Form 1042: Annual Withholding Tax Return for U.S. Source Income of Foreign Persons

Line 61a to 61b: Number of Forms 1042-S filedCount on paper (61a) and electronically (61b). A QI, WP or WT that later reports pooled amounts to specific recipients amends Form 1042 to update this count.Click to open the row in the table belowLine 62a to 62d: Total gross amounts reportedFDAP income from box 2 of all Forms 1042-S and Forms 1000, split between ordinary FDAP and substitute payments; 62d shows amounts actually paid if different from 62c.Click to open the row in the table below

Hover over a line for what goes on it; click to open its row in the table below. On a touch screen, tap the line to jump to the row.

Line 63a to 63e: Total tax reported as withheld or paidTax withheld by you (63a), by other agents (63b), adjustments for over- and underwithholding (63c) and tax paid from your own funds (63d). Each ties to specific 1042-S boxes.Click to open the row in the table belowLine 64a to 64e: Total net tax liability64a adjustments (kept out of lines 1 to 60), 64b chapter 3, 64c chapter 4, 64d section 5000C excise tax; 64b to 64d must equal the Section 1 monthly totals.Click to open the row in the table belowLine 65a to 65b: Total paid by EFTDeposits for the year (65a) and deposits made in the following year designated to this year (65b).Click to open the row in the table belowLine 66: Prior-year overpayment creditOverpayment from the 2025 Form 1042 applied to 2026.Click to open the row in the table belowLine 67a to 67b: Credit for amounts withheld by other agentsMust be substantiated by attaching the supporting Forms 1042-S or 1099, or the credit is denied.Click to open the row in the table belowLine 68: Total paymentsLines 65 through 67.Click to open the row in the table belowLine 69: Balance dueIf line 64e is larger than line 68. Do not include interest or penalties here.Click to open the row in the table belowLine 70a to 70b: Overpayment70a for chapter 3 and 4 overwithholding, 70b for section 5000C excise tax.Click to open the row in the table belowLine 71a to 71d: Credit or refundChoose a credit on the next year's Form 1042 or a refund, with routing number, account type and account number for direct deposit.Click to open the row in the table belowSection 2: Reconciliation of U.S. source FDAP incomeLines 1 to 6: income withheld on under chapter 4, income reportable but exempt (codes 13 to 21), and the variance against total 1042-S income, explained on line 6. Required even with no chapter 4 withholding.Click to open the row in the table belowSection 3: Potential section 871(m) transactionsCheck if you made any payment under a potential 871(m) transaction, such as a derivative referencing U.S. stock.Click to open the row in the table belowSection 4: Payments by a QDDCheck if a QI was a qualified derivatives dealer, enter its regular EIN, and attach Schedule Q for each QDD even with zero liability.Click to open the row in the table below

Who files Form 1042

Every withholding agent or intermediary that pays, controls or has custody of a withholdable payment or an amount subject to withholding files Form 1042 for the preceding calendar year. You must file if you are required to file (or do file) any Form 1042-S under chapter 3 or 4, whether or not tax was withheld: “File Form 1042 even if you file Form(s) 1042-S electronically.” Publicly traded partnerships and nominees withholding under section 1446, entities reporting section 1445 distributions, payers of section 5000C federal procurement payments, payers to covered expatriates, payers of investment income to foreign private foundations, and QIs, WPs, WTs and FFIs claiming collective refunds also file. As a withholding agent “you are personally liable for any tax required to be withheld”.

File one Form 1042 consolidating all recipients for both chapters, regardless of branches or income types, but a separate return for each capacity (for example, as a QI for some accounts and an NQI for others), and a separate return for a U.S. branch of a participating FFI. Wages paid to nonresident alien employees are reported on Form 941, not Form 1042; pensions and annuities paid to foreign persons are 1042 items.

Form 1042-T is the paper transmittal for Copy A of paper Forms 1042-S. Use a separate 1042-T for each type (chapter 4 or 3, original or amended, pro rata or not, partnership subsequent-year reporting), send it with Copy A flat to Ogden by March 15, and enter both status codes, the total gross income and the chapter 4 or chapter 3 tax withheld. “Do not use Form 1042-T if you submit Forms 1042-S electronically.” It does not replace Form 1042.

Line by line

Due dates

Deposits

All tax shown on Form 1042, under chapter 3, chapter 4 or section 5000C, is deposited through EFTPS or IRS Direct Pay; failing to use them can draw a 10% penalty, and deposits must not be mailed to the IRS. The frequency depends on how much is undeposited:

1. Quarter-monthly. If undeposited tax is $2,000 or more at the end of any quarter-monthly period, deposit within 3 business days after the period ends.
2. Monthly. If undeposited tax at month end is at least $200 but less than $2,000, deposit within 15 days after the month ends. After a $2,000 deposit in December, an end-of-December balance under $2,000 is paid with Form 1042 by March 15.
3. Annual. If undeposited tax at year end is less than $200, pay it with Form 1042 or deposit it by March 15.

Deposits of tax withheld in the following year (where the regulations permit) must be designated to the payment year when made and reported on line 65b. Amounts held under the escrow procedure are not reported as liability or as withheld until the year they must be deposited. The Form 1042 deposit penalty calculator estimates late-deposit exposure.

