Get Answers Support Tax Filings & Payments Other Forms Form 1042 How do chapter 3 or chapter 4 codes apply in Form 1042? Last modified 3/6/2024 12:48:28 AM EST Withholding agents must enter both Chapter 3 and Chapter 4 status codes to represent their withholding responsibilities accurately. These codes correspond to the agent's current status and the payments made to foreign entities. Chapter 3: About the Type of Income Under Sections 1441-1443 of the IRC, Chapter 3 mandates a 30% withholding rate on U.S. source Fixed, Determinable, Annual, or Periodical (FDAP) income paid to foreign persons unless a tax treaty specifies a reduced rate or exemption. Chapter 4: Rules for Reporting by FFIs Chapter 4 focuses on the Foreign Account Tax Compliance Act (FATCA) regulations, requiring a 30% withholding on payments to Foreign Financial Institutions (FFIs) unless they comply with FATCA by registering as a participating FFI, deemed-compliant FFI, or exempt beneficial owner. Was this helpful? Yes No Related Questions When is the deadline to file Form 1042? What is Schedule Q (Form 1042)? How do I file Form 1042 with TaxBandits? How to file an extension for Form 1042? Go to Home Page Need more help? Get in touch with our dedicated support team Contact Us (704) 684-4751 support@taxbandits.com Sign Up for a FREE TaxBandits Account! The Smart CPA Choice Register Now Already have an account? Sign in