IRS Releases 2018 Form 1042-S Instructions

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.

Author

Adam Rivera

Adam Rivera is a member of the Regulatory Analysis Team’s Direct Tax division at Sovos. His main areas of focus are Federal and State Tax Withholding and Affordable Care Act (ACA) Reporting. Prior to Sovos, Adam worked as a legislative aide in the Florida House of Representatives. He also has experience in securities law, focusing on securities litigation and researching emerging crowdfunding methods of raising capital. Adam is a member of both the Massachusetts and Florida Bars. He earned his B.A. from the University of Florida and his J.D. from the University of Miami.
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