Certain distributions subject to section 1445 withholding tax.

Publicly traded trusts, real estate investment trusts (REITs), and regulated investment companies that are qualified investment entities (as defined under section 897(h)(4)) must withhold section 1445 tax on certain distributions and report such amounts on Form 1042. For more information, see Regulations section 1.1445-8 and the Instructions for Form 1042-S.

Publicly traded partnerships (section 1446 withholding tax).

For purposes of reporting on Form 1042, a publicly traded partnership (PTP) must withhold section 1446(a) tax on distributions of effectively connected taxable income (ECTI) or amounts realized on distributions for section 1446(f) purposes made to its foreign partners. A nominee that receives a distribution of ECTI from a PTP and is treated as the withholding agent for section 1446 purposes must use Form 1042 to report the tax withheld. For purposes of section 1446(f), starting for the 2023 year a broker is generally required to withhold on an amount realized from the sale of a PTP interest that it effects for a foreign person that is the transferor of the interest. Absent an applicable exception to the withholding, a broker is required to withhold at a 10% rate on the amount realized and report the amount realized and withholding on Forms 1042 and 1042-S. See Regulations section 1.1461-1(c)(2)(i)(Q) and (R) for further information on this reporting. A broker is also required to withhold under section 1446(f) on an amount realized on a PTP distribution. For this purpose, a nominee is a person that holds an interest in the PTP on behalf of one or more foreign partners and that is a domestic person, a QI that assumes primary responsibility for the distribution, or a U.S. branch of a foreign person that agrees to be treated as a U.S. person. For more information, see Regulations sections 1.1446-4 and 1.1446(f)-4, the QI Agreement in Rev. Proc. 2022-43, and Pub. 515, Withholding of Tax on Nonresident Aliens and Foreign Entities.

Liability for tax.

As a withholding agent, you are personally liable for any tax required to be withheld as well as interest and any applicable penalties. A withholding agent acting through an agent is liable for any failure of the agent to deposit any tax required to be withheld and deposited even if the agent is also a withholding agent and is itself separately liable for the failure to comply with the provisions of chapter 3 or 4.

For purposes of chapter 3, if you fail to withhold and the foreign payee fails to satisfy its U.S. tax liability, then both you and the foreign person are liable for tax, as well as interest and any applicable penalties. The applicable tax will be collected only once. If the foreign person satisfies its U.S. tax liability, you are not liable for the tax but remain liable for any interest and penalties for failure to withhold.

Qualified intermediary (QI).

A QI is a foreign intermediary (or a QDD) that is a party to a QI Agreement with the IRS described in Regulations section 1.1441-1(e)(5)(iii) or (e)(6). For information on the QI Agreement, see IRS.gov/Businesses/Corporations/Qualified-Intermediary-System.

Withholding foreign partnership (WP) or withholding foreign trust (WT).

A WP or WT is a foreign partnership or trust that has entered into a withholding agreement with the IRS described in Regulations section 1.1441-5(c)(2) and (e)(5) in which it agrees to assume primary withholding responsibility under chapters 3 and 4 for all payments that are made to it for its direct partners, beneficiaries, or owners.

Nonqualified intermediary (NQI).

An NQI is any intermediary that is not a U.S. person and that is not a QI.

Nonwithholding foreign partnership (NWP).

An NWP is a foreign partnership that is not a WP.

Nonwithholding foreign trust (NWT).

An NWT is a foreign trust that is not a WT.

Qualified derivatives dealer (QDD).

A QDD is a QI that is an eligible entity that agrees to assume the requirements of a QDD and the other requirements in the QI Agreement. Any applicable home office or branch that seeks to be a QDD must qualify and be approved for QDD status. A QDD must document itself to a withholding agent with a Form W-8 IMY, Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding and Reporting, indicating that it is acting as a QDD for payments with respect to potential section 871(m) transactions and underlying securities that it receives in a principal capacity, separately identify the home office or branch as the recipient on a withholding statement (if necessary), and indicate on the form that it will assume primary chapters 3 and 4 withholding responsibilities and primary Form 1099 reporting and backup withholding responsibilities for certain payments it makes and receives as a QDD, as well as including any other information required by the QI Agreement. See Regulations section 1.1441-1(e)(6) and the QI Agreement in Rev. Proc. 2022-43 for more information. See also Notice 2022-37, described in Section 871(m) transition , earlier.

