TaxBandits Knowledge Base

What is Tax Liability in Section 1 of Form 1042?

Record of Federal Tax Liability (Lines 1-60)

• Tax liability represents the amount of U.S. tax owed on payments made to foreign persons under Chapter 3 or Chapter 4. 

• The tax liability should be reported for the period when the income was paid or distributed, regardless of when the tax was deposited and whether it was withheld or paid by the withholding agent. 

• If a reduction to liability is required due to repayment under the reimbursement or set-off procedure, it should be reported on Line 59. 

• If this results in a negative amount, the adjustment should be applied to an earlier period to ensure no negative values appear on Lines 1 through 60.