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Non-US Citizen With US Income Subject to Withholding Do Not Ignore Form 1042-S

1042-S – What Is It and Who Needs to Complete It?

This form has to be completed by a Withholding Agent – this obscure term generally refers to bank or broker that pays passive income and must withhold tax on the disbursals, but the overall scope is broader than that.

-“You are a withholding agent if you are a U.S. or foreign person that has control, receipt, custody, disposal, or payment of any item of income of a foreign person that is subject to withholding. A withholding agent may be an individual, corporation, partnership, trust, association, or any other entity, including any foreign intermediary, foreign partnership, or U.S. branch of certain foreign banks and insurance companies. You may be a withholding agent even if there is no requirement to withhold from a payment or even if another person has withheld the required amount from the payment.

Great – How Does This Affect Me (Taxpayer)?

If you are a Non-US citizen who receives passive income from a US source, there is a strong likelihood there is tax withheld from payment disbursal.  You are likely then in receipt of form 1042-S, which must be added to your US tax return.  Potentially your withholding may be too large and you may be eligible for a refund as this income may be non-taxable due to your treaty benefits. Or effective tax rate is lower than default amount of withholding.  WIth correctly filed form 1042-S attached to your US non-resident tax return, potential refunds will not be delayed.

 

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