Box 2, Gross Income

Enter the gross amount you paid to or on behalf of the recipient during calendar year 2002, including withheld tax. The following special procedures apply to the reporting of gross income.

• You must report the entire amount of a corporate distribution made with respect to stock even if you elect to reduce the amount of withholding on the distribution because all or a portion of the distribution is nontaxable or represents a capital gain dividend or exempt-interest dividend distributed by a regulated investment company.
• You must report the entire amount of a payment if you do not know at the time of payment the amount that is subject to withholding because the determination of the source of the income or the calculation of the amount of income subject to tax depends upon facts that are not known at the time of payment.
• You must report the entire amount of gains relating to the disposal of timber, coal, or domestic iron ore with a retained economic interest and gains relating to contingent payments received from the sale or exchange of patents, copyrights, and similar intangible property.
• You must report only the amount of cash paid on notional principal contracts.

Box 3, Withholding Allowances

This box should only be completed if the income code reported in box 1 is 15 (scholarship or fellowship grants) or 16 (compensation for independent personal services). See Pub. 515 for more information.

Box 4, Net Income

Complete this box only if you entered an amount in box 3. Otherwise, leave it blank.

Box 5, Tax Rate

Enter the correct rate of withholding that applies to the income in box 2 (gross income) or box 4 (net income), as appropriate. The correct tax rate should be included even if you withheld less than that rate. For example, if an NQI is reporting dividends paid to a beneficial owner who is a resident of a country with which the United States does not have a treaty and a U.S. withholding agent paid the dividend and withheld only 15% (rather than the required 30%) and the NQI withholds an additional 15%, the NQI should report 30.00 in box 5. See Example 2 on page 10.

Enter the tax rate using the following format: two digits, a decimal, and two digits (e.g., 30.00 for 30%). However, if the income is exempt from tax under a U.S. tax treaty or the Code, enter -0-. If the tax rate is less than 10%, enter a zero before the tax rate (e.g., enter 04.00 for 4%).

Note:   If you withheld at more than one tax rate for a specific type of income that you paid to the same recipient, you must file a separate Form 1042-S for each amount to which a separate rate was applied.

Box 6, Exemption Code

Note:   If you are filing a Form 1042-S to correct certain information already provided to you by another withholding agent on a Form 1099 or Form 1042-S (e.g., as required under Amounts Paid by Nonqualified Intermediaries and Flow-Through Entities on page 10), see item 5 below.

Generally, if the tax rate you entered in box 5 is 0% (-0-), you should enter the appropriate exemption code (01 through 09) from the list on page 13.

