement withholding or certain expatriate distributions, still require Form 1042-S, if tax is withheld.
Pro tip: Review the payee’s W-8 (BEN/BEN-E/ECI/EXP/IMY) before you decide not to file. The W-8 drives treaty claims, Chapter 3 vs. Chapter 4 status, and beneficial-owner type.
Important Boxes/Fields on Form 1042-S
| Box / Field | What you enter |
|---|---|
| Box 1: Income Code | Two-digit income code (Codes 01–61) which identifies the type of income paid |
| Chapter 3 Fields (Box 3a, 3b, 3c) | Chapter 3 Exemption Code (if applicable) in Box 3a and tax rate applied under Chapter 3 in Box 3b. |
| Section 2 (Box 12 to 13) | Recipient information including name, Chapter 3 & 4 status code, address, country code, Tax ID, etc. |
| Section 3 (Box 14 to 19) | Withholding agent information including name, EIN, GIIN, Chapter 3 & 4 status code, etc. |
| Section 5 (Unique ID) | 10-digit identifier unique to Form 1042-S |
Form 1042-S Deadlines, Deposits, & Extensions For 2025 Tax Year
| Filing Type | Deadline |
|---|---|
| Filing with the IRS | March 16, 2026 (Original deadline: March 15*) |
| Recipient Copy Distribution |
* The deadline moves to the next business day if March 15 is a holiday.
Filing Extension & Corrections
If you need more time to file Form 1042-S, you can file Form 8809 for an automatic 30-day extension. A second non-automatic 30 days can be granted for hardship. If you need more time to furnish copies to the recipient, use Form 15397 to request additional time.
To make a correction in an already filed and submitted Form 1042-S, you must file a new form, check the “CORRECTED” box, submit it to the IRS, and send a copy to the recipient as soon as possible.
Withholding Deposits (Chapter 3 withholding schedule):
- $2,000 or more undeposited at the end of the quarter-monthly period (7th, 15th, 22nd, & last day): Deposit within 3 business days.
- Less than $2,000 undeposited at the end of the month: Deposit by the 15th day of the next month.
- Less than $2000 at the end of the calendar year: Pay with Form 1042 or deposit by March 15 (next business day if weekend/holiday).
Form 1042-S Real-Life Filing Examples
1. $5,000 royalty to a German limited liability company (GmbH) with treaty
Use Income Code 12, apply the appropriate treaty Exemption Code 04, and report Chapter 3 Tax Rate of 0% based on the U.S.–Germany treaty.
2. $10,000 software license to an Indian company with no treaty
Withhold 30%, apply the Form 1042 quarter-monthly deposit rule, and file 1042-S using the correct Chapter 3 Status Code
3. $900 qualified scholarship to a nonresident student
Report with Income Code 15, use Exemption Code 16, and apply Chapter 3 Tax Rate of 0% only for the qualified portion.
4. Portfolio interest to a Cayman fund
Use Exemption Code 05 (portfolio interest), Income Code 01, and apply Chapter 3 Tax Rate of 0%.
5. $200,000 federal contract payment to a Canadian vendor
Use Income Code 58 and report the 2% tax withheld under Section 5000C.
How To E-file Form 1042-S With 1099Online
Step 1: Collect & Validate
Import W-8s and treaty data via bulk imports (Excel, CSV, API).
Use Real-time TIN and GIIN checks to flag expired or invalid documents.
Step 2: Calculate & Apply Appropriate Codes
Use our built-in logic rule to match payments to the correct Income Codes and status codes, apply treaty rates, and receive alert if deposits lag.
Step 3: E-File & Store
Submit the form to the IRS via our platform and automatically deliver recipient copies via a secure email or portal. Store the data for up to four years.
FAQs
1. Do you file even at a 0% treaty rate?
Yes. You still file Form 1042-S with a tax rate of 0% and the correct exemption code.
2. Do partnerships file 1042-S for ECI?
Generally, no. ECI is usually reported on Forms 8804/8805 and Schedule K-1, not on Form 1042-S, except for certain PTP ECI items.
Generally, no partnership ECI is usually reported on Forms 8804/8805 and Schedule K-1, not on Form 1042-S, except for certain PTP ECI items.
3. Can recipient copies be electronic?
Yes, if the recipient agrees and you follow the IRS rules for electronic recipient statements.
4. Need more time to furnish?
You can use Form 15397 to request a 30-day extension to furnish Form 1042-S to recipients.
5. Need more time to file with IRS?
Use Form 8809 to request an extension of time to file Forms 1042-S with the IRS
6. Is Form 1042-T required if I e-file with 1099Online?
No. Form 1042-T is only used to send paper Form 1042-S to the IRS, not when you e-file.
7. What are the 2025 penalty amounts again?
$60 (≤ 30 days late), $130 (by August 1), $330 (after August 1), $660 (intentional disregard), plus interest.
Your Complete Workflow for Accurate, Stress-Free 1042-S Filing
Automatically match codes, apply treaty rates, prevent TIN errors, track deposits, furnish recipient copies, and maintain a full compliance trail.