Form 1042-S: Reporting and Withholding on U.S. Source Income for Foreign Persons

Avoiding Filing Errors, Credit Disallowances and Audit Penalties

Recording of a 110-minute CPE webinar with Q&A


Conducted on Tuesday, December 12, 2017

Recorded event now available

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Program Materials

This webinar will provide tax preparers and professionals with a deep dive into preparing Form 1042-S. The panel will discuss evaluating potential Form 1042-S withholding and filing responsibilities, review common mistakes, and offer ways to avoid or mitigate late-filing or non-filing penalties.

Description

U.S. taxpayers who pay wages or other amounts subject to withholding tax such as interest, dividends and fees to foreign persons must report those amounts on IRS Form 1042-S. Tax professionals must be aware of withholding requirements for non-resident aliens (NRAs), the proper 1042-S reporting for various classes of income, and the exclusions of income payments not subject to NRA withholdings.

In 2016, the IRS began denying refunds of withholding tax credits for certain taxpayers’ Form 1040NR claims, if those amounts did not match the remittances claimed on Form 1042-S. The Service announced its heightened focus on international tax information reporting, using data collection to cross reference filings to verify taxpayer compliance.

Failure to accurately report amounts paid to NRAs can lead to stiff penalties for the payer of the amounts—including secondary liability for the withholding tax, interest and various penalties.

There are different filing duties for payers and NRA recipients of payments, depending on whether payments are made directly to the NRA or through an intermediary. Tax professionals must understand the information required to complete a Form 1042-S to avoid negative audit consequences.

Listen as our panel reviews federal rules and offers guidance affecting a tax professional’s completion of Form 1042-S, including withholding and filing requirements.

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Outline

  1. When withholding and Forms 1042, 1042-S and 1042-T are required
  2. Payments to foreign persons subject to federal withholding tax
  3. Exemptions
  4. Reporting treaty positions
  5. Completing the Form 1042-S
  6. New IRS enforcement initiatives
  7. Noncompliance penalties

Benefits

The panel will examine these and other relevant topics:

  • Which payments to related parties trigger withholding obligations, and which don’t, under the IRC?
  • Anticipating and avoiding common errors that tax professionals make when preparing Form 1042-S
  • Understanding the new rules for substitute Form 1042-S
  • Adapting to the changes in Form 1042-S reporting for FATCA
  • Identifying triggers and issues that lead to audit or denial of claimed withholding credits

Faculty

Gifford, Dirk
Dirk Gifford
Managing Director
KPMG

Mr. Gifford serves as a Tax Managing Director in the Tysons Corner office of KPMG's International Corporate...  |  Read More

Samtoy, John
John Samtoy

Tax Principal
Holthouse Carlin & Van Trigt

Mr. Samtoy’s practice specializes in international tax compliance and consulting services, with a focus on...  |  Read More

Prendergast, Elis
Elis A. Prendergast
Senior Manager
KPMG

Mr. Prendergast is part of the firm's Information Reporting and Withholding practice. He has considerable...  |  Read More

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