Income Codes, Exemption Codes, and Recipient Codes

Income Codes, Exemption Codes, and Recipient Codes

Box 1. Enter the appropriate income code.		Box 6. If the tax rate entered in box 5 is 0%, you must generally enter the appropriate exemption code from the list below (but see the Caution below).
Code	Interest Income	Code	Authority for Exemption
01	Interest paid by U.S. obligors - general	01	Income effectively connected with a U.S. trade or business
02	Interest paid on real property mortgages	02	Exempt under an Internal Revenue Code section (income other than portfolio interest)
03	Interest paid to controlling foreign corporations	03	Income is not from U.S. sources 4
04	Interest paid by foreign corporations	04	Exempt under tax treaty
05	Interest on tax-free covenant bonds	05	Portfolio interest exempt under an Internal Revenue Code section
29	Deposit interest	06	Qualified intermediary that assumes primary withholding responsibility
30	Original issue discount (OID)	07	Withholding foreign partnership or withholding foreign trust
31	Short-term OID	08	U.S. branch treated as a U.S. person
Code	Dividend Income	09	Qualified intermediary represents income is exempt
06	Dividends paid by U.S. corporations - general	Caution: See the instructions for box 6 on page 12 for information on additional codes (00 and 99) that may be required.
07	Dividends qualifying for direct dividend rate	Box 12. Enter the appropriate recipient code.
08	Dividends paid by foreign corporations	Code	Type of Recipient
Code	Other Income	01	Individual 2
09	Capital gains	02	Corporation 2
10	Industrial royalties	03	Partnership other than a withholding foreign partnership 2
11	Motion picture or television copyright royalties	04	Withholding foreign partnership or withholding foreign trust
12	Other royalties (e.g., copyright, recording, publishing)	05	Trust
13	Real property income and natural resources royalties	06	Government or international organization
14	Pensions, annuities, alimony, and/or insurance premiums	07	Tax-exempt organization (IRC section 501(a))
15	Scholarship or fellowship grants	08	Private foundation
16	Compensation for independent personal services 1	09	Artist or athlete 2
17	Compensation for dependent personal services 1	10	Estate
18	Compensation for teaching 1	11	U.S. branch treated as U.S. person
19	Compensation during studying and training 1	12	Qualified intermediary
20	Earnings as an artist or athlete 2	13	Private arrangement intermediary withholding rate pool - general 5
24	Real estate investment trust (REIT) distributions of capital gains	14	Private arrangement intermediary withholding rate pool - exempt organizations 5
25	Trust distributions subject to IRC section 1445	15	Qualified intermediary withholding rate pool - general 5
26	Unsevered growing crops and timber distributions by a trust subject to IRC section 1445	16	Qualified intermediary withholding rate pool - exempt organizations 5
27	Publicly traded partnership distributions subject to IRC section 1446	17	Authorized foreign agent
28	Gambling winnings	20	Unknown recipient
32	Notional principal contract income 3
50	Other income
1 If compensation that otherwise would be covered under Income Codes 16-19 is directly attributable to the recipient's occupation as an artist or athlete, use Income Code 20 instead.
2 If Income Code 20 is used, Recipient Code 09 (artist or athlete) should be used instead of Recipient Code 01 (individual), 02 (corporation), or 03 (partnership other than withholding foreign partnership).
3 Use appropriate Interest Income Code for embedded interest in a notional principal contract.
4 Non-U.S. source income paid to a nonresident alien is not subject to U.S. tax. Use Exemption Code 03 when entering an amount for information reporting purposes only.
5 May be used only by a qualified intermediary.

If an amount was withheld under Chapter 3 of the Code (i.e., the tax rate you entered in box 5 is greater than zero and is not due to backup withholding), enter 00 in box 6. If the tax rate you entered in box 5 is due to backup withholding, leave box 6 blank.

1. If exemption code 01 (income effectively connected with a U.S. trade or business) may apply, you must enter the recipient's U.S. TIN in box 14. If the recipient's U.S. TIN is unknown or unavailable, you must withhold tax at the foreign-person rate of 30% (30.00) and enter 00 in box 6.
2. A withholding agent should use exemption code 06 (qualified intermediary that assumes primary withholding responsibility) only if it is making a payment to a QI that has represented on its Form W-8IMY that it is assuming primary withholding responsibility under Chapter 3 of the Code.
3. A withholding agent should use exemption code 07 (withholding foreign partnership or withholding foreign trust) only if it is making a payment to a foreign partnership or trust that has represented that it is a withholding foreign partnership or trust.
4. A withholding agent should use exemption code 09 (qualified intermediary represents income is exempt) only if it makes a payment to a QI that has not assumed primary withholding responsibility under Chapter 3 of the Code or primary backup withholding responsibility, but has represented on a withholding statement associated with its Form W-8IMY that the income is exempt from withholding.
5. If you have failed to provide another withholding agent with appropriate information regarding the status of the person to whom you are making a payment, the other withholding agent may be required to withhold on the payment based on the presumption rules. If the income is in fact exempt from withholding, you must submit a Form 1042-S providing the correct information. In this situation, you must:
   • Indicate the correct rate at which the income should have been subject to withholding in box 5 (usually 0% (-0-)),
   • Enter 99 in box 6, and
   • Enter the actual amount of U.S. Federal tax withheld by the other withholding agent in box 7.

You must also provide the correct recipient code in box 12 and the name and address of the actual recipient in box 13.

Box 7, U.S. Federal Tax Withheld

Note:   Box 7 must be completed in all cases, even if no tax has actually been withheld.

Enter the total amount of U.S. Federal tax actually withheld. If no tax has been withheld on the payment by any withholding agent, enter -0-. If you are a withholding agent filing a Form 1042-S to report income that has already been subject to withholding by another withholding agent, enter the aggregate amount of tax withheld by you and any other withholding agent (see instructions for box 6 above).

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