Form 1042-S: Withholding on Foreign Persons' U.S. Income

Final Regulations, Avoiding Filing Errors, Credit Disallowances, and Audit Penalties

Note: CLE credit is not offered on this program

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

Conducted on Thursday, July 30, 2020

Recorded event now available

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Program Materials

This webinar will provide tax advisers with a thorough and practical guide to preparing Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding. The panel will discuss incorporating the due diligence and reporting requirements outlined in the final regulations issued in December 2019. The webinar will also review common mistakes and offer ways to reduce IRS scrutiny and mitigate late-filing or non-filing penalties.


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. Certain FDAP (fixed, determinable, annual, or periodic income) payments, are reportable regardless of withholding. Tax professionals must be aware of withholding requirements for nonresident aliens (NRAs), the proper 1042-S reporting for various classes of income, and the exclusions of income payments not subject to NRA withholdings.

The final regulations adopt, with modifications, the January 2017 temporary regulations and incorporate modifications included in the 2018 proposed regulations, including the requirement to disclose the limitation on benefits clause used to claim treaty benefits.

The IRS' Foreign Payments Practice, a practice within the IRS' Large Business and International (LB&I) International Business Compliance division, is devoted to enforcing withholding and remittance of these required multinational payments. 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.

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



  1. Background
  2. When withholding and Forms 1042, 1042-S, and 1042-T are required
  3. Payments to foreign persons subject to federal withholding tax
  4. Final regulations issued Dec. 27, 2019
  5. Exemptions
  6. Reporting treaty positions
  7. Completing the Form 1042-S
  8. New IRS enforcement initiatives
  9. Avoiding noncompliance penalties


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
  • What modifications were made to the previously issued regulations in the final rules?
  • How are lag payments treated?
  • Identifying triggers and issues that could lead to an audit


Khan, Jerry
Jerry Khan

Managing Director, Information Reporting & Withholding Tax

Mr. Khan has extensive experience with information reporting and withholding tax documentation, reporting, and project...  |  Read More

Prendergast, Elis
Elis A. Prendergast

Senior Manager

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

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