What’s the Difference Between Form 1042 and 1042-S?
Understand the key relationship between the annual summary return and the individual statements used for reporting U.S. income paid to foreign persons.
When a U.S. person or business pays income to a foreign person or entity, they become a withholding agent with specific tax reporting obligations to the Internal Revenue Service (IRS). This system ensures the U.S. government can collect taxes on income generated within its borders, even when the recipient is not a U.S. resident. Two documents, Form 1042 and Form 1042-S, are central to this process.
Form 1042 The Annual Withholding Tax Return
Form 1042, “Annual Withholding Tax Return for U.S. Source Income of Foreign Persons,” is a comprehensive summary filed by the withholding agent with the IRS. This document aggregates all financial activity for payments made to foreign persons during a calendar year into a single report. It provides a high-level overview of the agent’s total liability and does not contain information about individual recipients.
The form requires the agent to report the total income paid that is subject to withholding, such as interest, dividends, and royalties, and the total U.S. federal tax deposited with the IRS. The form reconciles these total amounts, showing total tax liability versus total payments. If an agent over-withheld, Form 1042 is used to claim a refund; if there was an underpayment, it calculates the balance due.
Form 1042-S The Foreign Person’s Income Statement
In contrast to the summary on Form 1042, Form 1042-S, “Foreign Person’s U.S. Source Income Subject to Withholding,” provides details for each individual recipient. A separate Form 1042-S must be prepared for each foreign person or entity that received a payment, functioning much like a Form W-2 or 1099. The withholding agent must file a copy of every Form 1042-S with the IRS and furnish a copy to the foreign recipient.
The recipient uses this information for their home country’s tax obligations or to claim a refund from the IRS if excess tax was withheld. Each Form 1042-S details the recipient’s name and address, the type of income paid, the gross income amount, and the U.S. tax withheld. It also includes information on any tax treaty exemptions that may have reduced the standard 30% withholding rate.
How The Forms Reconcile and Work Together
The two forms have a relationship of direct reconciliation, as the totals on Form 1042 must match the sum of the amounts from all individual Forms 1042-S filed for that year. For example, the total gross income reported on Form 1042 must equal the sum of the gross income amounts from every Form 1042-S. Likewise, the total tax withheld on Form 1042 must be the exact sum of the tax withheld from all individual 1042-S forms.
Any discrepancy will trigger scrutiny from the IRS. When filing paper copies of Form 1042-S, they must be sent with Form 1042-T, “Annual Summary and Transmittal of Forms 1042-S.” This transmittal sheet acts as a cover page for the batch of forms, summarizing the number of forms and total amounts reported.
Filing Requirements for Withholding Agents
For the 2024 tax year, the deadline to file Form 1042 with the IRS and to both file and furnish all Forms 1042-S is March 17, 2025. These forms are due by March 15 of the year after the income was paid, but the deadline moves to the next business day if March 15 is on a weekend or holiday. Extensions are available, but the rules differ for each form.
An automatic six-month extension to file Form 1042 can be obtained by submitting Form 7004, but this does not apply to Form 1042-S. For Form 1042-S, filing Form 8809 provides an automatic 30-day extension to file with the IRS, but not to furnish statements to recipients. An extension to provide Form 1042-S to recipients requires filing Form 15397.
For filings in 2025, agents who file 10 or more information returns of any type must electronically file Forms 1042 and 1042-S. Form 1042 is filed through the Modernized e-File (MeF) system, and Forms 1042-S are filed through the Filing Information Returns Electronically (FIRE) system.