Tax & Accounting Blog

Penalties for Failure to Comply with NRA Withholding and 1042-S Information Reporting – Part 3: Penaly for Late 1042-S Submission

Penalties for Failure to Comply with NRA Withholding and 1042-S Information Reporting – Part 3: Penaly for Late 1042-S Submission

U.S.-source income payments to foreign persons that are subject to withholding or that are exempt from withholding under an Internal Revenue Code or income tax treaty provision must be reported on Form 1042-S. Unlike the rules for Form 1099, Form 1042-S is required whether or not the payer is engaged in a U.S.trade or business. There is … Read More

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Penalties for Failure to Comply with NRA Withholding and 1042-S Information Reporting: Part 2 – A Penalty for Late Deposit

The IRS prescribes when deposits of NRA withholding are required in IRS Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities. A payer who fails to make a required deposit of withheld taxes within the time prescribed is liable for a penalty on the underpayment (i.e., the excess of the … Read More

Penalties for Failure to Comply with NRA Withholding and 1042-S Information Reporting – Part 1

Penalties for Failure to Comply with NRA Withholding and 1042-S Information Reporting – Part 1

In August of 2010, the IRS announced “executing our international strategy is a top priority, and our work continues to intensify in this area.” Included in this strategy is a requirement for examiners to review withholding and reporting on payments to foreign individuals and entities during corporate audits. Other organizations should anticipate that the IRS will apply … Read More

Form 1042-S: IRS Alerts Payers to the Correct Use of Codes for Unknown Recipient and Unknown Country

Form 1042-S: IRS Alerts Payers to the Correct Use of Codes for Unknown Recipient and Unknown Country

A perennial problem in Form 1042-S reporting, noted by the IRS in the current edition of Publication 1187, is misreporting which results from the payer not making correct use of Unknown Recipient (recipient code 20) and Unknown Country (country code UC). UC is used as a country code only when you conclude you have paid an … Read More

New IRS Form to Report Foreign Assets

New IRS Form to Report Foreign Assets

The IRS recently released a draft of new Form 8938 that requires taxpayers to report on certain foreign financial assets for tax year 2011. This reporting is part of FATCA (Foreign Account Tax Compliance Act), which strives to improve compliance of U.S. taxpayers who have offshore assets. This new IRS filing requirement does not replace the taxpayer’s … Read More

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Why the Nature of Income Paid to Foreign Vendors Matters

U.S. organizations making payments to vendors must determine whether the vendor is a U.S. person or a non-U.S. person because only payments to U.S. persons (actual or presumed) are covered by Form 1099 rules and procedures. The term, U.S. persons, includes U.S. citizens, resident aliens (based on I.R.C. Section 7701(b), the tax residency rules) and … Read More