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Department of the Treasury 2020 Internal Revenue Service Instructions for Form 1042 Annual Withholding Tax Return for U.. Source Income of Foreign Persons

Section references are to the Internal Revenue procedures until the extended due date for section 871() transaction (rather than Code unless otherwise noted. filing Form 1042-S (unless the Form just payments made under notional 1042-S has already been filed or principal contracts or other derivatives Future Developments furnished). Additionally, a withholding contracts that reference a U.S. stock or For the latest information about agent may use the extended due date for underlying security). Any withholding developments related to Form 1042 and filing a Form 1042 to claim a credit for any agent making such a payment must its instructions, such as legislation adjustments made to overwithholding. complete Section 3. enacted after they were published, go to Centralized partnership audit regime. Section 871(m) transition. On IRS.gov/Form1042. Section 1101 of the Bipartisan Budget Act December 16, 2019, Notice 2020-2, (BBA) of 2015 repealed the TEFRA 2020-3 I... 327, was issued announcing What's New partnership procedures and the Electing the Department of the Treasury and the The following clarifications have been Large Partnership (ELP) provisions and IRS intention to amend the section 871(m) made to Form 1042: replaced them with a new centralized regulations to further delay the effective/ • On page 1, a “Note” was inserted partnership audit regime effective for applicability date of certain rules in those immediately below the Record of Tax partnership tax years beginning on or after final regulations and certain requirements Liability (lines 1 through 60) that clarifies January 1, 2018. The new regime of a QDD. that the totals from the Record of Tax provides for determination, assessment, Schedule (Form 1042). If the Liability table are entered on lines 64b and collection of underpayments at the taxpayer, or any branch of the taxpayer, is through 64d, in the manner indicated in partnership level unless certain elections a QDD, the taxpayer must attach to Form the instructions for those lines. are made by the partnership. Under these 1042 a Schedule Q (Form 1042), Tax • On page 2, a heading was inserted rules, a partnership (or a pass-through Liability of Qualified Derivatives Dealer before lines 64a through 71 indicating that partner) may be required to withhold under (QDD), for each QDD. Schedule Q (Form those lines pertain to Computation of Tax chapter 3 or chapter 4 when there has 1042) replaces the previous requirement Due or Overpayment. been an adjustment under the centralized to attach a statement to the Form 1042 to partnership audit regime to an item of provide information regarding a QDD's tax income or gain allocable to a foreign Reminders liability. person (or any other person subject to Reliance on proposed regulations re- withholding). If the adjustment is to an Line 63c, Adjustments to overwith- ducing burden under FATCA and amount subject to withholding that is holding. Withholding agents that reduce Chapter 3. On December 18, 2018, the reportable on Form 1042, the partnership their withholding by repaying a beneficial Internal Revenue Service and Department (or pass-through partner) should report owner in the year following the calendar of Treasury issued proposed regulations the withholding on Form 1042 for the year year of overwithholding pursuant to the (83 FR 64757) to reduce taxpayer burden in which it pays the tax required to be reimbursement or set-off procedures with respect to certain requirements under withheld. See section 6241(9). should report such repayments on Chapters 3 and 4 of the Code. The line 63c(1). Withholding agents that Qualified derivatives dealers (QDDs). proposed regulations provide that, under increase their withholding in the year A withholding agent that is a Qualified section 7805(b)(1)(), taxpayers may following the calendar year of Intermediary (QI) acting as a QDD must generally rely on the proposed regulations underwithholding by withholding on future assume certain withholding and reporting until final regulations are issued. payments made to a beneficial owner or responsibilities with respect to payments Specifically, for purposes of these from other property or additional made on potential section 871(m) instructions, a withholding agent may rely contributions of a beneficial owner that are transactions in its QDD capacity. Form on the following provisions of these held in custody or otherwise controlled by 1042 includes Section 4, which a QI that is proposed regulations in connection with the withholding agent should report the a QDD (or has a branch that is a QDD) completing Form 1042. additional withholding on line 63c(2). must complete if it made any payments in • Withholding and reporting in a Withholding agents should also report on its QDD capacity that are reportable on subsequent year. A partnership or trust line 63c(2) any other amounts withheld in this form. For more information on the that is permitted to withhold in a the year following the calendar year in withholding and reporting requirements of subsequent year with respect to a foreign which the related payment was made (to a QDD, see the QI Agreement in Rev. partner's or beneficiary's share of income the extent permitted under an applicable Proc. 2017-15, 2017-03 I.R.B. 437. See for the prior year may designate the regulation section in chapter 3 or 4). See also section 871(m) and Notice 2020-2. deposit of the withholding as attributable the instructions for Lines 63a through 63e, to the preceding year and report the These instructions provide guidance to later. associated amounts on Forms 1042 and QDDs regarding the proper withholding 1042-S for the preceding year. See agent status code to use when filing Form Lines 65a and 65b. Withholding agents Foreign partners of U.S. partnerships and 1042 (and Form 1042-S). See Chapter 3 should use line 65b to report deposits of foreign beneficiaries of U.S. trusts, later. and 4 status codes of withholding agent, tax withheld in the year following the • Adjustments to overwithholding later. calendar year in which the related under the reimbursement and set-off payment was made. See Deposit procedures. A withholding agent may Potential 871(m) transactions. Section Requirements, later, for when a make adjustments to overwithholding 3 of Form 1042 applies to payments made withholding agent should designate a using either the reimbursement or setoff by a withholding agent under any potential

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deposit as being made for the calendar partnership (PTP) must withhold section government agency, association, or year in which the payment was made. 1446 tax on distributions of effectively tax-exempt foundation, whether domestic connected income (ECI) to its foreign or foreign. For purposes of chapter 4, a Chapter 3 and 4 status codes. The partners. A nominee that receives a withholding agent includes a participating chapter 3 and 4 status codes of distribution of ECI from a PTP and is FFI or registered deemed-compliant FFI to withholding agents are required treated as the withholding agent must use the extent such FFI is required to withhold regardless of the types of payments Form 1042 to report the tax withheld. For tax. See Regulations section 1.1473-1() reported on this form. this purpose, a nominee is a domestic for the definition of a withholding agent for Escrow procedure. See the instructions person holding an interest in the PTP on purposes of chapter 4. for Lines 1 through 60, later, if you are behalf of one or more foreign partners. For Liability for tax. As a withholding agent, using the escrow procedure under more information, see Regulations section you are