Form 1042-S Instructions for the
2023 Tax Year

1. How Do I Fill Out the 2023 Form 1042-S?

Form 1042-S contains 17 boxes(fields). Here’s a breakdown of each box in IRS Form 1042-S along with instructions on how to fill out each one.

Unique Form Identifier

The withholding agents must provide a unique form identifier number on each Form 1042-S that it files in the box provided at the top of the form. When you file a correction, this identifier will be used to identify the corresponding return if there are multiple 1042-S forms filed for the recipient.

The unique form identifier must:

• Be numeric (for example, 1234567891)
• Be exactly 10 digits
• Not be the U.S. recipients or foreign TIN

• Box 1 - Income Code

  The income code in 1042-S is a 2-digit code used to identify the type of income reported on the form. There are a total of 52 income codes available in Form 1042-S, Each code corresponds to a specific type of income explanation.

  Code - Type of income

  Interest

  • 01 - Interest paid by U.S. obligors—general
  • 02 - Interest paid on real property mortgages
  • 03 - Interest paid to controlling foreign corporations
  • 04 - Interest paid by foreign corporations
  • 04 - Interest on tax-free covenant bonds
  • 22 - Interest paid on deposit with a foreign branch of a domestic corporation or partnership
  • 29 - Deposit interest 30 Original issue discount (OID)
  • 31 - Short-term OID
  • 33 - Substitute payment—interest
  • 51 - Interest paid on certain actively traded or publicly offered securities
  • 54 - Substitute payments—interest from certain actively traded or publicly offered securities

  Dividend

  • 06 - Dividends paid by U.S. corporations—general
  • 07 - Dividends qualifying for direct dividend rate
  • 08 - Dividends paid by foreign corporations
  • 34 - Substitute payment—dividends
  • 40 - Other dividend equivalents under IRC section 871(m)
  • 52 - Dividends paid on certain actively traded or publicly offered securities
  • 53 - Substitute payments-dividends from certain actively traded or publicly offered securities
  • 56 - Dividend equivalents under IRC section 871(m) as a result of applying the combined transaction rules

  Others

  • 09 - Capital gains
  • 10 - Industrial royalties
  • 11 - Motion picture or television copyright royalties
  • 12 - Other royalties (for example, copyright, software, broadcasting, endorsement payments)
  • 13 - Royalties paid on certain publicly offered securities
  • 14 - Real property income and natural resources royalties
  • 15 - Pensions, annuities, alimony, and/or insurance premiums
  • 16 - Scholarship or fellowship grants
  • 17 - Compensation for independent personal services
  • 18 - Compensation for dependent personal services
  • 19 - Compensation for teaching
  • 20 - Compensation during studying and training
  • 23 - Other income 24 Qualified investment entity (QIE) distributions of capital gains
  • 25 - Trust distributions subject to IRC section 1445
  • 26 - Unsevered growing crops and timber distributions by a trust subject to IRC section 1445
  • 27 - Publicly traded partnership distributions subject to IRC section 1446(a)
  • 28 - Gambling winnings

  • 32 - Notional principal contract income
  • 35 - Substitute payment—other
  • 36 - Capital gains distributions
  • 37- Return of capital
  • 38 - Eligible deferred compensation items subject to IRC section 877A(d)
  • 39 - Distributions from a non-grantor trust subject to IRC section 877A(f)(1)
  • 41 - Guarantee of indebtedness
  • 42 - Earnings as an artist or athlete—no central withholding agreement
  • 43 - Earnings as an artist or athlete—central withholding agreement
  • 44 - Specified federal procurement payments
  • 43- Earnings as an artist or athlete—central withholding agreement
  • 50 - Income previously reported under escrow procedure
  • 55 - Taxable death benefits on life insurance contracts
  • 57 - Amount realized under IRC section 1446(f)
  • 58 - Publicly traded partnership distributions—undetermined

• Box 2 - Gross income

  In Box 2, enter the total amount paid to the recipient under each income category you mentioned, including tax withholding.

