The IRS recently issued a correction to their 2017 Instructions for Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding. The 1042-S is generally used to report payments from U.S. sources to foreign persons.
The IRS corrections relate to income codes on page 21 of the 2017 Instructions for Form 1042-S.
- Income Code 54 was changed from “Other Income” to “Substitute payments-interest from certainly traded or publicly offered securities”. Withholding agents should use Income Code 54 to report payments of interest on actively traded or publicly offered securities if the interest is described in Regulations section 1.1441-6(c)(2) and the withholding agent reduced the rate of the withholding under an income tax treaty.
- Income Code 23 was changed from “Gross income – Other” to “Other Income”. Agents should use Income Code 23 to report payments of income for which no other code applies.
Please note that these codes are correct on the 2017 Form 1042-S: The correction was made to the instructions alone.