personally liable for any tax Regulations section 1.1471-2(a)(5)(ii) or 1.1446-4 and Pub. 515, Withholding of required to be withheld as well as interest 1.1441-3(d) (and are not depositing the Tax on Nonresident Aliens and Foreign and any applicable penalties. A amount of tax withheld with the IRS during Entities. withholding agent acting through an agent the year). is liable for any failure of the agent to Rounding. These instructions have been Who Must File deposit any tax required to be withheld modified to require withholding agents to Every withholding agent or intermediary and deposited even if the agent is also a round amounts so that only whole dollar who receives, controls, has custody of, withholding agent and is itself separately amounts are reported. See Rounding off disposes of, or pays a withholdable liable for the failure to comply with the to whole dollars, later. payment (to which chapter 4 withholding provisions of chapter 3 or 4. applies) or an amount subject to For purposes of chapter 3, if you fail to General Instructions withholding, must file an annual return for withhold and the foreign payee fails to the preceding calendar year on Form 1042 satisfy its U.S. tax liability, then both you Purpose of Form unless an exception to filing applies. Also, and the foreign person are liable for tax, any PTP or nominee making a distribution as well as interest and any applicable Use Form 1042 to report the following. of ECI under section 1446, or any entity penalties. The applicable tax will be The tax withheld under chapter 3 • required to report a distribution on Form collected only once. If the foreign person (excluding withholding under sections 1042-S that is subject to withholding under satisfies its U.S. tax liability, you are not 1445 and 1446 except as indicated below) section 1445, must file Form 1042 for the liable for the tax but remain liable for any on certain income of foreign persons, preceding calendar year. interest and penalties for failure to including nonresident aliens, foreign You must file Form 1042 if any of the withhold. partnerships, foreign corporations, foreign following applies. estates, and foreign trusts. • You are required to file or otherwise file The tax withheld under chapter 4 on Intermediary • Form(s) 1042-S for purposes of either withholdable payments. For the An intermediary is a person who acts as a chapter 3 or 4 (whether or not any tax was withholding requirements of chapter 4, see custodian, broker, nominee, or otherwise withheld or was required to be withheld to Regulations sections 1.1471-2(a), as an agent for another person, regardless the extent reporting is required). File Form 1.1471-4(b), and 1.1472-1(a). of whether that other person is the 1042 even if you file Form(s) 1042-S The tax withheld pursuant to section beneficial owner of the amount paid, a • electronically. 5000C on specified federal procurement flow-through entity, or another • You file Form(s) 1042-S to report to a payments. intermediary. recipient tax withheld by your withholding The tax withheld under section 877A on • agent. Qualified intermediary. A QI is an payments of eligible deferred • You pay gross investment income to intermediary (or in the case of a QDD, a compensation items or distributions from foreign private foundations that are principal) that is a party to a QI Agreement nongrantor trusts to a covered expatriate. subject to tax under section 4948(a). with the IRS described in Regulations Payments that are reported on Form • • You pay any foreign person specified section 1.1441-1()(5)(iii). For information 1042-S under chapter 3 or 4. See federal procurement payments that are on the QI Agreement, see IRS.gov/ Regulations section 1.1474-1(d)(2)(i) for subject to withholding under section Businesses/Corporations/Qualified- the definition of a chapter 4 reportable 5000C. Intermediary-System. amount (which are amounts required to be • You pay an eligible deferred reported on Form 1042-S for chapter 4 Withholding foreign partnership or compensation item to a covered expatriate purposes) and Regulations section withholding foreign trust. A WP or WT or you are a trustee making a distribution 1.1461-1(c)(2) for amounts subject to is a foreign partnership or trust that has from a nongrantor trust to a covered reporting for chapter 3 purposes. entered into a withholding agreement with expatriate under section 877A. the IRS described in Regulations section Certain distributions subject to section • You are a qualified intermediary (QI), 1.1441-5(c)(2) and (e)(5) in which it 1445 withholding tax. Publicly traded withholding foreign partnership (WP), agrees to assume primary withholding trusts, real estate investment trusts, and withholding foreign trust (WT), responsibility under chapters 3 and 4 for regulated investment companies that are participating foreign financial institution all payments that are made to it for its qualified investment entities (as defined (FFI), or reporting Model 1 FFI making a partners, beneficiaries, or owners. under section 897()(4)) must withhold claim for a collective refund under your section 1445 tax on certain distributions respective agreement with the IRS. See Nonqualified intermediary. A and report such amounts on Form 1042. Regulations section 1.1471-1(b)(114) for nonqualified intermediary (NQI) is any For more information, see Regulations the definition of a reporting Model 1 FFI. intermediary that is not a U.S. person and section 1.1445-8 and the Instructions for that is not a QI. Form 1042-S. Withholding Agent Nonwithholding foreign partnership. A Publicly traded partnerships (section Any person required to withhold tax is a nonwithholding foreign partnership (NWP) 1446 withholding tax). For purposes of withholding agent. A withholding agent is a foreign partnership that is not a reporting on Form 1042, a publicly traded may be an individual, trust, estate, withholding foreign partnership. partnership, corporation, nominee,

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Nonwithholding foreign trust. A 1.1471-1(b)(114) for the definition of from 6:00 a.m. to 11:00 p.m. Eastern time nonwithholding foreign trust (NWT) is a reporting Model 1 FFI). or write to: foreign trust that is not a withholding Participating FFI. A participating FFI is foreign trust. Internal Revenue Service an FFI that has agreed to satisfy the International Section Qualified derivatives dealer (QDD). A obligations of an FFI agreement under Philadelphia, PA 19255-0725 QDD is a qualified intermediary (QI) that is chapter 4 with respect to all of its an eligible entity that agrees to assume branches of the FFI, other than a branch the requirements of a QDD and the other that is a reporting Model 1 FFI or a U.S. Income Tax Withholding requirements in the QI Agreement. Any branch. This includes a reporting Model 2 on Wages, Pensions, applicable home office or branch that FFI (that has entered into an FFI Annuities, and Certain seeks to be a QDD must qualify and be agreement with respect to a branch) and a approved for QDD status. A QDD must QI branch of a U.S. financial institution Other Deferred Income document itself to a withholding agent with unless such branch is a reporting Model 1 Use Form 941, Employer’s QUARTERLY a Form -8IMY indicating that it is acting FFI. Federal Tax Return, to report income tax as a QDD for payments with respect to Nonparticipating FFI. A withheld and social security and Medicare potential section 871(m) transactions and nonparticipating FFI is an FFI that is not a taxes on wages paid to a nonresident underlying securities that it receives in a participating FFI, deemed-compliant FFI, alien employee. principal capacity, separately identify the or exempt beneficial owner. Payments of pensions, annuities, and home office or branch as the recipient on a certain other deferred income paid to a withholding statement (if necessary), and Recalcitrant account holder. foreign person are subject to withholding indicate on the form that it will assume Generally, a recalcitrant account holder is under section 1441 (rather than section primary chapters 3 and 4 withholding an account holder of a participating or 3405). Report these payments on Forms responsibilities and primary Form 1099 deemed-compliant FFI that failed to 1042 and 1042-S. reporting and backup withholding provide the documentation required under chapter 4 to determine the account responsibilities for certain payments it Use Schedule H (Form 1040), holder’s status or to enable the FFI to makes and receives as a QDD. See Household Employment Taxes, to report report the account as a U.S. account. See Regulations section 1.1441-1(e)(6) and income tax withheld and social security Regulations section 1.1471-5(). the QI Agreement in Rev. Proc. 2017-15 and Medicare taxes on wages paid to a for more information. See also Notice Passive nonfinancial foreign entity nonresident alien household employee. 