Why a Resident Alien Received a Form 1042-S

Receiving a Form 1042-S can be confusing for an individual classified as a resident alien for U.S. tax purposes. This form is used by employers and financial institutions to report income and tax withholding for nonresident aliens. A resident alien, on the other hand, is a non-U.S. citizen who meets the “green card test” or the “substantial presence test.” They are taxed in the same manner as a U.S. citizen, reporting their worldwide income on Form 1040. The confusion arises because a form designated for a “foreign person” is sent to someone treated as a U.S. person for tax filing. While this may seem like an error, there are often valid and specific explanations for why a resident alien would receive a Form 1042-S.

Why a Resident Alien Might Receive Form 1042-S

A primary reason for receiving the form is having a “dual-status” tax year. This occurs when an individual’s tax residency status changes from nonresident alien to resident alien partway through the year. For example, if you met the substantial presence test in July, you were a nonresident for the first part of the year and a resident for the second. In this case, any U.S. source income subject to withholding that you received during your nonresident period would be correctly reported on a Form 1042-S, while income earned during your resident period would be reported on a Form W-2 or 1099.

Another reason involves claiming tax treaty benefits. Under certain income tax treaties between the U.S. and other countries, a resident alien may still be able to claim treaty benefits on specific types of income, such as scholarships, fellowships, or pensions. When you claim a treaty provision to reduce or eliminate the tax withholding on this income, the payer is required to report the payment and the treaty-based exemption on Form 1042-S. This reporting documents to the IRS why they did not withhold tax at the standard rate.

Finally, the issuance of a Form 1042-S can be a mistake. The withholding agent or payer might have outdated or incorrect information regarding your tax status. They may still have you classified as a nonresident alien in their system based on a previously submitted Form W-8BEN. If your status changed and you did not update the payer with a Form W-9, they may erroneously issue a 1042-S instead of a Form 1099.

Understanding the Information on Your Form 1042-S

Understanding the key boxes on the Form 1042-S you received is necessary to properly report the income and any tax paid. Each box provides specific information that translates to your tax return.

• Box 1, Income Code: This two-digit code identifies the specific type of income being reported, such as code 16 for a scholarship or code 20 for compensation for studying. These codes help determine how the income should be treated on your tax return.
• Box 2, Gross Income: This shows the total amount paid to you before any tax was withheld. This figure represents the full income you must account for on your tax return.
• Boxes 3a and 3b, Exemption Code and Tax Rate: If you claimed a tax treaty benefit, you will likely see an exemption code such as ’04’ (exempt under a tax treaty) and a corresponding tax rate of ‘00.00’. These boxes confirm that the payer applied a treaty provision.
• Box 7a, U.S. Federal Tax Withheld: This is the actual amount of U.S. federal income tax that the payer deducted from your payment. You will claim this amount as a payment on your Form 1040.
• Boxes 12 through 14, Payer and Recipient Information: Always verify the information in these boxes, which contain the payer’s and recipient’s details, to ensure your name, address, and Taxpayer Identification Number (TIN) are correct.

How to Report Form 1042-S Income on Your Tax Return

As a resident alien, the income shown on Form 1042-S must be included on your Form 1040 return. How you report the gross income from Box 2 depends on the income code in Box 1. For example, scholarship income may have different reporting requirements than compensation for services. Tax preparation software provides a specific section for Form 1042-S information, while paper filers should follow the instructions for that income type.

If federal income tax was withheld, as shown in Box 7a, you will claim this as a payment toward your total tax liability on Form 1040. You should include the withheld amount from Form 1042-S with other federal withholdings, such as those from a Form W-2 or 1099. This ensures you receive credit for the taxes already paid.

You will receive three copies of Form 1042-S. If filing a paper return, you must attach Copy C to your federal tax return to verify the income and withholding. Copy D is for your state tax return, if required, and Copy B is for your records. Electronic filers will find that tax software handles the attachment of this data.

Correcting an Erroneously Issued Form 1042-S

If you were a resident alien for the entire tax year, the Form 1042-S was issued in error. This most often occurs when a payer has incorrect records and should have issued a different form, such as a Form 1099-MISC or 1099-NEC.

The first action is to contact the withholding agent or payer who issued the form. You should state that you are a resident alien for the full year and should have received a Form 1099 or W-2, not a Form 1042-S. Request that they issue a corrected information return and void the original 1042-S.

If the payer is unresponsive or refuses to issue a corrected form, you should still proceed with filing your Form 1040. Report the income correctly as you would if it were on a Form 1099 and claim any federal tax withheld as a payment. It is best to attach a statement to your tax return explaining that the Form 1042-S was issued in error, you are a resident alien, and you contacted the payer to request a corrected form.