• Box 3 - Chapter indicator

  If you are required to report amounts in boxes 7 through 9, enter either a “3” or “4” to indicate whether the amounts were withheld (or paid by the withholding agent) according to Chapter 3 or Chapter 4.

  

• Box 3a & 3b and 4a & 4b - Exemption Code and Tax Rate

  These boxes are used to indicate the type of exemption (if applicable) and associated tax rates. In the tax rate box, enter the correct withholding rate as applied to the income in box 2 (gross income) or box 6 (net income), as applicable.

  If the tax rate you entered in box 3b or 4b is 00.00, you must enter the appropriate exemption code (01 through 24) as mentioned in Appendix B, depending on the chapter indicator.

  The Valid tax rate format is two digits, a decimal point, and two digits (for example, “30.00” for 30%). However, if the income is exempt from tax under a U.S. tax treaty or the Internal Revenue Code, enter “00.00.” If the tax rate is less than 10%, enter a zero before the tax rate (for example, “04.00” for 4%)

  Valid Tax Rate table: (04.00 equals 4%, 04.90 equals 4.9%, etc.)
  00.00	10.00	24.00
  02.00	12.00	25.00
  04.00	12.50	27.50
  04.90	14.00	28.00
  04.95	15.00	30.00
  05.00	17.50	37.00
  07.00	20.00
  08.00	21.00

• Box 5 - Withholding allowance

  Here, you can report the total amount exempt from withholding. This box should only be completed if you entered any of the following income codes
  in box 1:

  • 16 for scholarship or fellowship grants
  • 17 for compensation for independent personal services
  • 18 for compensation for dependent personal services
  • 19 for compensation for teaching
  • 20 for compensation during studying and training
  • 42 for earnings as an artist or athlete with no central withholding agreement.

• Box 6 - Net Income

  Report the net income in this box only if an amount is reported in box 5. If not, leave it blank. Net income can be calculated by subtracting the Withholding allowance from Gross income.

• Box 7a through 11 - Federal tax withheld

  

  This part is used to report Nonqualified Compensation Income, which includes wages, salaries, bonuses, and other forms of compensation that are not eligible for any tax treaty benefits.

• Box 7a

  Enter the total amount of U.S. federal tax that you actually withheld in box 7a under Chapter 3 or 4. If no tax was withheld, enter "-0-." Do not leave it blank.

• Box 7b

  You can check this box if the federal taxes you withheld were not deposited with the IRS. Instead, you have followed escrow procedures.

  

  What is the Escrow Procedure?

  An escrow procedure is a legal concept in which a financial agreement, such as money, is held by a third party on behalf of the two other parties that are in the process of completing a transaction.

• Box 7c

  Check box 7c if you are a partnership that received an amount subject to withholding in the preceding year and you are withholding on the amount that belongs to a foreign partner’s share after March 15 of the subsequent year. You can check this box if withholding occurred in subsequent years with respect to a partnership interest.

• Box 8 - Tax withheld by other agents

  If the income you report in this Form 1042-S was subjected to withholding by other withholding agents, enter the amounts they withheld.

• Box 9 - Overwithheld tax repaid to recipient pursuant to adjustment procedures

  If you have withheld more tax than the necessary amount from a non-US resident's income and have repaid the excess amount to the recipient during the corresponding calendar year, enter the amount here.

  

  Note:If you have repaid the amount during the preceding calendar year, do not complete this part. Instead, you can reduce the amount you entered on 7a.

• Box 10 - Total withholding credit

  Total withholding credit is the sum of the amounts entered in boxes 7a, 8, and 9.

• Box 11 - Tax paid by withholding agent (amounts not withheld)

  If the tax you paid was not withheld from the recipient’s income, report the amount here.

• Boxes 12a to 12i - Filing Agent Information

  

• Box 12a - Withholding Agent's Employer Identification Number (EIN):

  You are required to enter your EIN. Suppose you are filing Form 1042 as a Qualified Intermediary (QI), Withholding Foreign Partnership (WP), or Withholding Foreign Trust (WT). In that case, you must enter your QI-EIN, WP-EIN, or WT-EIN.

