What they are. Form 1042 is the withholding agent's annual tax return for the 30% (or treaty-reduced) tax on FDAP income, such as dividends, rents and some interest, paid to foreign persons. Form 1042-S is the slip each foreign recipient gets, showing what was paid and withheld, a bit like a W-2 for foreign investors.
Who has to file. Any withholding agent: anyone who pays US-source FDAP to a foreign person. In funds that's often the fund, its administrator or the paying bank. They must file even if no tax was withheld because a treaty or the portfolio interest exemption applied, which is why the payee's W-8BEN-E matters.
When they're due. March 15 after the calendar year, for both the 1042 and the 1042-S (to the IRS and to recipients). The tax itself has to be deposited during the year, not with the return.
Worked example
A US REIT pays a $1m dividend to a UK pension fund that qualifies for a reduced treaty rate. The REIT withholds at the treaty rate and, by March 15, files Form 1042 and sends the pension fund a Form 1042-S showing the dividend and the tax withheld.
Where you'll see it: Year-end investor reporting, treaty claims, and checking that every foreign LP's W-8 is on file and current.
See all 53 terms in the glossary
This glossary is general information, simplified for learning. It is not tax, legal or investment advice, and real structures turn on facts and documents not shown here.