Qualified securities lender (QSL).

A QSL is an FFI that is a bank, custodian, broker-dealer, or clearing organization subject to regulatory supervision in its home jurisdiction and that is:

For further information about requirements for QSL status and the withholding requirements for substitute dividend payments, see Notice 2010-46, 2010-24 I.R.B. 757, available at IRS.gov/irb/2010-24_IRB#NOT-2010-46. An entity may claim QSL status and be treated as a recipient for substitute dividend payments made before January 1, 2025. See Notice 2022-37.

Foreign financial institution (FFI).

An FFI is a foreign entity described in Regulations section 1.1471-5(d).

Registered deemed-compliant FFI (RDCFFI).

A RDCFFI (as defined in Regulations section 1.1471-5(f)(1)) is an FFI that is deemed to satisfy the requirements of section 1471(b). This includes a reporting Model 1 FFI or branch of an FFI that is a reporting Model 1 FFI (see Regulations section 1.1471-1(b)(114) for the definition of a reporting Model 1 FFI).

Participating FFI (PFFI).

A PFFI is an FFI that has agreed to satisfy the obligations of an FFI agreement under chapter 4 with respect to all of its branches of the FFI, other than a branch that is a reporting Model 1 FFI or a U.S. branch. This includes a reporting Model 2 FFI (that has entered into an FFI agreement with respect to a branch) and a QI branch of a U.S. financial institution unless such branch is a reporting Model 1 FFI.

Nonparticipating FFI.

A nonparticipating FFI is an FFI that is not a PFFI, deemed-compliant FFI, or exempt beneficial owner.

Recalcitrant account holder.

Generally, a recalcitrant account holder is an account holder of a participating or deemed-compliant FFI that failed to provide the documentation required under chapter 4 to determine the account holder’s status or to enable the FFI to report the account as a U.S. account. See Regulations section 1.1471-5(g).

Passive nonfinancial foreign entity (NFFE).

A passive NFFE is a nonfinancial foreign entity other than an excepted NFFE, including a WP, WT, QI, or direct reporting NFFE. See Regulations sections 1.1471-1(b)(80) and 1.1472-1(b).

Paper filing.

Mail Form 1042 by March 15, 2024, to:

Electronic filing.

Electronic filing of Form 1042 is required for tax year 2023, for a withholding agent that is a financial institution. Otherwise, electronic filing of Form 1042 is required for a withholding agent that is required to file 10 or more information returns, as described in Regulations section 301.6011-2, during the year or that is a partnership with more than 100 partners. For general information about electronic filing, see Pub. 4163, Modernized e-file Information for Authorized IRS e-file Providers for Business Returns.

Electronic deposit requirement.

You must make electronic deposits of all depository tax liabilities using EFTPS. If you fail to use EFTPS, you may be subject to a 10% penalty. To enroll in or get more information about EFTPS, call 800-555-4477 or visit EFTPS.gov. To contact EFTPS using Telecommunications Relay Services (TRS) for people who are deaf, hard of hearing, or have a speech disability, dial 711 and then provide the TRS assistant the 800-555-4477 number above or 800-733-4829.

Same-day wire payment option.

If you fail to initiate a deposit transaction on EFTPS by 8 p.m. Eastern time the day before the date a deposit is due, you can still make your deposit on time by using the Federal Tax Collection Service (FTCS). If you ever need the same-day wire payment method, you will need to make arrangements with your financial institution ahead of time. Check with your financial institution regarding availability, deadlines, and costs. Your financial institution may charge you a fee for payments made this way. To learn more about the information you will need to provide to your financial institution to make a same-day wire payment, visit EFTPS.gov to download the Same-Day Payment Worksheet.

Escrow procedure.

