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Form 1042-S Information Reporting to Non-U.S. Persons Part 2: Payments Not Reportable on Form 1042-S

By On · Add Comment - 1042-S, 1099, FATCA, ONESOURCE, ONESOURCE Nonresident Alien Taxation, Tax Information Reporting, Trust Tax, Uncategorized, W-8 & W-9 Foreign Reporting -

Income payments not subject to NRA withholding are also not subject to Form 1042-S reporting. They include:

• Income excluded from income under section 61 (e.g., qualified scholarships and fellowships).
• Proceeds on sales of U.S. real property interests by non-U.S. persons (use Form 8288).
• Partnership profits reported by the partnership to a foreign partner (use Form 8805).
• Wages that are subject to wage withholding (use Form W-2).

Wages exempt from wage withholding under an applicable tax treaty provision must be reported on a Form 1042-S, however. If a payment was erroneously subjected to NRA withholding, and the payment was not refunded, that payment and the taxes withheld must also be reported on Form 1042-S.

Foreign-source income is not reportable at all because it is not subject to U.S. income tax. A payer may, however, choose to report foreign-source income on a Form 1042-S in which case the Exemption Code is 03. Whether income paid is U.S. or foreign-source is determined under U.S. tax code rules which vary with the type of income paid.

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Author

Paula Singer

Paula N. Singer, Esq. a practice leader with Thomson Reuters ONESOURCE Nonresident Alien Taxation and award-winning author has over 30 years of experience as a tax lawyer specializing in cross-border tax issues for individuals, businesses, trusts, and estates. In 1994, Paula co-founded Windstar Technologies, Inc., to provide an easy-to-use and understand software solution for international tax compliance and reporting. A nationally recognized international tax attorney and partner in the law firm Vacovec, Mayotte and Singer LLP, in Newton, Massachusetts, Paula’s practice has concentrated in international tax matters for individuals, businesses, trusts, and estates. She has provided individuals and organizations with tax planning as well as compliance services for individuals relocating internationally since 1978. Paula is a frequent speaker and author of over 80 published articles and is the author of numerous tax guide books. Her articles on international tax topics have appeared in AILA publications, Tax Analysts’ Tax Notes International and Tax Notes as well as their online services, West and RIA publications, and bar association publications. Paula assisted the IRS and NAFSA with the development of Form 1040NR-EZ. Her comments on proposed regulations under section 7701(b) on the substantial presence test and under section 1441 on withholding on payments to foreign persons were incorporated into the final regulations under each section. Paula was a panelist with IRS International Issues Specialist, Lowell Hancock on two IRS webcasts on TaxTalkToday.tv “US Tax Withholding Issues in the Global Business Economy” Dec 2002 and on “Understanding U.S. Income Tax Treaties”, Mar 2008 and on a series of audio seminars in 2009 sponsored by the immigration portal ILW.com. The IRS has used Paula’s tax guidebooks to train their personnel. Paula is also co-author with Prof. Cynthia Blum of Rutgers Law School of two law review articles, “A Comprehensive Policy for U.S. Residence-Based Taxation of Individuals” published in 2008 by the Vanderbilt Journal of Transnational Taxation and “A Proposal for Taking the Complexities out of U.S. Retirement Distributions to Foreign Nationals’ published in 2012 by the Florida Tax Review, the law review of the University of Florida’s graduate tax program.

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