Written by: Rita M. Ryan, JD, LLM
On November 15, 2021, the IRS launched a new online tool designed to help U.S. withholding agents comply with the reporting and withholding responsibilities relative to Form 1042-S – Foreign Person’s U.S. Source Income Subject to Withholding. A summary of the data integrity tool is below.
What is Form 1042-S?
Form 1042-S is used to report U.S. source income and associated withholding paid to non-U.S. persons.
Form 1042-S can be filed on paper or electronically and must be filed with the IRS by March 15 after the close of the taxable year.
What the Tool Does:
According to the release, the tool performs a quality review of data before submission of Form 1042-S to the IRS. The tool does not relieve the withholding agent’s obligation to file the Form 1042-S with the IRS and provide a copy of the same to the payee. It is simply a tool to aid in filing responsibility.
The tool is designed to accept Form 1042-S data from most withholding agents’ systems and will provide a report indicating errors and any potential errors. While the tool identifies errors and potential errors, the IRS has made it clear that this report does not relieve the withholding agents’ responsibility to make the changes to their data before submitting the final forms to the IRS. Further, the data upload to the tool for review is NOT the same as filing the Form 1042-S with IRS processing. The withholding agent remains responsible for the Form 1042-S filing which is done separately.
The tool can be used multiple times to check new or revised data. The IRS has indicated that it does not have access to user data and the use of the tool is completely voluntary. Finally, the IRS has noted that it will consider a withholding agents’ use of the tool when making determinations relative to enforcement and penalties.
Hyper Link to Tool:
https://1042sdi.for.irs.gov/Account/LogIn?ReturnUrl=%2F
Hyper Link to Release:
https://www.irs.gov/newsroom/irs-announces-new-online-tool-to-help-us-withholding-agents-validate-their-1042-s-data-prior-to-filing
How Can We Help?
Wolf’s International Tax Team can provide Form 1042-S, 1042, and 1042-T preparation and process review.
For more information or if you have questions about Form 1042-S, please reach out to the following Wolf team representatives:
Kristin L. Stone, CPA, MST
Principal
Wolf & Company, P.C.
255 State Street, Boston, MA 02109
Direct +1 (617) 428-5464
[email protected]
Rita Ryan, J.D., LL.M.
International Tax Senior Manager
Wolf & Company, P.C.
255 State Street, Boston, MA 02109
Direct +1(617) 419-4202
[email protected]
