The IRS has released the 2018 Form 1042-S Instructions.
There are a number of changes from the previous revision:
- Changes to withholding rates
- For tax years beginning after December 31, 2017, the rate of withholding under section 1446 by a publicly traded partnership on a distribution of income effectively connected to a U.S. trade or business has changed to 21% for corporate partners and 37% for all other partners.
- For tax years beginning after December 31, 2017, the rate of withholding by a Qualified Investment Entity on a distribution to a nonresident alien or foreign corporation that is treated as gain from the sale or exchange of a U.S. real property interest by the shareholder has changed to 21%.
- Changes to codes
- To reflect changes made to the chapter 4 regulations regarding U.S. branches of foreign entities that act as intermediaries, chapter 4 status codes have been added for U.S. branches treated as U.S. persons and U.S. branches not treated as U.S. persons that are reporting under Regulations section 1.1471-4. Finally, the LOB Treaty Category code for individuals (code 01) has been removed. Withholding agents making payments to an individual who is claiming treaty benefits should leave Box 13j blank
- Boxes 9 and 11 of Form 1042-S have been switched and clarifying language has been added to those boxes on the form.
- Clarifying language has also been added to boxes 7b and 10
- New sections “Requirement to Withhold” and “Before Completing Form 1042-S” have been added to clarify a withholding agent’s obligations under chapters 3 and 4 and provide general steps that should be considered when completing Form 1042-S
- Appendix C has been added
- Provides an expanded Example 1 that provides information regarding how to complete every applicable entry field on Form 1042-S along with explanations for each of the entries
- Appendix D has been added, and it provides an example of how to complete Form 1042-S for gambling winnings
To view the new 1042-S Instructions, please click here.