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Instructions for Form 1042-S

Avoid Common Errors(p19)

To ensure that your Forms 1042-S can be correctly processed, be sure that you:
All information you enter when reporting the payment must correctly reflect the intent of the statute and regulations. In most cases, you should rely on the withholding documentation you have collected (Form W-8 series, Form 8233, etc.) to complete your Form 1042-S submissions.

Income Codes

Box 1.Enter the appropriate income code.
Code Interest Income 16Scholarship or fellowship grants
01Interest paid by U.S. obligors – general17Compensation for independent personal services2
02Interest paid on real property mortgages18Compensation for dependent personal services2
03Interest paid to controlling foreign corporations19Compensation for teaching2
04Interest paid by foreign corporations20Compensation during studying and training2
05Interest on tax-free covenant bonds23Gross income – Other
22Interest paid on deposit with a foreign branch of a domestic corporation or partnership24Qualified investment entity (QIE)
29Deposit interest25Trust distributions subject to IRC section 1445
30Original issue discount (OID)26Unsevered growing crops and timber distributions by a trust subject to IRC section 1445
31Short-term OID27Publicly traded partnership distributions subject to IRC section 1446
33Substitute payment – interest28Gambling winnings3
51Interest paid on certain actively traded or publicly offered securities1
Code   Dividend Income32Notional principal contract income4
  35Substitute payment – other
06Dividends paid by U.S. corporations – general36Capital gains distributions
07Dividends qualifying for direct dividend rate37Return of capital
08Dividends paid by foreign corporations38Eligible deferred compensation items subject to IRC section 877A(d)(1)
34Substitute payment – dividends39Distributions from a nongrantor trust subject to IRC section 877A(f)(1)
40Other dividend equivalents under IRC section 871(m) (formerly 871(l))41Guarantee of indebtedness
52Dividends paid on certain actively traded or publicly offered securities142Earnings as an artist or athlete – no central withholding agreement5
53Substitute payments‐ dividends from certain actively traded or publicly offered securities 1  
Code  Other Income43Earnings as an artist or athlete – central withholding agreement5
09Capital gains44Specified Federal procurement payments
10Industrial royalties50Income previously reported under escrow procedure6
11Motion picture or television copyright royalties54Other income
12Other royalties (for example, copyright, software, broadcasting, endorsement payments)  
13Royalties paid on certain publicly offered securities1  
14Real property income and natural resources royalties  
15Pensions, annuities, alimony, and/or insurance premiums  
1This code should only be used if the income paid is described in §1.1441‐6(c)(2) and withholding agent has reduced the rate of withholding under an income tax treaty without the recipient providing a U.S. or foreign TIN.
2 If compensation that otherwise would be covered under Income Codes 17 through 20 is directly attributable to the recipient's occupation as an artist or athlete, use Income Code 42 or 43 instead.
3 Subject to 30% withholding rate unless the recipient is from one of the treaty countries listed under Gambling winnings (Income Code 28) in Pub. 515.
4 Use appropriate Interest Income Code for embedded interest in a notional principal contract.
5 Income Code 43 should only be used if Letter 4492, Venue Notification, has been issued by the Internal Revenue Service (otherwise use Income Code 42 for earnings as an artist or athlete). If Income Code 42 or 43 is used, Recipient Code 22 (artist or athlete) should be used instead of Recipient Code 16 (individual), 15 (corporation), or 08 (partnership other than withholding foreign partnership).
6 Use only to report gross income the tax for which is being deposited in the current year because such tax was previously escrowed for chapters 3 and 4 and the withholding agent previously reported the gross income in a prior year and checked the box to report the tax as not deposited under the escrow procedure. See the instructions to this form for further explanation.

Exemption Codes and Recipient Codes

Boxes 3a and 4a. Exemption code (applies if the tax rate entered in boxes 3b and 4b is 00.00).11Withholding Foreign Trust
CodeAuthority for Exemption 12Qualified Intermediary
Chapter 3 13Qualified Securities Lender – Qualified Intermediary
01Effectively connected income 14Qualified Securities Lender – Other
02Exempt under IRC (other than portfolio interest)15Corporation
03Income is not from U.S. sources16Individual
04Exempt under tax treaty17Estate
05Portfolio interest exempt under IRC18Private Foundation
06QI that assumes primary withholding responsibility19Government or International Organization
07WFP or WFT20Tax Exempt Organization (Section 501(c) entities)
08U.S. branch treated as U.S. Person21Unknown Recipient
09Territory FI treated as U.S. Person22Artist or Athlete
10QI represents that income is exempt23Pension
11QSL that assumes primary withholding responsibility24Foreign Central Bank of Issue
12Payee subjected to chapter 4 withholding25Nonqualified Intermediary
22QDD that assumes primary withholding responsibility26Hybrid entity making Treaty Claim
Chapter 4 34 U.S. Withholding Agent-Foreign branch of FI
  35Qualified Derivatives Dealer
13Grandfathered payment Pooled Reporting Codes 9
14Effectively connected income  
15Payee not subject to chapter 4 withholding27Withholding Rate Pool – General
16Excluded nonfinancial payment28Withholding Rate Pool – Exempt Organization
17Foreign Entity that assumes primary withholding responsibility29PAI Withholding Rate Pool – General
18U.S. Payees – of participating FFI or registered deemed-compliant FFI30PAI Withholding Rate Pool – Exempt Organization
19Exempt from withholding under IGA731Agency Withholding Rate Pool – General
20Dormant account832Agency Withholding Rate Pool – Exempt Organization
21Other – payment not subject to chapter 4 withholding  
Boxes 12b, 12c, 13f, 13g, 15b, 15c, 16d, and 16e. Chapter 3 and Chapter 4 Status Codes (used to identify the type of Withholding Agent, Recipient, Intermediary, or Payer).  DO NOT USE code 33, 36, 37, or 38. See "What’s New" item on page 1 for more information.
  33Joint Account Withholding Rate Pool
Chapter 3Status Codes36Qualifying dividend equivalent offsetting payments to U.S. persons
37Nonqualifying dividend equivalent payments to U.S. persons – Undisclosed
01U.S. Withholding Agent – FI38Other qualifying dividend equivalent offsetting payments (ECI)
02U.S. Withholding Agent – Other  
03Territory FI treated as U.S. Person  
04Territory FI – not treated as U.S. Person  
05U.S. branch – treated as U.S. Person  
06U.S. branch – not treated as U.S. Person  
07U.S. branch – ECI presumption applied  
08Partnership other than Withholding Foreign Partnership  
09Withholding Foreign Partnership  
10Trust other than Withholding Foreign Trust  
7 Use only to report a U.S. reportable account or non-consenting U.S. account that is receiving a payment subject to chapter 3 withholding.
8 Use only if applying the escrow procedure for dormant accounts under 1.1471‐4(b)(6).
9 Codes 27 through 32 should only be used by a QI (including a QI acting as a QDD), QSL, WP, or WT. Codes 33, 36, 37, and 38 are not valid codes and are not to be used. Note that the 2017 form does not reflect this change.

