2003 Tax Help Archives  
  Home > Tax Help Archives > 2003 > Instructions > Form 1042-S
Instructions for Form 1042-S 2003 Tax Year

Specific Instructions for Withholding Agents

This is archived information that pertains only to the 2003 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

Table of Contents


Note:

All amounts must be reported in U.S. dollars.

Rounding Off to Whole Dollars

To round off amounts to the nearest whole dollar, drop amounts under 50 cents and increase amounts from 50 to 99 cents to the next dollar. If you have to add two or more amounts to figure the amount to enter on a line, include cents when adding and only round off the total.

VOID and CORRECTED Boxes at Top of Form

See Correcting Paper Forms 1042-S beginning on page 14.

PRO-RATA BASIS REPORTING Box

Withholding agents must check this box to notify the IRS that an NQI that used the alternative procedures of Regulations section 1.1441-1(e)(3)(iv)(D) failed to properly comply with those procedures. See Pro-rata reporting on page 7 for additional information and examples.

Box 1, Income Code

All filers must enter the appropriate 2-digit income code from the list on page 12. Use the income code that is the most specific. For example, if you are paying bank deposit interest, you should use code 29 (deposit interest), not code 01 (interest paid by U.S. obligors–general). If you paid more than one type of income to or on behalf of the same recipient, you must complete a separate Form 1042-S for each income type.


Note:

Although income codes are provided for deposit interest, short-term OID, and notional principal contract income, those items are not always subject to reporting on Form 1042-S. For example, bank deposit interest is reportable if it is effectively connected with the conduct of a U.S. trade or business or is paid to a resident of Canada. Short-term OID or bank deposit interest may need to be reported by an NQI or flow-through entity if those amounts are paid to foreign persons and another withholding agent backup withheld on those amounts under the presumption rules. (See Example 3 on page 10.) Notional principal contract income is reportable if it is effectively connected with the conduct of a trade or business in the United States. For more information, see the regulations under Chapter 3 of the Code and Pub. 515.

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

Box 2, Gross Income

For each income type, enter the gross amount you paid to or on behalf of the recipient during calendar year 2003, 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 tax 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 9), 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 12.

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 Amounts Paid by Nonqualified Intermediaries and Flow-Through Entities on page 9).

Box 8, Amount Repaid to Recipient

This box should be completed only if:

  • You repaid a recipient an amount that was overwithheld and
  • You are going to reimburse yourself by reducing, by the amount of tax actually repaid, the amount of any deposit made for a payment period in the calendar year following the calendar year of withholding.

Generally, a QI should not enter an amount in box 8 unless it is a QI that has represented on its Form W-8IMY that it is assuming primary withholding responsibility under Chapter 3 of the Code.

You must also state on a timely filed Form 1042 for the calendar year of overwithholding that the filing of the Form 1042 constitutes a claim for refund.

Box 9, Withholding Agent's Employer Identification Number (EIN)

You are generally required to enter your EIN. However, if you are filing Form 1042-S as a QI, withholding foreign partnership, or withholding foreign trust, enter your QI-EIN. Enter the number and check the applicable box.

If you do not have an EIN, you should apply for one on Form SS-4, Application for Employer Identification Number. You can get Form SS-4 by calling 1-800-TAX-FORM (1-800-829-3676) or from the IRS Web Site at www.irs.gov. File corrected Forms 1042-S when you receive your EIN.

To get a QI-EIN, submit Form SS-4 with your Application for QI Status (completed in accordance with Section 3 of the preamble of Rev. Proc. 2000-12. You can find Rev. Proc. 2000-12 on page 387 of Internal Revenue Bulletin 2000-4 at www.irs.gov/pub/irs-irbs/irb00-04.pdf.) Do not send an application for a QI-EIN to the Philadelphia Service Center; it will not be processed.

Box 10, Withholding Agent's Name and Address

Enter your name and address. Include the suite, room, or other unit number after the street address. If your post office does not deliver mail to the street address and you have a P.O. box, show the box number instead of the street address.


Note:

On statements furnished to Canadian recipients of U.S. source deposit interest, in addition to your name and address, you must include the telephone number of a person to contact. This number must provide direct access to an individual who can answer questions about the statement. The telephone number is not required on Copy A of paper forms or on magnetic media filed with the IRS. You must also include a statement that the information on the form is being furnished to the United States Internal Revenue Service and may be furnished to Canada.