2020-2, described in Section 871(m) (NFFE). A passive NFFE is a nonfinancial transition, earlier. foreign entity other than an excepted Election To Withhold Qualified securities lender. A qualified NFFE, including a WP, WT, QI, or direct Under Section 3406 securities lender (QSL) is a foreign reporting NFFE. See Regulations sections If you are a participating FFI that has financial institution that is a bank, 1.1471-1(b)(80) and 1.1472-1(b). made an election to withhold under custodian, broker-dealer, or clearing For chapter 4 purposes, an section 3406 instead of withholding under organization subject to regulatory ! intermediary must provide its chapter 4, use Form 945 to report tax supervision in its home jurisdiction and CAUTION chapter 4 status to a withholding withheld on a withholdable payment that is that is: agent to determine whether withholding also a reportable payment made to any of 1. Regularly engaged in the business applies to the payment. Thus, a chapter 4 your recalcitrant account holders that are of borrowing securities of U.S. status must be provided for a withholdable also U.S. nonexempt recipients subject to corporations and lending such securities payment made to a foreign entity. backup withholding. Also, use Form 945 to to unrelated customers; and report tax withheld on a withholdable 2. Subject to audit by the IRS under Where and When To File payment that is also a reportable payment made to recalcitrant account holders of a section 7602 or, in the case of a QI, an Mail Form 1042 by March 15, 2021, to: external auditor. participating or registered Internal Revenue Service deemed-compliant FFI that is an NQI, For further information about NWP, or NWT, or a QI that elects to be requirements for QSL status and the P.. Box 409101 Ogden, UT 84409 withheld upon under section 1471(b)(3), withholding requirements for substitute and from whom you received a dividend payments, see Notice 2010-46, withholding statement that indicates that 2010-24 I.R.B. 757. An entity may claim Extension of time to file. If you need such FFI has elected for withholding under QSL status and be treated as a recipient more time to file Form 1042, you may section 3406 to apply instead of for substitute dividend payments made submit Form 7004, Application for withholding under chapter 4 with respect before January 1, 2023. See Notice Automatic Extension of Time To File to one or more recalcitrant account 2020-2. Certain Business Income Tax, Information, holders. See Regulations section Foreign financial institution. A foreign and Other Returns. 1.1471-4(b) and 1.1474-1(d)(4)(i)(B). A financial institution (FFI) is a foreign entity Form 7004 does not extend the time for withholding QI, WP, or WT that is an FFI described in Regulations section payment of tax. should also use Form 945 if it elects to 1.1471-5(d). withhold under section 3406 on Additional Information withholdable payments made to certain Registered deemed-compliant FFI. A recalcitrant account holders. registered deemed-compliant FFI (as For details on the withholding of tax, see defined in Regulations section 1.1471-5() Pub. 515. You can get Pub. 515 from (1)) is an FFI that is deemed to satisfy the IRS.gov. Deposit Requirements requirements of section 1471(b) of the You are required to use the Electronic Code. This includes a reporting Model 1 Need Assistance? Federal Tax Payment System (EFTPS), discussed later, to deposit the tax withheld FFI or branch of an FFI that is a reporting If you need help completing Form 1042, and required to be shown on Form 1042 Model 1 FFI (see Regulations section call 267-941-1000 (not a toll-free number) (regardless of whether withholding was

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applied under chapter 3 or 4 or with wire payment method, you will need to to withhold when it pays the dividend in respect to a specified federal procurement make arrangements with your financial January of 2021 (pursuant to the payment). institution ahead of time. Check with your procedures for adjusting underwithholding financial institution regarding availability, in Regulations section 1.1461-2(b) or To avoid a penalty, do not mail deadlines, and costs. Your financial 1.1474-2(b)), it should report the liability your deposits directly to the IRS. ! institution may charge you a fee for with respect to the distribution on its 2020 CAUTION payments made this way. To learn more Form 1042 and should designate the The amount of tax you are required to about the information you will need to deposit of such tax as being made for withhold determines the frequency of your provide to your financial institution to make 2020 (if the deposit is made by March 15, deposits. The following rules explain how a same-day wire payment, visit 2021). often deposits must be made. EFTPS.gov to download the Same-Day Additionally, under proposed Payment Worksheet. regulations (83 FR 64757), a partnership Note. If you are requesting an extension or trust that is permitted to withhold in a of time to file using Form 7004, follow Note. All payments should be made in subsequent year with respect to a foreign these rules to see if you must make a U.S. dollars. partner's or beneficiary's share of income deposit of any balance due or if you can Escrow procedure. See the instructions may designate the deposits of the pay it with Form 7004. See Form 7004 and for Lines 1 through 60, later, if you are withholding as attributable to the its instructions for more information. using the escrow procedure under preceding calendar year. See Foreign 1. If at the end of any quarter-monthly Regulations section 1.1471-2(a)(5)(ii) or partners of U.S. partnerships and foreign period the total amount of undeposited 1.1441-3(d) (and are not depositing the beneficiaries of U.S. trusts, later. taxes is $2,000 or more, you must deposit amount of tax withheld with the IRS during the taxes within 3 business days after the the year). Under Regulations section Interest and Penalties end of the quarter-monthly period. (A 1.1471-2(a)(5)(ii) or 1.1441-3(d), if a If you file Form 1042 late, or fail to pay or quarter-monthly period ends on the 7th, withholding agent is not able to determine deposit the tax when due, you may be 15th, 22nd, and last day of the month.) A the portion of a payment subject to liable for penalties and interest unless you business day is any day other than a withholding (for example, because it is can show that the failure to file or pay was Saturday, Sunday, or legal holiday in the unable to determine the source of the due to reasonable cause and not willful District of Columbia. income at the time of the payment), a neglect. withholding agent can follow the escrow 2. If at the end of any month the total procedures by withholding 30% on the You do not have to figure the amount of undeposited taxes