Recipient Codes (continued)

CodeType of Withholding Agent, Recipient, Intermediary, or Payer50U.S. Withholding Agent-Foreign branch of FI
Chapter 4Status Codes Pooled Reporting Codes
01U.S. Withholding Agent – FI42Recalcitrant Pool – No U.S. Indicia
02U.S. Withholding Agent – Other43Recalcitrant Pool – U.S. Indicia
03Territory FI – not treated as U.S. Person44Recalcitrant Pool – Dormant Account
04Territory FI – treated as U.S. Person45Recalcitrant Pool – U.S. Persons
05Participating FFI – Other46Recalcitrant Pool – Passive NFFEs
06Participating FFI – Reporting Model 2 FFI47Nonparticipating FFI Pool
07Registered Deemed-Compliant FFI – Reporting Model 1 FFI48U.S. Payees Pool
08Registered Deemed-Compliant FFI – Sponsored Entity49QI‐Recalcitrant Pool‐General 12
09Registered Deemed-Compliant FFI – Other  
10Certified Deemed-Compliant FFI – OtherBox 13j.LOB Code (enter the code that best describes the applicable limitation on benefits (LOB) category that qualifies the taxpayer for the requested treaty benefits).
11Certified Deemed-Compliant FFI – FFI with Low Value Accounts  
12Certified Deemed-Compliant FFI – Non-Registering Local BankCodeLOB Treaty Category
13Certified Deemed-Compliant FFI – Sponsored Entity  
14Certified Deemed-Compliant FFI – Investment Advisor or Investment Manager01Individual
15Nonparticipating FFI02Government – contracting state/political subdivision/local authority
16Owner-Documented FFI03Tax exempt pension trust/Pension fund
19Passive NFFE identifying Substantial U.S. Owners04Tax exempt/Charitable organization
20Passive NFFE with no Substantial U.S. Owners05Publicly-traded corporation
21Publicly Traded NFFE or Affiliate of Publicly Traded NFFE06Subsidiary of publicly-traded corporation
22Active NFFE07Company that meets the ownership and base erosion test
23Individual08Company that meets the derivative benefits test
24Section 501(c) Entities09Company with an item of income that meets the active trade or business test
25Excepted Territory NFFE10Discretionary determination
26Excepted NFFE – Other11Other
27Exempt Beneficial Owner  
28Entity Wholly Owned By Exempt Beneficial Owners  
29Unknown Recipient  
30Recalcitrant Account Holder  
31Nonreporting IGA FFI  
32 Direct reporting NFFE  
33U.S. reportable account  
34Nonconsenting U.S. account  
35Sponsored direct reporting NFFE  
36Excepted Inter-affiliate FFI  
37Undocumented Preexisting Obligation  
38U.S. branch – ECI presumption applied  
39Account Holder of Excluded Financial Account 10  
40Passive NFFE reported by FFI 11  
41NFFE subject to 1472 withholding  
10 This code should only be used if income is paid to an account that is excluded from the definition of financial account under 1.1471‐5(b)(2) or under Annex II of the applicable Model 1 IGA or Model 2 IGA.
11 This code should only be used when the withholding agent has received a certification on the FFI withholding statement of a participating FFI or registered deemed‐compliant FFI that maintains the account that the FFI has reported the account held by the passive NFFE as a U.S. account (or U.S. reportable account) under its FATCA requirements. The withholding agent must report the name and GIIN of such FFI in boxes 15d and 15e.
12 This code should only be used by a withholding agent that is reporting a payment (or portion of a payment) made to a QI with respect to the QI’s recalcitrant account holders.
Also note the following:
You, the withholding agent, are liable for the tax if you know, or should have known, that underwithholding on a payment has occurred.

Specific Instructions for Withholding Agents(p20)

All amounts must be reported in U.S. dollars.

Rounding Off to Whole Dollars(p20)

You must round off cents to whole dollars. To round off amounts to the nearest whole dollar, drop amounts under 50 cents and increase amounts from 50 to 99 cents to the next dollar. For example, $1.39 becomes $1 and $2.50 becomes $3. If you have to add two or more amounts to figure the amount to enter on a line, include cents when adding and only round off the total.