Tax & Accounting Blog

Information Reporting on Form 1042-S, A New Challenge for Accounts Payable – Part 7: Nonservice Income Codes

Information Reporting on Form 1042-S, A New Challenge for Accounts Payable – Part 7: Nonservice Income Codes

IRS Publication 515, Table 1, Withholding Tax Rates on Income Other Than Personal Service Income Under Chapter 3, Internal Revenue Code, and Income Tax Treaties, assigns Income Codes to the categories of income described in the table for reduced rates of tax by treaty country.  Income Codes for some income not included in Table … Read More

Information Reporting on Form 1042-S, A New Challenge for Accounts Payable – Part 6: Income Code

Information Reporting on Form 1042-S, A New Challenge for Accounts Payable – Part 6: Income Code

As is evident from the assignment of income codes in the two overview tables and the discussions about specific types of income in IRS Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, Income Codes are used primarily to differentiate reduced rates of tax under income tax treaty provisions. This makes sense … Read More

Information Reporting on Form 1042-S, A New Challenge for Accounts Payable – Part 4: Payments to Agents and Intermediaries Recipient Code

Information Reporting on Form 1042-S, A New Challenge for Accounts Payable – Part 4: Payments to Agents and Intermediaries Recipient Code

If income is paid to an agent who acts on behalf of the beneficial owner, the beneficial owner is the recipient, not the agent, unless the agent has an agreement with the IRS to take responsibility for NRA withholding and reporting. When income is received by a partnership (Recipient Code 03) or other intermediary that … Read More

Information Reporting on Form 1042-S, A New Challenge for Accounts Payable – Part 3: Payments to Third Parties Recipient Code

Information Reporting on Form 1042-S, A New Challenge for Accounts Payable – Part 3: Payments to Third Parties Recipient Code

Occasionally, the beneficial owner of the income will request that the income that they are owed be paid to a third party. Although the payer may make the payment to the third party as requested, under the assignment of income doctrine, the income must still be reported in the name of the beneficial owner. Under … Read More

Information Reporting on Form 1042-S, A New Challenge for Accounts Payable – Part 2: Payments to Beneficial Owners Recipient Code

Information Reporting on Form 1042-S, A New Challenge for Accounts Payable – Part 2: Payments to Beneficial Owners Recipient Code

In order to report income and taxes properly, payers must generally maintain a record in the name of the income recipient even if payment is made to a different payee. Generally, the recipient named on the Form 1042-S is the individual (Code 01) or entity such as a corporation (Code 02) that is the … Read More

NRA Withholding and Reporting on Payments to Foreign Nationals – Part 12: What if the Recipient of the Income Requested that Payment Be Made to a Third Party?

NRA Withholding and Reporting on Payments to Foreign Nationals – Part 12: What if the Recipient of the Income Requested that Payment Be Made to a Third Party?

If a third party has been designated to receive the payment for services, whether you still have to withhold and report the income as if made to the individual who provided the services depends on the circumstances. If the arrangement for the services was made with the service provider who, after the services were performed, indicated … Read More