is at least entire payment and depositing the amount TIP amount of any interest or penalties $200 but less than $2,000, you must withheld in an escrow account instead of you may owe. Because figuring deposit the taxes within 15 days after the depositing such amounts with the IRS. these amounts can be complicated, the end of the month. If you make a deposit of With respect to such payment, the IRS will do it for you and send you a bill for $2,000 or more during any month except withholding will be due the earlier of the any amount due. December under rule 1, earlier, carry over date a determination is made with respect any end-of-the-month balance of less than to the amount subject to withholding or 1 If you include interest or penalties with $2,000 to the next month. If you make a year from the date the amount is placed in your payment, identify and enter the deposit of $2,000 or more during escrow. To the extent that withholding is amount in the bottom margin of Form December, any end-of-December balance not required, the escrowed amount must 1042. Do not include interest or penalties of less than $2,000 should be remitted be repaid to the payee. Note that generally in the balance due on line 69. with your Form 1042 by March 15, 2021. an amount placed in escrow during 1 Interest. Interest is charged on taxes not 3. If at the end of a calendar year the calendar year will be reported on a Form paid by the due date, even if an extension total amount of undeposited taxes is less 1042 the following year. See the of time to file is granted. Interest is also than $200, you may either pay the taxes instructions for Lines 1 through 60, later, if charged on penalties imposed for failure with your Form 1042 or deposit the entire you are using the escrow procedures and to file, negligence, fraud, and substantial amount by March 15, 2021. are not depositing the amount of tax understatements of tax from the due date withheld with the IRS during the year. Electronic deposit requirement. You (including extensions) to the date of must make electronic deposits of all Deposits made during subsequent payment. Interest is figured at a rate depository tax liabilities using EFTPS. If year. If you are making a deposit of tax determined under section 6621. you fail to use EFTPS, you may be subject withheld in the year following the calendar Late filing of Form 1042. The penalty for to a 10% penalty. To enroll in or get more year in which the related payment was not filing Form 1042 when due (including information about EFTPS, call made (to the extent permitted under an extensions) is 5% of the unpaid tax for 800-555-4477 or visit EFTPS.gov. applicable regulation section in chapter 3 each month or part of a month the return is or 4), you must designate the deposit at late, up to a maximum of 25% of the Depositing on time. For deposits the time that it is made as attributable to unpaid tax. made by EFTPS to be on time, you must the calendar year in which the payment submit the deposit by 8 p.m. Eastern time was made. In such a case, you should Late payment of tax. The penalty for not the day before the date the deposit is due. report the tax paid on line 65b. paying tax when due is usually one-half of If you use a third party to make deposits 1% of the unpaid tax for each month or For example, if a real estate investment on your behalf, they may have different part of a month the tax is unpaid. The trust (REIT) declares a dividend to cut-off times. penalty cannot exceed 25% of the unpaid shareholders of record in October, tax. Same-day wire payment option. If you November, or December of 2020, but fail to initiate a deposit transaction on pays the dividend in January of 2021, Other penalties. Penalties may be EFTPS by 8 p.m. Eastern time the day under section 857(b)(9), the dividend is imposed for negligence, substantial before the date a deposit is due, you still treated as having been paid by the REIT understatement of tax, and fraud. See can make your deposit on time by using and received by each shareholder on sections 6662 and 6663. the Federal Tax Collection Service December 31, 2020. If the REIT chooses (FTCS). If you ever need the same-day

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Avoid Common Errors drop amounts under 50 cents and being made. See pages 2 and 3 of these increase amounts from 50 to 99 cents to Form 1042 instructions for definitions of To ensure that your Form 1042 can be the next dollar. For example, $1.39 intermediary, qualified intermediary (QI), correctly processed, be sure that you do becomes $1 and $2.50 becomes $3. If withholding foreign partnership (WP), the following. you have to add two or more amounts to withholding foreign trust (WT), • Carefully read the information provided figure the amount to enter on a line, nonqualified intermediary (NQI), qualified in Pub. 515 and these instructions. include cents when adding and only round securities lender (QSL), participating FFI, • Complete all required information for off the total. and registered deemed-compliant FFI. the withholding agent including the See the Form 1042-S instructions for withholding agent’s name, address, Employer identification number (EIN). definitions of U.S. branch of a participating chapter 3 and chapter 4 status codes, and You are required to enter your EIN. If you FFI or registered deemed-compliant FFI the EIN, QI-EIN, WP-EIN, or WT-EIN. are filing Form 1042 as a QI, WP, or WT, treated as a U.S. person, territory financial Note that you must include the enter your QI-EIN, WP-EIN, or WT-EIN. institution (FI) treated as a U.S. person, withholding agent’s chapter 3 and If you are a QSL that is also a QI, enter and flow-through entity. chapter 4 status codes regardless of your QI-EIN. Otherwise, enter the EIN you the types of payments being reported have been assigned. Withholding agents should use on Form 1042. the applicable code that is most • Ensure that the correct EIN is provided. If you are for chapter 4 purposes a specific to your status (for If you are filing Form 1042 as a QI, WP, or participating FFI or other financial example, chapter 3 status code 12 WT, enter your QI-EIN, WP-EIN, or WT- institution that has been issued a global (Qualified Intermediary)). EIN. intermediary identification number (GIIN) • Lines 1 through 60, Record of Federal for chapter 4 reporting purposes, you must Withholding agents are to use specified Tax Liability, must show the federal tax nevertheless get an EIN to file Form 1042 chapter 4 status codes on Forms 1042-S liability for payments made during the (or use your existing EIN, such as a for payments made. See the 2020 applicable quarter-monthly period. This QI-EIN in the case of a QI if filing in such Instructions for Form 1042-S. A U.S. section reports the tax liability, not the tax capacity). financial institution should continue to use deposited by the withholding agent. If you are a participating FFI or other its own withholding agent chapter 4 status • The sum of the monthly totals in Section financial institution filing this form on code (code 01) for purposes of completing 1 (lines 5, 10, 15, 20, 25, 30, 35, 40, 45, behalf of a branch other than your U.S. Form 1042 if there are any payments 50, 55, and 60) must match the amount of branch, you cannot use the EIN of the made by the U.S. home office reflected on total tax liability reported on lines 64b, 64c, U.S. branch to file this form and you must the form. Otherwise, use chapter 4 status and 64d. get a separate EIN to file this form on code 50 (U.S. Withholding Agent-Foreign • Do not include amounts reported as behalf of all your branches other than your branch of FI) unless a more specific status adjustments on line 64a in the Record of U.S. branch. code applies (for example, chapter 4 Federal Tax Liability (lines 1 through 60). If you do not have an EIN, you can status code 07 (Registered • You must designate the tax liability as apply for one online at IRS.gov/EIN. You Deemed-Compliant FFI-Reporting Model either a chapter 3 tax liability or a can apply for an EIN by telephone at 1 FFI)). chapter 4 tax liability. Report the portion of 800-829-4933. You can also file Form A QI that is a QDD should use the the tax liability for the calendar year that is -4, Application for Employer withholding agent chapter 3 status code a chapter 3 tax liability on line 64b. Report Identification Number, by fax or mail. File for a QI (code 12) for purposes of filing its the portion of the tax liability for the amended Forms 1042-S when you receive Form 1042, regardless of the types of calendar year that is a chapter 4 tax your EIN. payments it made for the calendar year. liability on line 64c. To get a QI-EIN, WP-EIN, or WT-EIN, However, a QI that is a QDD should use You must complete Section 2, • submit Form SS-4 with your application for the withholding agent chapter 3 status Reconciliation of Payments of U.S. Source that status. Do not send an application for code for a QDD (code 35) for purposes of FDAP Income. Section 2 must be a QI-EIN, WP-EIN, or WT-EIN to the reporting on Form 1042-S a payment that completed even if you have not withheld addresses listed in the Instructions for it made in its capacity as a QDD. any amounts under chapter 4. Form SS-4. Send the application along with Form SS-4 to: Section 1. Record of Specific Instructions Internal Revenue Service Federal Tax Liability File only one Form 1042 LB&I: International: QI Group 1031 Lines 1 through 60. Except as otherwise ! consolidating all Form 1042-S 290 Broadway, 12th floor provided in these instructions, include the CAUTION recipient information for both New York, NY 10007-1867 USA tax liability for the period in which the chapter 3 and 4 purposes regardless of income was paid or distributed regardless the number of different clients, branches, of whether the liability is under chapter 3 divisions, or types of income for which you Address. Include the suite, room, or other unit number after the street address. or chapter 4 and regardless of whether the are the withholding agent. However, if you liability was satisfied through withholding are acting in more than one capacity (for If your post office does not deliver mail to the street address and you have a P.O. or was paid by the withholding agent (see example, you are acting as a QI for certain the instructions for box 11 of Form designated accounts and as an NQI for box, show the box number instead of the street address. 1042-S). Do not enter any negative other accounts), file a separate Form 1042 amounts on these lines. If you are required for each capacity in which you are acting. Chapter 3 and 4 status codes of with- to report a reduction to liability on line 59 holding agent. Enter your chapter 3 and (because you made a repayment under A U.S. branch of a participating FFI that is chapter 4 status codes from the list of the reimbursement or set-off procedure), required to report amounts under “Type of Recipient, Withholding Agent, and this results in a negative amount of tax chapter 4 must file a separate Form 1042. Payer, or Intermediary Code” on Form liability for the period corresponding to Rounding off to whole dollars. You 1042-S. You must enter both a chapter 3 line 59, you should instead report any must round off cents to whole dollars. To and a chapter 4 withholding agent status negative amount for the next earlier round off amounts to the nearest dollar, code regardless of the type of payment period(s) so that you are not reporting any

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negative amounts on lines 1 through 60. Example. In 2020, USP, a U.S. and the amount withheld reported on See Adjustment for Overwithholding, later. partnership, has foreign partners that are line 65b. individuals and for which it has obtained Lines 1 through 60 must show the valid documentation to establish their Note. Reporting in the preceding year is withholding agent’s record of ! foreign status. The withholding tax under also permitted when a partnership or trust CAUTION federal tax liability for payments section 1441 relating to the distributive allocates a share of income allocable to a made during the applicable quarter- shares of the foreign partners was $120. partner or beneficiary attributable to the monthly period. Withholding agents USP made no distributions in 2020. On preceding year that was not distributed should report the tax liability for each the 2020 Form 1042, USP did not enter during that year provided that the period, rather than the amount of tax any amount as tax liability on lines 1 partnership meets the previously actually deposited with the IRS. As such, through 60 because it did not distribute referenced due date of September 15, the sum of lines 5, 10, 15, 20, 25, 30, any amounts. 2021, for the applicable Form(s) 1042-S. 35, 40, 45, 50, 55, and 60 should be USP made a distribution on February reported on lines 64b through 64d, as Note. A U.S. partnership or trust may rely 11, 2021, that related to the 2020 applicable (see instructions for lines on the proposed regulations for 2020 in distributive shares of the foreign partners. 64b through 64d, later). lieu of the reporting described earlier, see USP withheld $100 at the time of the Foreign partners of U.S. partnerships and distribution. USP sent the 2020 Schedules Withholding and depositing of tax foreign beneficiaries of U.S. trusts. The -1 (Form 1065) to its partners on April 2, is not required under both proposed regulations may also be applied 2021. chapters 3 and 4 for the same by a foreign partnership or trust that itself payment. In the case of a payment for On the 2021 Form 1042, USP entered withholds as described above. which withholding is required under $100 on line 7. This is the tax liability for chapters 3 and 4, a withholding agent may the period (February 8 through 15) during Note. For rules that apply for WPs and credit the withholding applied under which it made a distribution. USP entered WTs, see Rev. Proc. 2017-21, 2017-6 chapter 4 against its liability for any tax $20 on line 16. This is the tax liability for I.R.B. 791. due under section 1441, 1442, or 1443. the period (April 1 through 7) during which Corporate distributions. Do not include For a payment subject to withholding it furnished the Schedules K-1 (Form on lines 1 through 60 any tax liability under section 1445 or 1446, withholding 1065) to the partners. under chapter 4 does not apply. caused by adjustments of underwithheld Use Form 8804 to report tax on corporate distributions made in Foreign partners of U.S. partnerships TIP withholding tax liability on the calendar year 2020 if the following apply. and foreign beneficiaries of U.S. partnership's income effectively • The distributing corporation made a trusts. To the extent that a domestic connected with a U.S. trade or business. reasonable estimate of accumulated and partnership has not distributed a foreign current earnings and profits under partner's distributive share of income Withholding and reporting in a Regulations section 1.1441-3(c)(2)(ii)(A) subject to withholding under section 1441, subsequent year. Proposed regulations or 1.1474-6(c)(2)(ii). 