See the instructions for Lines 1 through 60, later, if you are using the escrow procedure under Regulations section 1.1471-2(a)(5)(ii) or 1.1441-3(d) (and are not depositing the amount of tax withheld with the IRS during the year). Under Regulations section 1.1471-2(a)(5)(ii) or 1.1441-3(d), if a withholding agent is not able to determine the portion of a payment subject to withholding (for example, because it is unable to determine the source of the income at the time of the payment), a withholding agent can follow the escrow procedures by withholding 30% on the entire payment and depositing the amount withheld in an escrow account instead of depositing such amounts with the IRS. With respect to such payment, the withholding will be due the earlier of the date a determination is made with respect to the amount subject to withholding or 1 year from the date the amount is placed in escrow. To the extent that withholding is not required, the escrowed amount must be repaid to the payee. Note that generally an amount placed in escrow during 1 calendar year will be reported on a Form 1042 the following year. See the instructions for Lines 1 through 60, later, if you are using the escrow procedures and are not depositing the amount of tax withheld with the IRS during the year.

Deposits made during subsequent year.

If you are making a deposit of tax withheld in the year following the calendar year in which the related payment was made (to the extent permitted under an applicable regulation section in chapter 3 or 4), you must designate the deposit at the time that it is made as attributable to the calendar year in which the payment was made. In such a case, you should report the tax paid on line 65b.

For example, if a REIT declares a dividend to shareholders of record in October, November, or December of 2023, but pays the dividend in January of 2024, under section 857(b)(9), the dividend is treated as having been paid by the REIT and received by each shareholder on December 31, 2023. If the REIT chooses to withhold when it pays the dividend in January of 2024 (pursuant to the procedures for adjusting underwithholding in Regulations section 1.1461-2(b) or 1.1474-2(b)), it should report the liability with respect to the distribution on its 2023 Form 1042 and should designate the deposit of such tax as being made for 2023 (if the deposit is made by March 15, 2024).

Additionally, under proposed regulations (83 FR 64757), a partnership or trust that is permitted to withhold in a subsequent year with respect to a foreign partner's or beneficiary's share of income may designate the deposits of the withholding as attributable to the preceding calendar year. See Foreign partners of U.S. partnerships and foreign beneficiaries of U.S. trusts , later.

Interest.

Interest is charged on taxes not paid by the due date, even if an extension of time to file is granted. Interest is also charged on penalties imposed for failure to file, negligence, fraud, and substantial understatements of tax from the due date (including extensions) to the date of payment. Interest is figured at a rate determined under section 6621.

Late filing of Form 1042.

The penalty for not filing Form 1042 when due (including extensions) is 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax.

Late payment of tax.

The penalty for not paying tax when due is usually one-half of 1% of the unpaid tax for each month or part of a month the tax is unpaid. The penalty cannot exceed 25% of the unpaid tax.

Other penalties.

Penalties may be imposed for negligence, substantial understatement of tax, and fraud. See sections 6662 and 6663.

Lines 1 through 60.

Except as otherwise provided in these instructions, include the tax liability for the period in which the income was paid or distributed regardless of whether the liability is under chapter 3 or chapter 4 and regardless of whether the liability was satisfied through withholding or was paid by the withholding agent (see the instructions for box 11 of Form 1042-S). Do not enter any negative amounts on these lines. If you are required to report a reduction to liability on line 59 (because you made a repayment under the reimbursement or set-off procedure), and this results in a negative amount of tax liability for the period corresponding to line 59, you should instead report any negative amount for the next earlier period(s) so that you are not reporting any negative amounts on lines 1 through 60. See Adjustment for Overwithholding, later.

Lines 1 through 60 must show the withholding agent’s record of federal tax liability for payments made during the applicable quarter‐monthly period. Withholding agents should report the tax liability for each period, rather than the amount of tax actually deposited with the IRS. As such, the sum of lines 5, 10, 15, 20, 25, 30, 35, 40, 45, 50, 55, and 60 should be reported on lines 64b through 64d, as applicable (see the instructions for lines 64b through 64d, later).

Foreign partners of U.S. partnerships and foreign beneficiaries of U.S. trusts.

To the extent that a domestic partnership has not distributed a foreign partner's distributive share of income subject to withholding under section 1441, 1442, or 1443, or under chapter 4, it should not include any tax liability on lines 1 through 60 for tax relating to the partner's distributive share in the year the partnership earns the income, subject to Regulations section 1.1441-2(e)(7) for certain amounts with respect to section 871(m) transactions and the rule for QDDs in the QI Agreement. For distributive shares not actually distributed, the partnership must include any tax liability on lines 1 through 60 of the Form 1042 for the following year. Include the tax liability on the line that represents the earlier of the following dates.

