Federal Form 1042-S reports payments to Nonresident Aliens (NRAs) and may be needed by these individuals to prepare their individual U.S. income tax return. In certain circumstances, NRAs may receive a W-2 in addition to their 1042-S. A Nonresident Alien’s treaty–exempt employment income will be reported on Form 1042-S rather than Form W-2.
A Nonresident Alien’s reportable scholarship/fellowship amounts are included on Form 1042-S. Penn will withhold at a rate of 14% if the individual is in F, J, M, or Q nonimmigrant status. Penn will withhold at 30% for payees in other nonimmigrant statuses.
All other non-employment income paid to Nonresident Aliens is also reported on Form 1042-S. This includes honorarium, royalties, reimbursed expenses, prizes, awards, and human subject participation income. Generally, Penn will withhold non-employment income paid to Nonresident Aliens at a rate of 30% or lesser tax treaty rate, if applicable. Penn will report the payment on Forms 1042-S, even if the entire amount of income is exempt under a tax treaty.
The IRS requires organizations to furnish 1042-S forms to individuals no later than March 15 each year.
Accessing Your 1042-S
An electronic copy of your 1042-S can be accessed through Sprintax Calculus.
The purpose of Sprintax Calculus is to determine a foreign individual’s tax status and whether tax exemptions or treaties are available. You will receive an email from Calculus within a week of Onboarding. This email will contain instructions as well as a link to access the Calculus site.
Please be aware that failure to complete your Calculus record in a timely manner could cause your income to be taxed incorrectly.
U.S. Income Tax Filing Requirements
Generally, every nonresident alien individual, nonresident alien fiduciary, and foreign corporation with United States income, including income that is effectively connected with the conduct of a trade or business in the United States, must file a United States income tax return. However, there are exceptions. To determine whether you are required to file a federal tax return, see the IRS guidelines at IRS Pub 519.
Understanding Your 1042-S
To have a much better understanding of the information on your 1042-S Form, below is an explanation of the contents of the various boxes on the form:
Recipients will receive three copies of Form 1042-S for each type of income (Box 1) subject to reporting on Form 1042-S, from each withholding agent. Tax filers must attach Copy C of each unique 1042-S to their federal return,
Copy D to their state tax return, and Copy B is for the recipient’s records. The recipient should retain a copy of their tax return and 1042-S forms for a minimum of 3 years after the due date for filing the income tax return.
Box 1 – Income Code: This two digit income code identifies the appropriate income source:
Payments made from Workday
- 16 (Scholarship/Fellowship or Grants)
- 19 (Compensation for Teaching)
- 20 (Compensation during studying and training).
Payments made from Accounts Payable
- 12 (Other royalties (e.g., copyright, software, broadcasting, endorsement payments)
- 17 (Compensation for independent personal services)
- 42 (Earnings as an artist or athlete)
- 54 (Other Income)
Note: A separate 1042-S will be issued for each income code. All forms must be filed. See IRS Publication 515 for a detailed explanation of the income codes: IRS Pub 515
Box 2 – Gross Income: For each income type, the gross amount paid during the calendar year.
Box 3a – Exemption Code. If the tax rate entered into box 3b is “00.00”, the exemption code “04” is used to indicate “Exempt under tax treaty”. Exempt Code “00” may be used to indicate that a tax rate greater than zero has been applied.
Box 3b – Tax Rate. The correct rate of withholding as applied to the income in Box 2 (gross income) or Box 6 (net income), as applicable.
Box 5 – Withholding Allowance. This box may display an amount if the income code reported in Box 1 is 16 or 17. The amount listed reduces your taxable income. No amount will be listed if you are receiving tax treaty benefits.
Box 6 – Net Income. This amount is the result of Box 2 (gross income) minus Box 5 (withholding allowance). This box is only used if there is an amount entered in Box 5; otherwise, this box will be blank.
Box 7 – Federal Tax Withheld. This is the total amount of U.S. federal tax actually withheld; if no tax was withheld, the amount is “0“. The tax amount withheld can be calculated by multiplying Box 6 (net income) by Box 3b (tax rate).
Box 13b – Ch. 3 Recipient Status Code. Code “16” is used to indicate an Individual.
Box 13e – Recipient’s Country Code. The country code must be for the country of which the recipient claims residency under that country’s tax law. “OC” (other country) is used when the country of residence does not appear in the Country Codes table. The Country Codes table can be found on the IRS website: Country Code Listing
Countries bolded and italicized on this table are those with which the United States had entered into an income tax treaty agreement at the time these instructions were printed.
Note – You may receive a W-2, 1042-S, and/or a Reportable Fellowship Letter reporting income or taxes withheld for any calendar year. If you receive one or more of these forms, you will need them to prepare your tax returns. Do not throw them away.