Who must file Form 1042?

Last modified 3/6/2024 12:20:38 AM EST

Form 1042 must be filed by withholding agents and intermediaries handling U.S. source income payments to foreign persons subject to withholding. This includes individuals or entities that receive, control, have custody of, dispose of, or pay withholdable amounts.

Withholding Agent

A withholding agent is any U.S. or foreign individual or entity responsible for withholding taxes on U.S. source income paid to foreign persons. This can include individuals, trusts & estates, partnerships, businesses & organizations, nominees & government agencies, and tax-exempt organizations.

Withholding agents must ensure that the correct amount of tax is withheld and reported, even if no tax was ultimately withheld in some cases.

Intermediary

An intermediary is an entity that acts on behalf of another party (such as a custodian, broker, or agent). Different types of intermediaries include:

• Qualified Intermediary (QI)
• Withholding Foreign Partnership (WP)
• Withholding Foreign Trust (WT)
• Nonqualified Intermediary (NQI) 
• Nonwithholding Foreign Partnership (NWP)
• Nonwithholding Foreign Trust (NWT) 
• Qualified Derivatives Dealer (QDD)
• Qualified Securities Lender (QSL)
• Foreign Financial Institution (FFI) 
• Registered Deemed-Compliant FFI (RDCFFI)
• Participating FFI (PFFI)
• Recalcitrant Account Holder 
• Passive Nonfinancial Foreign Entity (NFFE)

Each has specific roles and responsibilities outlined in these IRS regulations.