Box 11, Recipient's Account Number

You may use this box to enter the account number assigned by you to the recipient.

Box 12, Recipient Code

Enter the recipient code from the list on page 12. The following special instructions apply.

  • If applicable, use recipient code 09 (artist or athlete) instead of recipient code 01 (individual), 02 (corporation), or 03 (partnership other than a withholding foreign partnership).
  • Use recipient code 12 if you are making a payment to a QI and 04 if you are making a payment to a withholding foreign partnership or a withholding foreign trust.
  • If you are making a payment to an NQI or flow-through entity, you generally must use the recipient code that applies to the type of recipient who receives the income from the NQI or flow-through entity.
  • Use recipient code 03 (partnership other than a withholding foreign partnership) only if you are reporting a payment of income that is effectively connected with the conduct of a trade or business of a nonwithholding foreign partnership in the United States. Otherwise, follow the rules that apply to payments to flow-through entities.
  • Use recipient code 20 (unknown recipient) only if you have not received a withholding certificate or other documentation for a recipient or you cannot determine how much of a payment is reliably associated with a specific recipient. Do not use this code because you cannot determine the recipient's status as an individual, corporation, etc. The regulations under Chapter 3 of the Code provide rules on how to determine a recipient's status when a withholding agent does not have the necessary information.
  • Only QIs may use recipient codes 13 (private arrangement intermediary withholding rate pool–general), 14 (private arrangement intermediary withholding rate pool–exempt organizations), 15 (qualified intermediary withholding rate pool–general), and 16 (qualified intermediary withholding rate pool–exempt organizations). A QI should only use recipient code 14 or 16 for pooled account holders that have claimed an exemption based on their tax-exempt status and not some other exemption (e.g., treaty or other Code exception). A U.S. withholding agent making a payment to a QI should use recipient code 12.

Box 13, Recipient's Name and Address

Name.   Enter the complete name of the recipient.
  • If you do not know the name of the recipient, enter “Unknown Recipient”.
  • If Form 1042-S is being completed by a QI for a withholding rate pool, enter “Withholding rate pool” in box 13. No address is necessary.
  • A QI reporting payments made to a PAI on a withholding rate pool basis must include the name and address of the PAI in box 13.

Address.   You must generally enter a foreign address in box 13. However, there are limited exceptions. For example, you may enter a U.S. address when reporting payments of scholarship or fellowship grants (income code 15).

  For addresses outside the United States or its possessions or territories, enter the complete address in the following order: street address, city or town, province or state, and country. Follow the foreign country's practice for entering the postal code. Do not abbreviate the country name.

  For addresses within the United States, enter the address in the following order: street address (number, street, apartment number, or rural route), city or town, state, and ZIP code. Use the U.S. Postal Service 2-letter abbreviation for the state name. Do not enter “United States” or “U.S.”

Box 14, Recipient's U.S. Taxpayer Identification Number (TIN)

You must obtain and enter a U.S. taxpayer identification number (TIN) for:

  • Any recipient whose income is effectively connected with the conduct of a trade or business in the United States.


    Note:

    For these recipients, exemption code 01 should be entered in box 6.

  • Any foreign person claiming a reduced rate of, or exemption from, tax under a tax treaty between a foreign country and the United States, unless the income consists of dividends and interest from stocks and debt obligations that are actively traded; dividends from any redeemable security issued by an investment company registered under the Investment Company Act of 1940 (mutual fund); dividends, interest, or royalties from units of beneficial interest in a unit investment trust that are (or were, upon issuance) publicly offered and are registered with the Securities and Exchange Commission under the Securities Act of 1933; and amounts paid with respect to loans of any of the above securities.
  • Any nonresident alien individual claiming exemption from tax under section 871(f) for certain annuities received under qualified plans.
  • A foreign organization claiming an exemption from tax solely because of its status as a tax-exempt organization under section 501(c) or as a private foundation.
  • Any QI.
  • Any withholding foreign partnership or withholding foreign trust.
  • Any nonresident alien individual claiming exemption from withholding on compensation for independent personal services.
  • Any foreign grantor trust with five or fewer grantors.
  • Any U.S. branch of a foreign bank or foreign insurance company that is treated as a U.S. person.

