How to Evaluate Your Provider’s Electronic 1042 Filing Readiness

Kelly Conner
November 14, 2023

This blog was last updated on February 28, 2024

Changes announced: Click here for the most up to date Form 1042 information.

With the IRS changing the filing requirements for Form 1042 to be electronic, businesses must ensure that they are working with a provider that is properly prepared for those updates. Here are key things to keep in mind when evaluating your provider’s electronic 1042 filing readiness.

Verify your provider is an Approved IRS Modernized e-File Vendor

For a provider to be able to submit your organization’s 1042 information electronically, it must go through rigorous testing with the IRS to become approved as an IRS Modernized e-File (MeF) business provider. This approval process shows that the IRS has vetted the vendor’s people and systems to ensure they are providing compliant solutions and services. If the IRS has not provided a list of approved providers for the upcoming tax year, it is recommended to go with a vendor that has previously been approved. This shows that the vendor has an established track record, has experience navigating the approval process and has system outputs already built and previously tested to ensure compliance.

Align on electronic reporting requirements

Simply selecting any vendor could introduce your organization to unwanted penalties or audits downstream if they have different interpretations of the new 1042 electronic filing requirements. Below are some suggested topics to bring up with your future provider, or verify on their website, to make sure you are both aligned on how your filings will be processed:

  1. Confirm they are filing 1042 returns through the IRS MeF system
    Because the IRS and the Treasury buried this new filing requirement into TD 9972 it has been challenging for businesses and vendors to get on the same page regarding the electronic filing requirement. Ensure your vendor understands the 1042 filing return is to be filed electronically and that they have taken the proper steps to get registered with the IRS MeF System as an approved filer.
  2. Understand how they are handling Line 67’s Claim Credit
    If you are filing Line 67 on Form 1042, then it’s important to verify a couple items. First, you’ll want to understand if they will support Line 67 or the ability to upload 1042-S forms to your 1042 filing. If they can support this, it’s also important to understand if they support filing six-month extensions (Form 7004) and/or if they’ll honor the six-month extension when filing 1042 filing returns in the month of September instead of March.
  3. Confirm if they require and retain Form 8879, IRS E-File Signature Authorization
    If a vendor is reporting on your organization’s behalf, they need to get your consent to electronically sign and file on your company’s behalf. To do this, most organizations will capture that electronically within a product – or they will require your organization to provide a completed Form 8879 providing them access to file. Without either of these two authorizations in place, the provider should not be electronic filing on your company’s behalf.

Understand their end-to-end process

Understanding the end-to-end process is important so you are aligned on what to expect from the provider, but also to ensure you are getting the information you need to protect your organization from penalty or audit situations. With Form 1042 being a Tier 1 audit item for the IRS, it is considered an enforcement priority. As most audits go, if the IRS finds that you were non-compliant with your 1042 filing returns, they will continue to poke around your business to find additional areas of non-compliance on which they can assess hefty penalties. Some questions you can ask your provider to ensure your company is protected in the event of penalties or audits include:

  1. Will your provider give you submission receipts showing that your file has been uploaded to the IRS MeF system and an acknowledgement file with status record indicating accepted or rejected?
  2. Will your provider have access to a complete audit trail that documents when and where changes were made, who made them and what changed?
  3. If you need to make adjustments to your filing return, will the vendor support amendments?

Take Action

Still have questions about evaluating your provider’s 1042 e-filing readiness? Reach out to our team to learn more.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Author

Kelly Conner

Kelly Conner is the Director, Product Marketing for Tax & Regulatory Reporting at Sovos. She has been with Sovos for 8 years and is responsible for directing a team that establishes the marketing strategy and direction for Sovos’ 1099, Affordable Care Act, Unclaimed Property, and Statutory Reporting solutions based on industry and client needs. Previously at Sovos, Kelly served as a customer service representative, where she serviced Sovos’ largest customers with unique tax reporting requirements. Kelly holds degrees in Marketing and Communication Studies from the University of Wisconsin-La Crosse.
Share this post

future of tax and compliance
North America
June 6, 2024
Observations and Predictions: The Future of Tax and Compliance

This blog was last updated on June 6, 2024 When I became the CEO of Sovos one year ago, I knew that I was stepping into an innovative company in an industry primed for a seismic transformation. However, even with this knowledge in place, I must admit that the speed and scope of change over […]

moneygram litigation settlement
North America Unclaimed Property
October 10, 2024
The Impact of the MoneyGram Litigation Settlement on Unclaimed Property Law

This blog was last updated on October 10, 2024 By Freda Pepper, General Counsel, Unclaimed Property The Supreme Court of the United States rarely addresses unclaimed property law, which made its ruling against Delaware in the 2023 MoneyGram litigation particularly noteworthy. The case focused on the escheatment of MoneyGram checks and similar written instruments. Following […]

motor insurance taxation in Italy
IPT North America VAT & Fiscal Reporting
September 26, 2024
Taxation of Motor Insurance Policies: Italy

This blog was last updated on September 26, 2024 In Italy, the insurance premium tax (IPT) code (which is being revised as of the date of this blog’s publication) and various other laws and regulations include provisions for taxes/contributions on motor hull and motor liability insurance policies. This article covers all you need to know […]

unclaimed property compliance
North America Unclaimed Property
September 25, 2024
The SMB’s Guide to Unclaimed Property Compliance

This blog was last updated on October 10, 2024 Unclaimed property compliance is often overlooked by small businesses, with many mistakenly thinking it only applies to large corporations. But this misconception can lead to serious financial and legal trouble. All businesses, no matter their size, must follow the same state regulations when it comes to […]

Minnesota Retail Delivery Fee
North America Sales & Use Tax
September 23, 2024
Understanding the Minnesota Retail Delivery Fee

This blog was last updated on September 24, 2024 If you are fulfilling a Minnesota Retail Delivery Fee, you should be double checking that you are considering all possible jurisdictionally-imposed fees due on the transaction. Depending on where you are delivering, you may need to collect a fee just for making the retail delivery itself! […]

What are Continuous Transaction Controls (CTCs)?
E-Invoicing Compliance North America VAT & Fiscal Reporting
September 20, 2024
Continuous Transaction Controls (CTC): The Future of Compliance

This blog was last updated on September 20, 2024 One key development shaping the future of tax compliance is the rise of Continuous Transaction Controls (CTCs). CTCs represent a shift in how governments monitor and enforce tax compliance, requiring businesses to submit transaction data to tax authority systems on an ongoing basis.  The models differ […]