1442, or 1443, or under chapter 4, it issued on December 18, 2018 (83 FR • The distributing corporation or should not include any tax liability on lines 64757) would allow partnerships or trusts intermediary immediately paid over the 1 through 60 for tax relating to the that are permitted to withhold in a underwithheld tax by March 15, 2021. partner's distributive share in the year the subsequent year with respect to a foreign Instead, include these payments of partnership earns the income. For partner's or beneficiary's share of income underwithheld tax on line 64a. distributive shares not actually distributed, for the prior year to designate the deposit the partnership must include any tax of the withholding as attributable to the Excise tax on specified federal pro- liability on lines 1 through 60 of the Form preceding year. In such a case, the curement payments. Section 5000C 1042 for the following year. Include the tax partnership or trust will be required to imposes a 2% tax on any foreign person liability on the line that represents the report the associated amount and tax that receives a specified federal earlier of the following dates. withheld on Forms 1042 and 1042-S for procurement payment. Include on lines 1 • The date on which the Schedule K-1 the preceding year. If a partnership through 60 any withholding obligation (Form 1065) is sent or otherwise furnished withholds on a foreign partner's share of under section 5000C with respect to to the foreign partner. income after March 15 of the subsequent specified federal procurement payments. • The due date for furnishing year, the due date for filing the applicable Report the amount on the line that Schedule K-1 (Form 1065) to the partner. Form(s) 1042-S is September 15 of the corresponds with the date the deposit was subsequent year. For example, if a due. Include such tax liability for the period partnership withholds on April 1, 2021, that includes the date the tax was required Specified federal procurement with respect to a foreign partner's share of to be withheld. See Regulations section payment. A specified federal undistributed income for the 2020 1.1441-5(b)(2)(i)(A). procurement payment means any calendar year, the partnership may payment made pursuant to a contract with A domestic trust should report on lines designate the deposit as made for 2020 1 through 60 in the same manner as a the U.S. Government entered into after and report the liability and tax withheld on January 1, 2011, for the provision of U.S. partnership to the extent that it is the 2020 Form 1042 and the 2020 Form required to distribute, but has not actually goods, if such goods are manufactured or 1042-S for the partner. The partnership or produced in any country which is not a distributed, a foreign beneficiary's share of trust must also ensure that its chapter 3 distributable net income subject to party to an international procurement status code properly reflects its status as a agreement with the United States, or the withholding under section 1441, 1442, or partnership or trust (including as a 1443, or under chapter 4, before the date provision of services, if such services are Withholding Foreign Partnership (WP) or provided in any country which is not a (without extensions) on which the income Withholding Foreign Trust (WT)). The is required to be reported on Form party to an international procurement associated liability should be reported on agreement with the United States. 1042-S. See Regulations section line 59, with the share of income to the 1.1441-5(b)(2)(ii). partner or beneficiary reported on line 62, QIs with no primary chapters 3 and 4 withholding responsibility. If you are a QI that did not assume primary

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withholding responsibility under both Total Gross Amounts Reported box 9, for reporting these corresponding chapters 3 and 4, enter the total amount of amounts. the tax liability of U.S. withholding agent(s) Lines 62a through 62c. Enter the under both chapters 3 and 4 on line 59. amounts reported on all Forms 1042-S for Line 63c(2). The amounts reported on Report all other amounts on the line that the calendar year (regardless of whether line 63c(2) should be amounts that you corresponds with the date the liability was the form was filed electronically or on withheld in the year following the calendar incurred. paper) and for all Forms 1000, Ownership year of underwithholding from future Certificate. payments made to a beneficial owner or Note. Reporting on line 59 as described from other property or additional Be sure to reconcile amounts on contributions of a beneficial owner that above also applies to any other entity that Form 1042 with amounts on reports on Form 1042 to the extent such ! you hold in custody or otherwise control. CAUTION Forms 1042-S (including Forms entity claims a credit on line 67 for See Adjustment for Underwithholding, 1042-S filed electronically) to avoid later. Also report on line 63c(2) any other amounts withheld by another withholding unnecessary correspondence with the agent (whether under chapter 3 or 4). amounts that you withheld in the year IRS. following the calendar year in which the Adjustments to withholding. If you related payments were made (to the used procedures for adjusting Line 62a. The amount on line 62a should extent permitted under an applicable overwithholding or underwithholding, see equal the sum of all amounts shown on regulation section in chapter 3 or 4). See Adjustment for Overwithholding and Form 1042-S, box 2, that are payments of Withholding after the time of payment, Adjustment for Underwithholding, later, for U.S. source FDAP income, less the sum of earlier, for how to report the tax liability instructions on reporting on lines 1 through all amounts that are U.S. source substitute related to such payments. 60. payments reported on line 62b. The total of the amounts reported on Escrow procedure. A withholding agent Line 62b. The amount on: lines 63a and 63c(2) should be the that withheld tax during calendar year • Line 62b(1) should equal the sum of all amounts withheld by the withholding agent 2020 and that was not required to deposit amounts shown on Form 1042-S, box 2, reported on box 7a of the corresponding with the IRS the amount of tax withheld that are U.S. source substitute dividend Forms 1042-S. payments; and during calendar year 2020 pursuant to the The total of the amounts reported on The amount shown on line 62b(2) escrow procedure under Regulations • lines 63b(1) and 63b(2) should be the should equal all amounts shown on Form section 1.1471-2(a)(5)(ii) or 1.1441-3(d) amounts reported on box 8 of the 1042-S, box 2, that are U.S. source should not report such amount as a liability corresponding Forms 1042-S. on lines 1 through 60 or lines 64a through substitute payments other than substitute 64d and should not report such amount as dividend payments. Line 63d. The amounts reported on withheld on lines 63a through 63d. An See Regulations section 1.1441-2(b)(4) line 63d should be the amounts paid by amount held in escrow is required to be regarding substitute payments. the withholding agent from its own funds reported on the future calendar year return rather than through withholding from the for the year in which the withholding agent Line 62c. The amount on line 62c should payment to the recipient. See Form is required to deposit the amount of tax equal the sum of all amounts shown on 1042-S, box 11, for the corresponding with the IRS. Forms 1042-S, box 2, and all amounts amounts. shown as gross interest paid on Forms Withholding after the time of payment. 