If a foreign person provides a TIN on a Form W-8, but is not required to do so, the withholding agent must include the TIN on Form 1042-S.

Box 15, Recipient's Country of Residence for Tax Purposes

Enter the unabbreviated name of the recipient's country of residence for tax purposes.

Box 16, Recipient's Country Code

You must enter the code (from the list that begins on page 15) for the country of which the recipient claims residency under that country's tax laws. Enter “OC” (other country) only when the country of residence does not appear on the list or the payment is made to an international organization (e.g., the United Nations). Enter “UC” (unknown country) only if the payment is to an unknown recipient. If you are making a payment to a QI or if you are a QI and are making a payment to a QI withholding rate pool, enter the country code of the QI.


Note:

If exemption code 04 (exempt under tax treaty) appears in box 6 or if a reduced rate of withholding based on a tax treaty is entered in box 5, the country code entered in box 16 must be a country with which the United States has entered into an income tax treaty.

Boxes 17 Through 20, Nonqualified Intermediary's (NQI's)/Flow-Through Entity's Name, Country Code, Address, and TIN

If you are reporting amounts paid to a recipient whose withholding certificates or other documentation has been submitted to you with a Form W-8IMY provided by an NQI or flow-through entity, you must include the name, address, and TIN, if any, of the NQI or flow-through entity with whose Form W-8IMY the recipient's Form W-8 or other documentation is associated.


Note:

An NQI or flow-through entity will leave these boxes blank unless it is making the payment to an NQI or flow-through entity.

For box 18, you must enter the country code from the list that begins on page 15 for the country where the NQI or flow-through entity is located.

Box 21, Payer's Name and Taxpayer Identification Number (TIN)

See the definition of a payer on page 3. Include the payer's name and TIN if different from that in boxes 9 and 10.

Boxes 22 Through 24, State Income Tax Withheld and Related Information

Include in these boxes information relating to any state income tax withheld.

Correcting Paper Forms 1042-S

If you filed a Form 1042-S with the IRS and later discover you made an error on it, you must correct it as soon as possible. To correct a previously filed Form 1042-S, you will need to file two Forms 1042-S. See the Step-by-Step Instructions on this page.

To determine whether you are required to submit corrections on magnetic media, see Magnetic Media/Electronic Reporting on page 1 and in Pub. 1187.


Note:

If you fail to correct Form(s) 1042-S, you may be subject to a penalty. See Penalties on page 11.

If any information you correct on Form(s) 1042-S changes the information you previously reported on Form 1042, you must also correct the Form 1042 by filing an amended return. To do this, see the Form 1042 instructions.

VOID box.   Enter an “X” in the VOID box of a Form 1042-S that shows the same information, including errors, as the form you previously filed with the IRS. This will identify the Form 1042-S you want the IRS to disregard. An “X” in the VOID box will not correct a previously filed Form 1042-S. See Step-by-Step Instructions on this page.

CORRECTED box.   Enter an “X” in the CORRECTED box of Copy A only if you are correcting a Form 1042-S you previously filed with the IRS. Enter an “X” in the CORRECTED box you give to the recipient only if you are correcting a Form 1042-S previously furnished to the recipient. You must provide statements to recipients showing the corrections as soon as possible.

Step-by-Step Instructions

To correct a previously filed Form 1042-S, prepare two Forms 1042-S following the steps below.

Step 1.   To identify the Form 1042-S you want the IRS to disregard, enter an “X” in the VOID box at the top of Copy A of the original Form 1042-S that you filed or do the following:
  • Prepare a Form 1042-S,
  • Enter all the information exactly as it appeared on the original Form 1042-S, and
  • Enter an “X” in the VOID box at the top of the form.

Step 2.   To correct Form 1042-S:
  • Prepare a new Form 1042-S.
  • Enter all the correct information on the form, including the recipient name and address, money amounts, and codes.
  • Enter an “X” in the CORRECTED box at the top of the form.

Step 3.   To file the VOID and CORRECTED Forms 1042-S, see the Form 1042 instructions.

Prev | First | Next

Instructions Index | 2003 Tax Help Archives | Tax Help Archives | Home