IRS form 1042-S is a tax form for foreign individuals reporting income from a United States-based source--in other words, non-residents who conduct some form of business within the United States. This can include investments or capital distribution. The form is sent to the non-resident by the bank or corporation that handles the transaction.
Obligations of Non-Resident Individuals and Corporations
Companies that conduct business in the United States despite not being physically located in the country are still responsible for reporting income and paying tax on that income. Form 1042-S is the way a bank or company lets people know that the income they received was reported to the IRS as dictated by tax law. It is then up to the people to file a tax return with this income included as part of the return.
When Is the Form Received
Form 1042-S follows the same guidelines as a normal W-2 form in distribution. The company responsible for reporting is required to distribute the form by the end of January of each year. The form tracks income on a yearly basis but for only one transaction source. It is possible for an individual to receive multiple 1042-S forms at the end of the year if he has many investments in the United States.
Refund of Taxes
There are some cases in which tax is withheld from earnings of an individual when in reality, no tax is owed. Form 1042-S indicates the amount of income reported to the IRS, and also the amount of tax that was withheld and sent to the IRS on the individual's behalf. If the individual has legal reasons or deductions that make the tax withheld unnecessary, he can file for a refund of taxes paid for that year. This is a complicated manoeuvre that many people prefer to leave in the hands of a tax professional.
Benefits of 1042-S
Form 1042-S makes it easy for foreign companies and individuals to keep track of the income that was generated within the United States. Knowing that the form must be mailed out each year means that they will know what they made from a United States tax standpoint, as well as how much money was cut from their earnings to cover potential taxes. Without 1042-S being distributed, the individual or company may be unaware that they have already paid taxes on some of the income.
Form 1042-S is updated each year to reflect the correct tax filing year. The form can always be found at http://www.irs.gov/pub/irs-pdf/i1042s.pdf. This is the form in Adobe Reader format. The document can then be printed out for tax preparation.