1042 Foreign Withholding

Foreign Person's U.S. Source Income Subject to Withholding. The 1042 forms are due March 15th.

Overview

• Users must file for a separate 1042 TCC number and enter this in the 1042 TCC: box on the 1099 Transmittal Maintenance.
• To file the 1042-S, users must verify that they have entered their 9-digit Employer ID Number (EIN) and Department Title on the 1099 Company Maintenance screen.
• Below is a table that will help you to identify whether a 1042 is necessary or if a 1099 should be used.
  

1042 Process

1. Extract Revenue or AP 1099's. Those coded to Foreign Withholding on their Sub-Account Maintenance will automatically be routed to the 1042-Foreign Withholding/Recipient Maintenance.
2. Run a listing to review the 1042-S Recipient Maintenance by running a listing. If the 1042s are corrected, mark the Corrected option at the top of the screen. Per IRS regulations, amounts should be in whole dollars per IRS regulations.
3. Run an Error Listing 1042. Correct any errors and run again until all errors are gone.
4. Export 1042 Transmittal. Take note of the file destination.

Recipient Maintenance

When Accounts Payable or Revenue 1099s are extracted, if any Sub-Accounts were coded to Foreign Withholding on their Sub-Account Maintenance, their tax form will be in the 1042-Foreign Withholding section of the 1099 module.

Box 1-Income Code - will be hard coded to 14 – Real property income and natural resources royalties

Box 3a Exemption codes and 3b Tax Rate (%) - determined by Owner Maintenance [F12] setting for Tax Class:

• Foreign Withholding will have an Exemption Code of 00 – Not Exempt and a Tax Rate of 30%
• Foreign Withholding- Exempt - will have an Exemption code of 01-Effectively connected income and a Tax Rate of 00.00%

NOTE - Other Box 3a Exemption codes are available, but they must be manually selected from the drop-down list in the 1042-S Payee Maintenance.

Box 13b: Recipient's Country Code - This field must be manually selected using the drop-down arrow. This information is not extracted from Owner Maintenance.

Unique Form Identifier—Beginning in 2017, withholding agents must assign a unique identifying number to each Form 1042-S they file. This number is used to identify which information return is being corrected or amended when a withholding agent files multiple information returns regarding the same recipient.

• The unique identifying number cannot be the recipient's U.S. or foreign TIN.
• The unique identifying number must be numeric.
• The length of a given identifying number must be exactly 10 digits.
• The identifying number must be unique to each original Form 1042‐S filed for the current year.
• As owners are added to the 1042-S Payee maintenance (manually or by extract), the system automatically assigns a Unique Form Identifier starting with number 0000000001. If an owner is added and then deleted from Payee Maintenance, the number assigned to that Payee Maintenance will be skipped.

Revisions Submitted - shows the number of Amended returns that have been printed/transmitted (see Print 1042-S Corrections for more info).

Edit button - address allows you to change the address in the Sub-Account maintenance and replace the 1042 address with the new address if desired. This may also be done in [F12], but a new extract will be needed for the new address to be used.

Find button - on the bottom of the screen allows a lookup display of all the extracted records.

List button - on the bottom of the screen is the recipient information with the amount printed.

*NOTE - Any manual changes made in 1042-S Maintenance will be overridden if Revenue 1099s are re-extracted.

Error Listing 1042-S

Selecting the Error Listing option on the 1042-S menu will produce an edit listing that informs you of any errors and provides company totals. The error listing can be run by clicking on Printer, File, or View on the 1042-S Error Listing screen. 

All errors must be corrected before printing or submitting 1099s/1042-S.

View/Print the 1042 Error Listing for any problems that may need to be corrected. This report will also provide the totals for the 1042 Total and the Federal Withholding Total. The Error Listing will alert you if an Employer's EIN is blank, the Error Listing will alert you. This is a required field in the transmittal file.

NOTE: There is a warning if the user has multiple records with multiple error codes. The system rolls all Payee records up into 1 record when creating the transmittal. Thus, if ALESUS has an exemption code of 01 on one record and an exemption code of 02 on another, one of these codes will not be reported to the IRS. Because of this, the 1042-S error listing will alert the user if an owner has multiple exemption codes (the same thing happens for the Recipient state and Chp. 3 Tax Rate).

Print Form 1042-S

Print Type

• Plain Paper - will print on regular copy paper and includes 1042-S Instructions. This option should be used to print:
  • Copy B for Recipient – Mask SSN should be used
  • Copy C for Payer – does not print instructions and prints 2 recipients per page
• Preprinted Forms - does not print the form; only prints the information to print on the preprinted form.
  • It should be used when printing Copy A for the IRS.
  • The Mask SSN should be left unchecked when printing the Copy A for the IRS, the Mask SSN should be left unchecked.

Mask SSN - if checked will only print the last four digits of a Payee's SSN. If unchecked, it will print Payee's entire SSN. EINs will always print the entire number regardless of setting.

Printer Offsets are used when printing Preprinted Forms. Not all printers print perfectly the first time, and adjustments to the printer settings may need to be made.

• When printing Preprinted forms, it is recommended that you print on plain paper and hold the paper up to the preprinted form until the printing aligns with it so that forms are not wasted.
  
• Between Forms Adjustments- Negative numbers Decrease space/ Positive numbers Increase space.

Printing Corrected 1042-S Forms - Printing corrected 1042-S forms works the same way as printing other corrected forms.

First, make any necessary changes to the data and perform a new extract or manually make the changes in Recipient Maintenance (not recommended). Then, in Recipient Maintenance, change the option from Original to Corrected (this is a manual change).

Finally, on the Print 1042-S screen, change the option from Original to Corrected, and select Print. (Only recipients whose Recipient Maintenance is marked as Corrected will be printed).

The form will be marked as amended with an amendment number and will have the same unique identifier number as the original form.

When printing a Corrected/Amended Form, users will receive the following pop-up with a question:

• Selecting Yes to this question will reset the Corrected Flags and Flag the Recipient Maintenance>Revisions Submitted to increase and the Amendment number on the form to increase. This option should be used if printing a 2nd or 3rd Corrected/Amended Form(s).
• Selecting No does not increase the Revisions Submitted number on the form's Recipient Maintenance or Amendment number.

Export 1042 Transmittal

This option will create the electronic file for the IRS. The path to the extracted file is given once the file has been created (OK has been selected). Take note of the file's destination: GLN32\XXXXX\EDI\ where "XXXXX" is the company code. If the file is a corrected file, mark the option for corrected.

Corrected transmittal: First, make any necessary changes to the data and perform a new extract or manually make the changes in Recipient Maintenance (not recommended). Then, in Recipient Maintenance, change the option from Original to Corrected (this is a manual change).

Finally, on the Export 1042 Transmittal screen, change the option from Original to Corrected and select Ok. (Only recipients whose Recipient Maintenance is marked as Corrected will be included in the Corrected Transmittal file):

When transmitting a Corrected/Amended file, the user will receive the following pop-up with a question:

• Selecting Yes to this question will reset the Corrected Flags and Flag the Recipient Maintenance>Revisions Submitted to increase and the Amendment number on the form to increase. This option should be used if transmitting a 2nd or 3rd Corrected/Amended file(s).
• Selecting No does not increase the Revisions Submitted number on the file's Recipient Maintenance or Amendment number on the file.