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2012

Department of the Treasury

Internal Revenue Service

Instructions for Form 1042

Annual Withholding Tax Return for U.S. Source Income of Foreign Persons

Section references are to the Internal Revenue

You pay gross investment income to

Rev. Proc. 2005-77, 2005-51 I.R.B.

Code unless otherwise noted.

foreign private foundations that are

1176, available at

subject to tax under section 4948(a).

Future Developments

You pay any foreign person specified

Withholding foreign partnership (WP)

For the latest information about

Federal procurement payments.

or withholding foreign trust (WT). A

developments related to Form 1042 and

WP or WT is a foreign partnership or trust

Withholding Agent

its instructions, such as legislation

that has entered into a withholding

enacted after they were published, go to

Any person required to withhold tax is a

agreement with the IRS in which it agrees

withholding agent. A withholding agent

to assume primary withholding

may be an individual, trust, estate,

responsibility for all payments that are

General Instructions

partnership, corporation, nominee (under

made to it for its partners, beneficiaries, or

section 1446), government agency,

owners. For information on these

association, or tax-exempt foundation,

withholding agreements, see Rev. Proc.

Purpose of Form

whether domestic or foreign.

2003-64, Appendix 1 and Appendix 2.

Use Form 1042 to report the following.

Also see Rev. Proc. 2004-21 and Rev.

Liability for tax. As a withholding agent,

The tax withheld on certain income of

Proc. 2005-77.

you are personally liable for any tax

foreign persons, including nonresident

required to be withheld. If you fail to

Nonqualified intermediary (NQI). An

aliens, foreign partnerships, foreign

withhold and the foreign payee fails to

NQI is any intermediary that is not a U.S.

corporations, foreign estates, and foreign

satisfy its U.S. tax liability, then both you

person and that is not a QI.

trusts.

and the foreign person are liable for tax,

The section 5000C 2% excise tax due

Qualified securities lender (QSL). A

as well as interest and any applicable

on specified Federal procurement

QSL is a foreign financial institution that is

penalties.

payments.

a bank, custodian, broker-dealer, or

The applicable tax will be collected

clearing organization subject to regulatory

Publicly traded partnerships (section

only once. If the foreign person satisfies its

supervision in its home jurisdiction and

1446 withholding tax). For purposes of

U.S. tax liability, you are not liable for the

that is:

reporting on Form 1042, a publicly traded

tax but remain liable for any interest and

partnership (PTP) must withhold section

1. Regularly engaged in the business

penalties for failure to withhold.

1446 tax on distributions of effectively

of borrowing securities of U.S.

connected income (ECI) to its foreign

corporations and lending such securities

Intermediary

partners. A nominee that receives a

to unrelated customers; and

An intermediary is a person who acts as a

distribution of ECI from a PTP and is

2. Subject to audit by the IRS under

custodian, broker, nominee, or otherwise

treated as the withholding agent must use

section 7602 or, in the case of a QI, an

as an agent for another person, regardless

Form 1042 to report the tax withheld. For

external auditor.

of whether that other person is the

this purpose, a nominee is a domestic

beneficial owner of the amount paid, a

For further information about QSL

person holding an interest in the PTP on

flow-through entity, or another

status and the withholding requirements

behalf of one or more foreign partners. For

intermediary.

for substitute dividend payments, see

more information, see Regulations section

Notice 2010-46, 2010-24 I.R.B. 757,

1.1446-4 and Pub. 515, Withholding of

Qualified intermediary (QI). A QI is an

available at

Tax on Nonresident Aliens and Foreign

intermediary that is a party to a

Entities.

withholding agreement with the IRS. An

entity must indicate its status as a QI on a

Where and When To File

Who Must File

Form W-8IMY submitted to a withholding

Mail Form 1042 by March 15, 2013, to:

agent.

Every withholding agent or intermediary

(see definitions next) who receives,

For information on a QI withholding

Ogden Service Center

controls, has custody of, disposes of, or

agreement, see:

P.O. Box 409101

pays any fixed or determinable annual or

Rev. Proc. 2000-12, which is on

Ogden, UT 84409

periodical income must file an annual

page 387 of Internal Revenue Bulletin

return for the preceding calendar year on

2000-4 at

Use Form 1042-T to transmit paper

Form 1042. Also, any PTP or nominee

irb00-04.pdf;

Forms 1042-S.

making a distribution of ECI under section

Notice 2001-4, which is on page 267 of

1446 must file Form 1042 for the

Internal Revenue Bulletin 2001-2 at

Extension of time to file. If you need

preceding calendar year.

irb01-02.pdf;

more time to file Form 1042, you may

Rev. Proc. 2003-64, Appendix 3,

submit Form 7004, Application for

You must file Form 1042 if any of the

2003-32 I.R.B. 306, available at

Automatic Extension of Time To File

following applies.

Certain Business Income Tax, Information,

You are required to file Form(s) 1042-S

Rev. Proc. 2004-21, 2004-14 I.R.B.

and Other Returns.

(whether or not any tax was withheld or

702, available at

was required to be withheld). File Form

Form 7004 does not extend the time for

1042 even if you file Forms 1042-S

payment of tax.

and

electronically.

Oct 31, 2012

Cat. No. 54843T

Instructions For Form 1042 - Annual Withholding Tax Return For U.s. Source Income Of Foreign Persons - 2012

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