A 1042-S is a tax withholding document issued by a US payor for income paid to a foreign person / non resident of the US.
The document shows the gross income received and any tax withheld (nil to 30%).
The 1042-S is used to file a US tax return where tax has been over withheld (and in some cases underpaid) and will also be attached to the tax return to obtain the refund (proof of withholding tax paid).
What sorts of income are shown on the 1042-S?
Every type of income is shown. The tax codes entered on the 1042-S (Box 1) allow for this to occur. Examples include:
01 - Interest paid by U.S. obligors—general
29 - Deposit interest
06 - Dividends paid by U.S. corporations—general
09 - Capital gains
11 - Motion picture or television copyright royalties
12 - Other royalties (for example, copyright, software, broadcasting, endorsement payments)
15 - Pensions, annuities, alimony, and/or insurance premiums
16 - Scholarship or fellowship grants
17 - Compensation for independent personal services
23 - Other income
28 - Gambling winnings
42 - Earnings as an artist or athlete—no central withholding agreement
43 - Earnings as an artist or athlete—central withholding agreement
55 - Taxable death benefits on life insurance contracts
What happens if 30% tax was withheld even though I completed a W-8BEN?
Some payors of US income play safe, and will withhold tax at the maximum so there is no come back from the IRS if they get it wrong. What this then means, is you, as the recipient of the income will now have to file a US 1040NR tax return to claim back the excess tax withheld,
This is obviously inconvenient if you do not owe it (maybe owing to a tax treaty benefit). However, if the 1042-S has been issued, it means the tax has already been transferred to the IRS and the only way to claim some or all of this back is by filing a 1040NR and attaching the 1042-S as proof of withholding to the tax return.
Separately, you will also need to apply for an Individual Taxpayer Identification Number (ITIN) if you do not have one already. All tax return submissions in the US require a TIN as it's known. In the case of a non resident, this is an ITIN application on Form W-7.
How can I file a 1040NR from outside the USA?
You can do this by either downloading the forms from the IRS website and doing so yourself OR by using an Enrolled Agent like Just Breve to assist with the 1040NR tax filing.
Just Breve is also a certifying acceptance agent in the United Kingdom and can assist both UK residents and citizens apply for an ITIN number to file the tax return and claim back any US tax paid.
How long will it take to get my refund?
If you do not have an ITIN - this is processed first and will take 2 to 3 months (due to Covid delays).
Once the ITIN is issued the tax return is forwarded for processing and will take 6 to 12 months (due to Covid delays).
Once the cheque is issued, another 4 weeks or so for this to arrive.
In normal times an ITIN would take 7 to 11 weeks and the tax refund would take 3 to 6 months. Unfortunately, the delays cannot be sped up and the timescales are what they are until the IRS catches up.
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