Looking for a Form 1042 Templates? Download it for free!

2017

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

instructions for Section 2, Reconciliation of

including nonresident aliens, foreign

Code unless otherwise noted.

U.S. Source FDAP Income, later.

partnerships, foreign corporations, foreign

estates, and foreign trusts.

Future Developments

Reminders

The tax withheld under chapter 4 on

withholdable payments. For the

For the latest information about

Line 63c, Adjustments to overwith-

withholding requirements of chapter 4, see

developments related to Form 1042 and

holding. Withholding agents that reduce

Regulations sections 1.1471-2(a),

its instructions, such as legislation

their withholding by repaying a beneficial

1.1471-4(b), and 1.1472-1(a).

enacted after they were published, go to

owner in the year following the calendar

The tax withheld pursuant to section

IRS.gov/Form1042.

year of overwithholding pursuant to the

5000C on specified federal procurement

What's New

reimbursement or set-off procedures

payments.

should report such repayments on

The tax withheld under section 877A on

line 63c(1). Withholding agents that

Qualified derivatives dealers (QDDs).

payments of eligible deferred

increase their withholding in the year

As of 2017, a withholding agent that is a

compensation items or distributions from

following the calendar year of

Qualified Intermediary (QI) acting as a

nongrantor trusts to a covered expatriate.

underwithholding by withholding on future

QDD must assume certain withholding

Payments that are reported on Form

payments made to a beneficial owner or

and reporting responsibilities with respect

1042-S under chapter 3 or 4. See

from other property or additional

to payments made on potential section

Regulations section 1.1474-1(d)(2)(i) for

contributions of a beneficial owner that are

871(m) transactions in its QDD capacity.

the definition of a chapter 4 reportable

held in custody or otherwise controlled by

The 2017 Form 1042 now includes a new

amount (which are amounts required to be

the withholding agent should report the

Section 4, which a QI that is a QDD (or

reported on Form 1042-S for chapter 4

additional withholding on line 63c(2).

has a branch that is a QDD) must

purposes) and Regulations section

Withholding agents should also report on

complete if it made any payments in its

1.1461-1(c)(2) for amounts subject to

line 63c(2) any other amounts withheld in

QDD capacity that are reportable on this

reporting for chapter 3 purposes.

form. For more information on the

the year following the calendar year in

Certain distributions subject to section

which the related payment was made (to

withholding and reporting requirements of

1445 withholding tax. Publicly traded

the extent permitted under an applicable

a QDD, see the QI Agreement (Rev. Proc.

trusts, real estate investment trusts, and

regulation section in chapter 3 or 4). See

2017-15) and the Code.

regulated investment companies that are

instructions for lines 63a through 63d,

These instructions provide guidance to

qualified investment entities (as defined

later.

QDDs regarding the proper withholding

under section 897(h)(4)) must withhold

agent status code to use when filing Form

Lines 65a and 65b. Withholding agents

section 1445 tax on certain distributions

1042 (and Form 1042-S). See Chapter 3

should use line 65b to report deposits of

and report such amounts on Form 1042.

and 4 status codes of withholding agent,

tax withheld in the year following the

For more information, see Regulations

later. These instructions also provide

calendar year in which the related

section 1.1445-8 and the instructions for

guidance to QDDs applying the

payment was made. See Deposit

Form 1042-S.

transitional guidance in Notice 2016-76 for

Requirements, later, for when a

Publicly traded partnerships (section

2017. See Special reporting requirements

withholding agent should designate a

1446 withholding tax). For purposes of

for QDDs, later.

deposit as being made for the calendar

reporting on Form 1042, a publicly traded

year in which the payment was made.

Potential 871(m) transactions. As of

partnership (PTP) must withhold section

2017, Section 3 of Form 1042 has been

Chapter 3 and 4 status codes. As of

1446 tax on distributions of effectively

modified to apply to payments made by a

2015, the chapter 3 and 4 status codes of

connected income (ECI) to its foreign

withholding agent under any potential

withholding agents are required

partners. A nominee that receives a

section 871(m) transaction (rather than

regardless of the types of payments

distribution of ECI from a PTP and is

just payments made under notional

reported on this form.

treated as the withholding agent must use

principal contracts or other derivatives

Form 1042 to report the tax withheld. For

Escrow procedure. See instructions for

contracts that reference a U.S. stock or

this purpose, a nominee is a domestic

lines 1 through 60 if you are using the

underlying security). Any withholding

person holding an interest in the PTP on

escrow procedure under Regulations

agent making such a payment must

behalf of one or more foreign partners. For

section 1.1471-2(a)(5)(ii) or 1.1441-3(d)

complete Section 3.

more information, see Regulations section

(and are not depositing the amount of tax

1.1446-4 and Pub. 515, Withholding of

Reconciliation of U.S. source FDAP in-

withheld with the IRS during the year).

Tax on Nonresident Aliens and Foreign

come. As of 2015, Section 2 of the form

General Instructions

Entities.

is no longer optional. It must be completed

by all withholding agents. For 2017, the

Who Must File

fields for the amounts of excluded

Purpose of Form

payments on offshore obligations and

Every withholding agent or intermediary

Use Form 1042 to report the following.

excluded payments on collateral have

who receives, controls, has custody of,

The tax withheld under chapter 3

been removed from Section 2 of Form

disposes of, or pays a withholdable

(excluding withholding under sections

1042 as these exclusions no longer apply

payment (to which chapter 4 withholding

1445 and 1446 except as indicated below)

under the chapter 4 regulations. See

applies) or an amount subject to

on certain income of foreign persons,

Dec 22, 2017

Cat. No. 54843T

Instructions For Form 1042 - Annual Withholding Tax Return For U.s. Source Income Of Foreign Persons - 2016

Related Articles

Related forms

Related Categories