• Boxes 12b and 12c - Withholding Agent's Chapter 3 and Chapter 4 Status Code:

  Enter the code(s) representing your withholding agent status. You'll find these codes in the Recipient Status Codes list in Appendix B. Remember to enter both a Chapter 3 and a Chapter 4 withholding agent status code, no matter what kind of payment you're dealing with. If you're a U.S. financial institution (USFI), use the code 01 for your Chapter 4 status code unless a foreign branch of a USFI is filling out Form 1042-S – in that case, use the Chapter 4 code 50.

• Boxes 12d Through 12i - Withholding Agent's Name, GIIN, Country Code, Foreign TIN (if any), and Address

• Boxes 12d - Enter the Withholding Agent's Name.

• Box 12e - Enter the Withholding agent’s Global Intermediary Identification Number (GIIN).

• Box 12f – Country code:

  Enter your country code from the IRS list of foreign countries. If you can’t locate the code for the country in the list, enter ‘OC.’

• Box 12g to 12i

  Enter the Foreign Tax Identification Number(if any) and address details of the withholding agent.

• Boxes 13a to 13l - Recipient Information

  

• Boxes 13a Through 13d - Recipient's Name, Country Code, and Address

  Enter the recipient's name, country code, and address details in this section.

  

• Boxes 13e and 13h - Recipient's U.S. TIN and GIIN

• Box 13e - You need to provide a U.S. TIN for the following recipients:

  • 1If someone gets income connected to a business in the U.S. (except for payments subject to section 1446(a) or (f) withholding), use exemption code 01 in box 3a or exemption code 14 in box 4a.
  • For a foreign person asking for a lower tax rate or tax exemption based on a treaty between their country and the U.S., and if they don't provide a Foreign Tax Identification Number (FTIN), use box 13i. This applies unless the income is an unexpected payment or involves certain types of actively traded investments, like stocks and debt obligations.
  • If a nonresident alien individual wants an exemption from tax under section 871(f) for specific annuities from qualified plans.
  • For a foreign organization claiming tax exemption under section 501(c) or as a private foundation.
  • Any Qualified Intermediary (QI) that is not disclosing information (they are not the recipient).
  • Withholding Foreign Partnership (WP) or Withholding Foreign Trust (WT).
  • A nonresident alien individual claiming exemption from withholding on independent personal services.
  • A U.S. branch of a Foreign Financial Institution (FFI) or a Territory Financial Institution is treated as a U.S. person.
  • Any Qualified Securities Lender (QSL) who received substitute dividend payments.

• Box 13h - Recipient GIIN:

  If you need to gather a GIIN (Global Intermediary Identification Number) from the person you're paying, as per the rules for documenting payees under Chapter 4, make sure to include it.

• Boxes 13f and 13g - Recipient’s Chapter 3 and Chapter 4 Status Codes:

  Enter the recipient status code from the list of Recipient Status Codes in Appendix B. There are special instructions to apply for the Chapter 3 and 4 status codes. To learn more about them, click here.

  You need a Chapter 4 status code only if the payment falls under withholdable payment or when a participating FFI or registered deemed-compliant FFI gives a Chapter 4 withholding rate pool of U.S. payees. The Chapter 4 status code may be determined under the applicable IGA by a withholding agent that is an FFI subject to such an agreement.

• Box 13i - Recipient's Foreign Tax Identification Number:

  In box 13i, provide the recipient's tax identification number from their country of residence.

• Box 13j - LOB Code:

  Enter the code that best describes the applicable limitation on benefits (LOB) category that qualifies the taxpayer for the requested treaty benefits

• LOB Code - LOB Treaty Category:

  • 02 - Government – contracting state/political subdivision/local authority
  • 03- Tax-exempt pension trust/Pension fund
  • 04 - Tax-exempt/Charitable organization
  • 05 - Publicly traded corporation
  • 06 - Subsidiary of publicly traded corporation
  • 07 - Company that meets the ownership and base erosion test
  • 08 - Company that meets the derivative benefits test
  • 09 - Company with an item of income that meets the active trade or business test
  • 10 - Discretionary determination
  • 11 - Other
  • 12 - No LOB article in treaty

• Box 13l - Recipient Account Number:

  If you are a financial institution reporting payments paid to a direct account holder for an account held by you at your U.S. office or branch, you must provide the recipient's account number in box 13k. If the payment is made through an NQI(nonqualified intermediary) or flow-through entity, you are not required to use this box.

