Instruction 1042-2025

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The document provides detailed instructions for completing Form 1042, the Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, as required by the Internal Revenue Service (IRS). It outlines updates and clarifications made to the form, including changes in tax liability reporting, adjustments for overwithholding and underwithholding, and specific requirements for various types of withholding agents. The document also explains filing deadlines, deposit requirements, penalties for late filing or payment, and procedures for claiming credits or refunds. Additionally, it includes guidance on handling payments related to foreign partners and beneficiaries.

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What is a 1042S statement?

Form 1042-S is created for anyone considered a nonresident alien for US tax purposes who received payments from the University for fellowship/scholarship, independent contracted services, or royalties as well as anyone with a benefit under a tax treaty with their resident country.

What is 1042 for?

Use Form 1042 to report the following: The tax withheld under chapter 3 on certain income of foreign persons, including nonresident aliens, foreign partnerships, foreign corporations, foreign estates, and foreign trusts. The tax withheld under chapter 4 on withholdable payments.

What is the IRS rule 1042?

Section 1042(a) provides that a taxpayer or executor may elect in certain cases not to recognize long-term capital gain on the sale of qualified securities to an employee stock ownership plan (as defined in section 4975(e)(7)) or eligible worker- Page 2 -2- owned cooperative if the taxpayer purchases qualified

How does a 1042 work?

Section 1042 is a provision in the tax code that enables business owners who are selling shares to an ESOP to defer the capital gains tax that would typically apply to the sale.

What is the US Code 1042?

26 U.S. Code 1042 - Sales of stock to employee stock ownership plans or certain cooperatives.

What does 1042 mean?

Form 1042, also Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, is used to report tax withheld on certain income of foreign persons. The employer only needs to submit Form 1042 to the IRS, not to their employee.

Who needs to file the IRS Form 1042?

Every withholding agent or intermediary who receives, controls, has custody of, disposes of, or pays a withholdable payment (to which chapter 4 withholding applies) or an amount subject to withholding, must file an annual return for the preceding calendar year on Form 1042 unless an exception to filing applies.

Instruction 1042-2025

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