This blog was last updated on February 14, 2022

No matter the size of the business, the tax season kicked off this past month with tax reporting professionals tackling the massive task of issuing and filing annual 1099s, W-2s, and other tax returns by January 31st. When January is in the rear-view mirror, businesses will turn to the next hurdle of 2022 tax reporting season; annual reporting of Form 1042-S for all types of business payments made to non-U.S. payees. Form 1042-S must be issued to the recipient and electronically filed with the IRS no later than March 15, 2023.

Complicated Form 1042-S reporting requirements

Virtually all types of U.S. source income that a U.S. entity pays to non-resident individuals or entities is reportable on Form 1042-S. There are 60 boxes on the form, and for each payment, the form must indicate the status of the filer or payer, the type of income that was paid and the status of the recipient that received the payment, among other details. To manage reporting of so many different types of income and statuses that could be applicable on a single form, the IRS requires filers to reference a series of unique income and status codes.

More income codes added for 2022

For 2022, the IRS has added new income codes to indicate changes in section 871(m) reporting of dividend equivalent payments and also for distributions or transfers of partnership interests under the new section 1446(f) requirements.

New recipient status codes

A new Chapter 3 Recipient Status code was also added for 2022 reporting to reflect that the payment was made to or from a publicly traded partnership.