Include such tax liability for the period that includes the date the tax was required to be withheld. See Regulations section 1.1441-5(b)(2)(i)(A).

A domestic trust should report on lines 1 through 60 in the same manner as a U.S. partnership to the extent that it is required to distribute, but has not actually distributed, a foreign beneficiary's share of distributable net income subject to withholding under section 1441, 1442, or 1443, or under chapter 4, before the date (without extensions) on which the income is required to be reported on Form 1042-S. See Regulations section 1.1441-5(b)(2)(ii).

For other than a PTP, use Form 8804, Annual Return for Partnership Withholding Tax (Section 1446), to report withholding tax liability on the partnership's income effectively connected with a U.S. trade or business.

Corporate distributions.

Do not include on lines 1 through 60 any tax liability caused by adjustments of underwithheld tax on corporate distributions made in calendar year 2023 if the following apply.

Instead, include these payments of underwithheld tax on line 64a.

Excise tax on specified federal procurement payments.

Section 5000C imposes a 2% tax on any foreign person that receives a specified federal procurement payment. Include on lines 1 through 60 any withholding obligation under section 5000C with respect to specified federal procurement payments. Report the amount on the line that corresponds with the date the deposit was due.

QIs with no primary chapters 3 and 4 withholding responsibility.

If you are a QI that did not assume primary withholding responsibility under both chapters 3 (including sections 1446(a) and (f)) and 4, enter the total amount of the tax liability of U.S. withholding agent(s) under both chapters 3 and 4 on line 59. Report all other amounts on the line that corresponds with the date the liability was incurred.

Adjustments to withholding.

If you used procedures for adjusting overwithholding or underwithholding, see Adjustment for Overwithholding and Adjustment for Underwithholding, later, for instructions on reporting on lines 1 through 60.

Escrow procedure.

A withholding agent that withheld tax during calendar year 2023 and that was not required to deposit with the IRS the amount of tax withheld during calendar year 2023 pursuant to the escrow procedure under Regulations section 1.1471-2(a)(5)(ii) or 1.1441-3(d) should not report such amount as a liability on lines 1 through 60 or lines 64a through 64d and should not report such amount as withheld on lines 63a through 63d. An amount held in escrow is required to be reported on the future calendar year return for the year in which the withholding agent is required to deposit the amount of tax with the IRS.

Withholding after the time of payment.

In limited cases, the regulations under chapters 3 and 4 allow you to withhold after the time that a payment has been made. In such a case, you should include the tax liability for the period in which you actually withheld with respect to the payment. If you withheld in the year following the calendar year in which the payment was made, include the tax liability relating to the payment on line 59 for the year you made the payment. For example, if a deemed distribution under section 305(c) is made on August 15, 2023, but you are not required to withhold with respect to the deemed distribution until a subsequent payment of interest is made on February 15, 2024 (see Proposed Regulations section 1.1441-2(d)(4)), report the tax liability related to the deemed distribution on line 59.

You should report on line 63c(2) the amounts you withheld in the following calendar year in which the payment was made. You should also report deposits of amounts withheld in the year following the calendar year in which the payment was made on line 65b.

Line 61.

Enter the number of Forms 1042-S filed on paper and electronically.

Line 1.

Enter the amounts of U.S. source FDAP income required to be withheld upon under chapter 4, including amounts withheld upon but for which no deposit has been made under an escrow procedure.

Line 2.

Enter amounts of U.S. source FDAP income not required to be withheld upon under chapter 4 on lines 2a through 2d according to the exception to withholding that applied to each payment reportable on Form 1042-S. The amount on line 2e should equal the sum of lines 2a through 2d.

Line 4.

Enter the sum of all amounts shown in box 2 of Form 1042-S that are payments of U.S. source FDAP income (including amounts reported under both chapter 3 and chapter 4). The amount on line 4 should equal the total gross amounts of U.S. source FDAP income reported on line 62c.

Line 5.

The amount on line 5 should be the total reported on line 4 (total amount of U.S. source FDAP income reported on all Forms 1042‐S) less the total reported on line 3 (total U.S. source FDAP income reportable under chapter 4).

Line 6.

If the amount reported on line 5 is other than zero, use this line to provide an explanation for the variance. If additional space is needed, attach a sheet to Form 1042 explaining the difference noted on line 5.