1000. Note. Amounts withheld and held in In limited cases, the regulations under Line 62d. Enter gross amounts escrow (and not deposited with the IRS) chapters 3 and 4 allow you to withhold pursuant to the escrow procedures under after the time that a payment has been reportable on Forms 1000 and Forms 1042-S if different from the total gross Regulations section 1.1471-2(a)(5)(ii) or made. In such a case, you should include 1.1441-3(d) are not reported on lines 63a the tax liability for the period in which you amounts actually reported on Forms 1000 and Forms 1042-S (as shown on line 62c). through 63d until the year they are actually withheld with respect to the deposited with the IRS. See the payment. If you withheld in the year Total Tax Reported as Withheld instructions for Lines 1 through 60, earlier. following the calendar year in which the or Paid Therefore, amounts that are reported as payment was made, include the tax held in escrow (see box 7b of Form liability relating to the payment on line 59 Lines 63a through 63e. Except as noted 1042-S) are not taken into account for for the year you made the payment. For directly below, enter for each line the purposes of reconciling lines 63a through example, if a deemed distribution under amounts reported for all Forms 1042-S 63d with the corresponding Forms section 305(c) is made on August 15, (regardless of whether the form was filed 1042-S. 2020, but you are not required to withhold electronically or on paper) and for all with respect to the deemed distribution Forms 1000. Total Net Tax Liability until a subsequent payment of interest is Line 64a. Include on line 64a any made on February 15, 2021 (see Line 63a. The amounts reported on adjustments to total net tax liability. For Proposed Regulations section 1.1441-2(d) line 63a should be the amounts actually example, report any adjustment to liability (4)), report the tax liability related to the withheld by the withholding agent before when: deemed distribution on line 59. any applicable adjustments reported on lines 63c(1) and 63c(2). • A distributing corporation made a You should report on line 63c(2) the reasonable estimate of accumulated and amounts you withheld in the following Line 63c(1). The amounts reported on current earnings and profits under calendar year in which the payment was line 63c(1) should be amounts you repaid Regulations section 1.1441-3(c)(2)(ii)(A) made. You should also report deposits of to the beneficial owner or payee in the or 1.1474-6(c)(2)(ii), and amounts withheld in the year following the year following the calendar year of • A distributing corporation or calendar year in which the payment was overwithholding pursuant to either the intermediary paid over any underwithheld made on line 65b. reimbursement or set-off procedures (and tax with respect to the distribution by should also be reported as a reduction in Line 61. Enter the number of Forms March 15, 2021. tax liability on line 59). See Adjustment for 1042-S filed on paper and electronically. Overwithholding, later. See Form 1042-S,

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Note. The amount reported on line 64a paid for a payee may only be claimed as a your total deposit. Report the reduced tax must not be included in the Record of credit by the payee. liability on lines 1 through 60 for the Federal Tax Liability (lines 1 through 60). period(s) for which you repaid the QSL claiming a credit forward. If you overwithheld tax. Lines 64b and 64c. Enter the sum of the are a QSL or other withholding agent amounts reported on the Record of claiming a credit forward of prior If the undeposited amount is not Federal Tax Liability (that is, the sum of withholding on substitute dividends on enough to make any adjustments, or if you lines 5, 10, 15, 20, 25, 30, 35, 40, 45, 50, line 67b as determined under Notice discover the overwithholding after the 55, and 60) that are attributable to liability 2010-46, you should attach Form(s) entire amount of tax has been deposited, under chapter 3 (on line 64b) and 1042-S issued to you to support such you can use either the reimbursement or chapter 4 (on line 64c). The amounts credits. If a credit is claimed with respect the set-off procedure to adjust the shown on lines 64b and 64c should not to any U.S. source substitute dividends overwithholding. include any amounts shown on lines 64a paid to you from a withholding agent that If March 15 is a Saturday, Sunday, and 64d. Do not make any other has not issued a Form 1042-S to you for TIP or legal holiday, the next business adjustments to this line. such payments, attach a supporting day is the final date for these statement to Form 1042 indicating the Line 64d. Enter on line 64d amounts actions. following to support your credit. reported on the Record of Federal Tax Liability that are attributable to liability for • The withholding agent's name, address, Reimbursement procedure. Under specified federal procurement payments and EIN (if known). the reimbursement procedure, you repay under section 5000C. • The amount of U.S. source substitute the beneficial owner or payee the amount dividends received from the withholding overwithheld. You use your own funds for Line 64e. The amount on line 64e should agent. this repayment and may reimburse equal the sum of lines 64a through 64d. • The amount of credit forward you yourself for an amount repaid by reducing Reporting of Taxes Paid and included on line 67b in connection with the amount of any subsequent deposit of these substitute dividends. tax made during the calendar year or the Overpayment or Balance Due subsequent calendar year. You must Lines 70a and 70b. Enter on line 70a make the repayment by the earlier of: Line 65. Enter the total tax deposits you any overpayment attributable to payments The date you actually file Form 1042-S made for the year (including amounts paid subject to withholding under chapters 3 • for the calendar year in which the amount with an extension of time to file). Enter and 4. Enter on line 70b any overpayment was overwithheld, or deposits of tax withheld during the attributable to payments subject to the The due date for filing Form 1042-S for calendar year in which the related excise tax on specified federal • the calendar year (generally, March 15 of payment was made on line 65a. Enter procurement payments. Do not include on the year after the calendar year in which deposits of tax withheld during the year these lines any overpayment attributable the amount is overwithheld). following the calendar year in which the to amounts that were actually withheld related payment was made (to the extent from the beneficial owner (unless such The reimbursement amount may not be permitted under an applicable regulation amounts were repaid pursuant to the more than the amount you actually repaid. section in chapter 3 or 4) on line 65b. See reimbursement or set-off procedures). The amount of the reduced tax liability for Withholding and reporting in a subsequent amounts repaid to the beneficial owner or year, earlier. Line 71. You may claim an overpayment payee during the calendar year must be (the sum of lines 70a and 70b) as a refund reflected on the line for the period you Line 66. Enter any overpayment reported or a credit. Check the applicable box on on the 2019 Form 1042 that you are reduced your liability. The amount line 71 to show which one you are reported on line 59 for the calendar year applying as a credit on the 2020 Form claiming. If you claim a credit, it can 1042. See line 71. for which you overwithheld tax must reflect reduce your required deposits of withheld the amount of the reduced tax liability for Line 67. You are permitted to take a tax for 2021. Note that if you repaid the amounts you repaid the beneficial owner credit for amounts withheld by other recipient overwithheld amounts after or payee in the subsequent calendar year, withholding agents that relate to the total year-end 2020 using the reimbursement or if applicable. Amounts reported on net tax liability reported on lines 64b and set-off procedures, you are not able to line 63c(1) should be limited to amounts 64c. For example, you are a QI and the claim a refund for such an amount on the repaid to the beneficial owner or payee in amount you entered on line 64b includes 2020 Form 1042. Instead, you must the subsequent calendar year (before the amounts withheld by a U.S. withholding indicate on line 71 that you are claiming a earlier of the filing of the associated Form agent under chapter 3 with respect to credit to be applied to the 2021 calendar 1042-S or the due date for such form). On payments made to you as an intermediary year. See Adjustment for Overwithholding, line 71, indicate