Penalties

Late filing is 5% of the unpaid tax for each month or part month, up to 25%; late payment is generally 0.5% per month, up to 25%; interest runs from the due date even with an extension. Late deposits draw 2% (1 to 5 days), 5% (6 to 15 days), 10% (16 or more days) and 15% if unpaid more than 10 days after the first IRS notice. Penalties for negligence, substantial understatement and fraud can also apply, and the withholding agent remains liable for the tax it failed to withhold.

The Forms 1042-S behind the return carry information return penalties: for 2026 forms filed in 2027, $60 per form corrected within 30 days, $130 by August 1, $340 after that, and the greater of $690 or 10% of the amount for intentional disregard.

Corrections

To change a filed return, file an amended Form 1042 for the same year: check the amended return box, complete the entire form, sign it, and attach a statement explaining the change (for example, a May liability misreported through a math error). If an amended Form 1042-S sent with a Form 1042-T changes the gross income or tax withheld already reported on line 62c or 63e, an amended Form 1042 is required.

Overwithholding is not corrected by amending: “Do not amend Form 1042 to recover taxes overwithheld in the prior year.” Discovered by March 15 of the following year, it is fixed by reimbursement or set-off with the recipient and a credit claimed on line 71a; discovered later, the recipient files its own return or claim (Form 1040-NR or 1120-F), unless you are a QI, WP, WT or FFI claiming a collective refund.

Where it goes wrong

• Section 1 records deposits. Lines 1 to 60 report liability for the period the income was paid. “This section reports the tax liability, not the tax deposited by the withholding agent.” The monthly totals (lines 5, 10, 15 and so on to 60) must equal lines 64b to 64d.
• Totals that do not tie to the 1042-S. Line 62c should equal box 2 of all Forms 1042-S plus Forms 1000; 63a plus 63c(2) should equal box 7a; 63d should equal box 11; Section 2 line 4 should equal line 62c. The instructions warn that mismatches cause unnecessary IRS correspondence.
• Missing status codes or the wrong EIN. Both a chapter 3 and a chapter 4 withholding agent status code are required on every return, and a QI, WP or WT files under its QI-EIN, WP-EIN or WT-EIN. A GIIN does not replace the EIN.
• Credits without support. A credit on line 67 for tax withheld by another agent is denied unless the supporting Forms 1042-S or 1099 are attached.
• Section 2 skipped. “Section 2 must be completed even if you have not withheld any amounts under chapter 4.”
• Filing on paper when e-file is required. See the Form 1042 e-file reject rules and the EFIN guide for 1042 filers before the season starts.

Inside the IRS: what happens to Form 1042

Paper Forms 1042 are worked by the International Code and Edit unit at the Ogden Submission Processing Center under IRM 3.21.110. “Early-filed Form 1042 returns must be held for processing until the beginning of the appropriate processing year.” A return missing a signature, schedule or entry draws Letter 1791C, and if line 64e shows a liability while the Section 1 record of liability is blank, the examiner will “correspond for the missing ROFTL amounts.”

The credit for tax withheld by other agents is checked at processing, not later. “Entries on Line 67a and Line 67b must be substantiated by attaching a copy of Form 1042-S, Copy B (C, D, and/or E), or Form 1099.” The recipient's name on the attached 1042-S “must be the same as the filer’s name on the Form 1042”, with an eligible recipient status code. If the support is missing or does not match, the examiner will “delete the amount claimed on Line 67a or 67b”, which raises the balance due.

Paper Forms 1042-S travel separately under IRM 3.21.111: “Paper Form 1042-T and Form 1042-S are filed at OSPC (Ogden)”, and one Form 1042-T must accompany each type of paper 1042-S, with the type on the 1042-T matching every form behind it.

Reconciliation is where examinations start. IRM 4.10.21 says the amounts on Form 1042 “should generally match the gross income and taxes withheld as determined by combining these amounts from all Forms 1042-S filed”, and examiners “should obtain the taxpayer’s reconciliation workpapers” and compare the two. They also check that the liability record was not filled in from deposit dates, because “this error may prevent identification of late deposits.” Section 2 “may help to reconcile why Chapter 4 withholding was not required on filed Forms 1042-S”, generally through the exemption codes used.

What to do: keep a reconciliation of every 1042-S total to lines 62 to 64 and Section 2, attach the 1042-S or 1099 copies behind any line 67 credit, and complete Section 1 from payment dates. A withholding agent that missed years can use the delinquent return procedures, which require “one complete submission to FPP” (the Foreign Payments Practice) with all delinquent 1042s, the related 1042-S forms and “A reconciliation (i.e. spreadsheet) of information returns to each applicable withholding tax return.” See paper 1042-S inside the IRS.

Questions people ask about Form 1042

Other employer, withholding and ACA forms

Payroll and employment tax returns: W-4 · 941 · 941-X · 944 · 943 · 940 · W-2 · W-3 · W-2c · 8027
Withholding returns: 945
Health coverage (ACA) returns: 1095-C · 1094-C · 1095-B · 1094-B
Paper transmittal: 1096
All of them on one table · Information returns (1099 series)

Sources: Form 1042 (2026 draft, posted Apr. 30, 2026; 2025 final) and Instructions for Form 1042 (2025); Form 1042-T (2026 draft, posted Apr. 30, 2026); Instructions for Form 1042-S (2026); Pub 515 (2026); IRS pages Requesting a waiver from the e-filing requirement of Form 1042 and Exemption from the requirement to electronically file Forms 1042 (2024 and 2025).