Form 1042-S for 2025: Key Insights
- Information Reported: U.S. source income (interest, dividends, royalties, services, scholarships) paid to foreign persons and any withholding applied.
- Who Needs to File: Withholding agents, including businesses & financial institutions.
- Due Date: March 17, 2025 (for 2024 tax year)
Who must file Form 1042-S?
Form 1042-S is filed by withholding agents who paid U.S.-sourced income to foreign individuals or entities. This includes:
- Employers: Those paying wages, salaries, or other compensation to nonresident alien employees.
- Financial Institutions: Entities such as banks or investment firms distributing interest, dividends, or royalties to foreign account holders or investors.
- Educational Institutions: Universities and colleges providing taxable scholarships, grants, or fellowship payments to nonresident alien students or researchers.
- Businesses: Companies making rental payments, licensing fees, or other payments to foreign persons.
Form 1042-S must still be filed to report the payment, even if no tax is withheld due to an exemption (such as an income tax treaty benefit or the income being effectively connected with a U.S. trade or business).
What information is reported on Form 1042-S?
Following are the key details reported on Form 1042-S.
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Income Types: This includes U.S.-sourced income such as:
- Interest: Payments from U.S. sources to foreign persons.
- Dividends: Distributions from U.S. corporations to foreign shareholders.
- Royalties: Payments for the use of intellectual property or natural resources.
- Amounts Withheld: Details regarding the U.S. federal income tax withheld on the payments under chapters 3 and 4 of the Internal Revenue Code.
- Income Codes: Each type of income is assigned a specific code to categorize the nature of the payment.
- Exemption Codes: If an exemption from withholding applies (e.g., due to a tax treaty), the applicable exemption code is reported.
- Specified Federal Procurement Payments: Payments subject to withholding under section 5000C, which imposes a tax on foreign persons receiving federal procurement payments.
- Distributions of Effectively Connected Income: Includes distributions by publicly traded partnerships or nominees that are effectively connected with a U.S. trade or business.
Get detailed information about IRS Form 1042-S Instructions.
Common 1042-S Scenarios
I'm a foreign student studying at a university in the United States. Do I need to worry about any tax forms?
Certainly, if your university pays you any income subject to withholding according to U.S. tax laws, they will provide you with a Form 1042-S. This encompasses various payments like scholarships, stipends, or wages earned through on-campus employment.
I received a scholarship from my university. Will I get a Form 1042-S for that?
Whether a scholarship is taxable depends on how it's used. Spending any part of the scholarship on things other than qualified tuition and related expenses, like room and board, might be taxable. In such cases, it will be reported on Form 1042-S.
I worked as a research assistant at my university. Will I receive a Form 1042-S for my wages?
Yes, if you're a nonresident alien for tax purposes, the wages you earned from on-campus work will probably be subject to withholding, which will be reported on Form 1042-S.
I am a foreign student at a university in the U.S., working part-time for my department and receiving monthly scholarship payments. Do I receive a W-2 for these payments?
The university will issue a W-2 and/or Form 1042-S. If you have an unlimited tax treaty, and no taxes are taken from your paychecks, you get only a 1042-S. If your tax treaty has a limit, and your earnings surpass that limit with taxes withheld, you get both a W-2 and a 1042-S. Without a tax treaty, all your wages go on a W-2. Scholarship payments are on a 1042-S, not a W-2.
I'm an international student and received a grant for my research project. Will that be reported on Form 1042-S?
Yes, grants provided to nonresident aliens for research or academic purposes are generally considered taxable income and will be reported on Form 1042-S.
I'm a foreign student and received royalties for a book I published while studying in the U.S. Will I get a Form
1042-S for that?
Yes, nonresident aliens' earning royalties from U.S. sources are subject to withholding and will be reported on Form 1042-S.
I'm a foreign student who gave a talk at my institution, for which I received an honorarium. Do I have to worry about taxes on that income?
Yes, if you're a foreign student and received payment for giving a lecture at your university (honorarium), you should be aware of taxes. Generally, the wages you earn for providing services in the U.S. (like giving a lecture) will have taxes taken out, and this income will be reported on Form 1042-S.
I come from a country that has a tax treaty with the United States. Does this affect my tax filing as a foreign student?
Certainly, yes, tax treaties can affect the taxation of certain types of income for foreign students. However, you may still receive a Form 1042-S reporting the income, and any applicable treaty benefits would be applied to reduce or eliminate the withholding tax.