• Box 13k - Recipient’s Date of Birth:

  Use box 13l to enter the recipient’s date of birth. The correct format is YYYYMMDD (for example, enter “20001205” for a date of birth of December 5, 2000).

• Box 14a and 14b - Primary Withholding Agent's Name and EIN

  Suppose you're an intermediary or a flow-through entity who reports amounts withheld by another withholding agent. In that case, make sure you provide the name and EIN of the primary withholding agent that withheld the tax.

• Box 15, Pro - Rata Basis Reporting Checkbox

  You must check box 15 to notify the IRS that the NQI (nonqualified intermediary) used the alternative procedures of regulations section 1.1441-1(e)(3)(iv)(D) failed to comply with those procedures.

• Boxes 15a through 15i - Intermediary/ Flow

  Through Entity's Name, Status Code, Country Code, Address, EIN, GIIN, and Foreign Tax Identification Number

  

  A withholding agent that is an intermediary or flow-through entity will leave these boxes blank unless it is making the payment to an intermediary or flow-through entity.

• Box 15a to 15e

  Enter the Intermediary or flow-through entity EIN(if any), Chapter 3 or 4 status code, name, and GIIN.

• Box 15f - Country code

  Enter the country code for the country where the intermediate or flow-through entity is located.

• Box 15g - Intermediary or flow-through entity's foreign tax identification number.

  In box 15g, enter the tax identification number of the intermediate or flow-through entity used in the country of residence for tax purposes. Please note Box 15g is optional.

• Box 15 (h, i)

  Enter the Intermediary/ Flow-Through Entity's address, city or town, state or province, country, ZIP, or foreign postal code.

• Box 16a to 16e - Payer's Name, TIN, GIIN, and Status Code

  

  If the person giving you the amount (payer) has a different name, TIN, or GIIN (Global Intermediary Identification Number) compared to the withholding agent mentioned in boxes 12a, 12d, and 12e, be sure to include the correct details. If the payment is managed by a transfer agent or a paying agent who is also handling withholding on behalf of the payer, enter the status codes for both Chapter 3 and Chapter 4 that apply to the payer in boxes 16d and 16e.

• Box 17a,b,c - State income tax withheld information

  

  Boxes 17a through 17c relate to the state income tax withheld information that includes State income tax withheld, payer state tax number, and state name.

2. When is the Deadline for Reporting 1042-S in 2024?

The deadline for filing Form 1042-S with the IRS and sending out the recipient copies is March 15 for the 2023 tax year. It is always essential to stay aware of the deadlines. If the deadline falls on any weekend or public holiday, the deadline will move to the next business day.

3. Which Copies of Form 1042-S Need to be Submitted?

The Form 1042-S contains four copies, and the recipient receives 3 out of them. The different copies of Form 1042-S are:

• Copy A is for use by the IRS.
• Copy B is for the recipient.
• Copy C is for the recipient, must be attached to any federal tax return filed.
• Copy D is for the recipient, must be attached to any state tax return filed.

4. How Do I File Form 1042-S Electronically?

TaxBandits is an IRS-authorized e-file provider that offers streamlined solutions for e-filing 1042-S forms.

TaxBandits simplifies the 1042-S electronic filing process by allowing filers to import information in bulk with Excel/CSV Templates and e-file in simple steps.

• Create an account and Choose Form 1042-S
• Enter 1042-S Form Information
• Review and Transmit 1042-S to IRS
• Distribute Recipient copy (Foreign Postal/Online)

Complete the compliance process by letting TaxBandits distribute the foreign recipient copies by mail or secure online delivery.