Tax & Accounting Blog

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

1042-S, 1099, International Reporting & Compliance, ONESOURCE, ONESOURCE Nonresident Alien Taxation, Tax Information Reporting, Trust Tax, W-8 & W-9 Foreign Reporting March 4, 2013

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.