Under the recently published Notice 2024-26, “Administrative Exemption from Requirement to Electronically File Form 1042”, the IRS has effectively waived the electronic filing requirement via administrative exemption for Form 1042 for calendar year 2024, and for withholding agents that are foreign persons continuing into calendar year 2025. Notice 2024-26 cites a number of reasons for this last-minute announcement, including the limited number of approved Modernized e-File Business Providers and difficulties accessing the schema and business rules for Form 1042.
In anticipation of the forthcoming March 15, 2024 due date, withholding agents (both U.S. and foreign) will be exempt from filing Form 1042 for tax year 2023 electronically. Beyond calendar year 2024, only withholding agents that are foreign persons will continue to be administratively exempt for calendar year 2025 when filing Form 1042 for tax year 2024.
It is important to note that associated electronic filing requirements remain unchanged, namely the e-file requirement for information returns and the e-file requirement for Form 1042-S. Despite being exempt from electronic filing, Form 1042 still counts towards the threshold for electronic filing of information returns like Forms 1099 and W-2: if 10 or more information returns in the aggregate are filed by an entity, including Form 1042, that entity is required to file their information returns electronically. Additionally, this administrative exemption does not apply to Form 1042-S, which must be filed electronically like its other information return counterparts mentioned previously.
To review Notice 2024-26, click here.
