Income payments made to non-U.S. persons must be reported on a Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, not on a Form 1099. Unlike Form 1099-reportable payments, there is no reporting exception for payments to corporations and no minimum dollar threshold for reporting on Form 1042-S. Reporting on Form 1042-S is required even if the income was exempt from withholding such as under an income tax treaty provision. Payers submitting one or more Forms 1042-S must also submit a Form 1042 Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, even if all of the Form 1042-S records are exempt from NRA withholding. Only one Form 1042 may be submitted per EIN although multiple Form 1042-S files may be submitted to the IRS.
Reporting must be in the name of the beneficial owner of the income, who is not necessarily the payee. If the beneficial owner of the income is not known, as is frequently the case in payments to flow-through entities (such as partnerships) or agents that do not provide withholding certificates from the owners, the income must be reported in the name “unknown recipient.”