Form 1042

Form 1042 is the IRS Annual Withholding Tax Return for U.S. Source Income of Foreign Persons. A US withholding agent files one Form 1042 per year to report and reconcile the tax it withheld on US-source income paid to foreign persons. The IRS states that Form 1042 reports “the tax withheld under chapter 3 on certain income of foreign persons” and “the tax withheld under chapter 4 on withholdable payments,” plus payments reported on Form 1042-S. For a US company paying foreign contractors, it is the year-end return that ties together everything the company withheld and reported during the year.

Form 1042 vs Form 1042-S

These two forms get confused constantly, so it is worth being precise. They are not the same document and they do different jobs.

• Form 1042-S is the per-recipient statement. The withholding agent issues one 1042-S to each foreign payee, and a copy to the IRS, showing that recipient’s US-source income and the tax withheld from it.
• Form 1042 is the single annual summary return. It rolls up every 1042-S the agent issued for the year and reconciles total income paid, total tax withheld, and total tax deposited.

A useful way to hold it: 1042-S is the line item, 1042 is the cover return that sums the line items. If you issue ten 1042-S forms, you still file just one Form 1042.

Who Files Form 1042

The filer is the withholding agent. Per the IRS, that is the person responsible for withholding tax on payments to foreign persons, including nonresident aliens, foreign partnerships, foreign corporations, foreign estates, and foreign trusts. A US company that pays US-source income to a foreign contractor is the withholding agent for that payment, which means it owns both the 1042-S statements and the Form 1042 return.

This obligation is tied to NRA withholding, the chapter 3 regime that requires withholding on US-source FDAP income paid to foreign persons. If a payment triggered chapter 3 or chapter 4 withholding, it flows onto a 1042-S and then onto the annual Form 1042.

What Form 1042 Covers

The return is broader than chapter 3 alone. The IRS lists what Form 1042 reports:

1. Tax withheld under chapter 3 on certain income of foreign persons, which is the NRA withholding regime.
2. Tax withheld under chapter 4 on withholdable payments, which is the FATCA regime.
3. Tax withheld under section 5000C on specified federal procurement payments.
4. Payments that are reported on the related Form 1042-S.

In practice, most US companies paying foreign contractors deal with the chapter 3 piece. The company determines whether each payment is US-source, applies the correct statutory or treaty rate, deposits the tax during the year, issues a 1042-S to each recipient, and files one Form 1042 to reconcile it all.

When It Is Due

Form 1042 is due March 15 of the year after the income was paid. The 1042-S statements share that March 15 deadline to recipients and to the IRS. Always confirm the current-year deadlines, extension options, and any electronic filing requirements in the live IRS instructions, since filing rules change.

Related Forms and Terms

• Form 1042-S: the per-recipient statement that Form 1042 summarizes.
• Withholding Agent: the party legally responsible for withholding and filing.
• NRA Withholding: the chapter 3 regime that produces most of the withholding reported on Form 1042.

This page is educational, not tax advice. For a specific filing position, work with a qualified tax advisor. Omnivoo Contract Management tracks each foreign contractor payment by source and documentation, applies the right rate, and produces the 1042-S records a withholding agent needs to assemble its annual Form 1042.