that you are claiming a on behalf of your account holders. You later. credit to be applied in the 2021 calendar may take a credit on line 67 for the Adjustment for year for amounts you repay the beneficial amounts that were withheld by the U.S. owner or payee in the subsequent withholding agent. The amount on line 67 Overwithholding calendar year (note, you may not claim a should equal the sum of all Forms 1042-S, What to do if you overwithheld tax refund for such an amount). box 8, that you file for the year. depends on when you discover the For example, if you overwithhold tax in overwithholding. Note. All withholding agents (including 2020, you must repay the beneficial owner QIs, WPs, WTs, NQIs, NWPs, and NWTs) Overwithholding discovered by March by March 15, 2021 (or the date on which must verify entries on lines 67a and 67b 15 of the following calendar year. If you filed the associated Form 1042-S with by attaching supporting Form(s) 1042-S or you discover that you overwithheld tax by the IRS, if earlier). You must keep a 1099 to verify the credit amounts claimed March 15 of the following calendar year, receipt showing the date and amount of for withholding by other withholding you may use any undeposited amount of the repayment and provide a copy of the agents. Failure to do so will result in the tax to make any necessary adjustments receipt to the beneficial owner if you denial of the refund or credit being between you and the recipient of the repaid the beneficial owner. If you repaid claimed. If you are a PTP or a nominee income before you make a deposit. Repay the beneficial owner after year-end 2020, withholding under section 1446, the tax the recipient and reduce the amount of you must report the repayment on

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line 63c(1). You must reduce your federal WT, participating FFI, or reporting Model 1 amounts of U.S. source FDAP income for tax liability on line 59 of your 2020 Form FFI making a claim for a collective refund which chapter 4 withholding is required 1042 by the amount of the repayment and under your respective agreement with the and reporting of the amounts for which claim a credit on line 71 for the difference IRS. See Regulations section 1.1471-1(b) withholding is not required according to between your tax liability and your (114) for the definition of a reporting Model the exemption from chapter 4 withholding deposits with the IRS. You may reimburse 1 FFI. applicable to each such amount. yourself by reducing any subsequent In this situation, the recipient will have deposits you make before the end of to file a U.S. income tax return (Form Note. The amounts of U.S. source FDAP calendar year 2021 (the year after the 1040-NR or Form 1120-F) or, if a tax income reportable for chapter 4 are: calendar year in which the amount was return has already been filed, a claim for • Payments of U.S. source FDAP income overwithheld). refund (Form 1040- or amended Form for which withholding under chapter 4 was applied to the payment, plus Set-off procedure. Under the set-off 1120-F) to recover the amount overwithheld. • Payments of U.S. source FDAP income procedure, you repay the beneficial owner for which withholding under chapter 4 was or payee the amount overwithheld by Adjustment for not required but that are subject to reducing the amount you would have been Underwithholding reporting for chapter 3 purposes on Forms required to withhold on later payments you 1042-S. make to that person but only if made Under the procedures for adjusting before the earlier of: underwithholding (see Regulations Line 1. Enter the amounts of U.S. source • The date you actually file Form 1042-S sections 1.1461-2(b) and 1.1474-2(b)), FDAP income required to be withheld for the calendar year in which the amount you may withhold from future payments upon under chapter 4, including amounts was overwithheld, or made to a beneficial owner the tax that withheld upon but for which no deposit • The due date for filing Form 1042-S for should have been withheld, or satisfy the has been made under an escrow the calendar year (generally, March 15 of tax from property or additional procedure. the year after the calendar year in which contributions of the beneficial owner that Line 2. Enter amounts of U.S. source the amount is overwithheld). you hold in custody or otherwise control, FDAP income not required to be withheld The reductions that you applied before the date (without extensions) that upon under chapter 4 on lines 2a through pursuant to the set-off procedure during the Form 1042 is required to be filed. You 2d according to the exception to the calendar year must be reflected on the should report the liability related to such withholding that applied to each payment line for the period you reduced your withholding on lines 1 through 60 for the reportable on Form 1042-S. The amount liability. The amount reported on line 59 for period during the year in which you on line 2e should equal the sum of lines 2a the calendar year for which you adjusted underwithholding by withholding through 2d. overwithheld tax must reflect reductions additional tax. If you adjust that you applied pursuant to the set-off underwithholding by withholding in the Line 2a. Enter the amounts of U.S. procedure during the subsequent calendar year following the calendar year of source FDAP income that are year, if applicable. Amounts reported on underwithholding, you should report the withholdable payments, but for which the line 63c(1) should be limited to amounts increased liability on line 59 for the year in withholding agent has obtained repaid to the beneficial owner or payee (by which the underwithholding occurred. documentation that establishes a reducing the withholding on a later Amounts reported on line 63c(2) should chapter 4 status that does not require payment) in the subsequent calendar year be limited to amounts withheld in the year withholding under chapter 4 (for example, (before the earlier of the filing of the following the calendar year of participating FFI). The amount reported on associated Form 1042-S or the due date underwithholding (before the date that the this line should generally equal the for such form). On line 71, indicate that Form 1042 is required to be filed without aggregate amount reported in box 2 on all you are claiming a credit to be applied to extensions). You should report deposits of of the Forms 1042-S you filed for the the 2021 calendar year for amounts you amounts withheld in the year following the calendar year for which exemption code set off in the subsequent calendar year calendar year of underwithholding 15, Payee not subject to chapter 4 (note, you may not claim a refund for such pursuant to these procedures on line 65b. withholding, was included in box 4a. an amount). See Deposits made during subsequent year, earlier, for how to designate such Line 2b. Enter the amounts of U.S. For 2020, a withholding agent may rely deposits as attributable to the year of source FDAP income that are not on proposed regulations (83 FR 64757), underwithholding. withholdable payments because they are which allow adjustments to nonfinancial type payments (for example, overwithholding using the reimbursement royalties, services, rents). The amount or set-off procedures until the extended Section 2. Reconciliation reported on this line should generally due date for filing Form 1042-S (unless a of U.S. Source FDAP equal the aggregate amount reported in Form 1042-S has already been filed with Income box 2 on all of the Forms 1042-S you filed for the calendar year for which the the IRS or furnished to the recipient). A This section is used by the withholding exemption code 16, Excluded nonfinancial withholding agent may also use the agent to reconcile the amount of U.S. payment, was included in box 4a. extended due date for filing Form 1042 to source FDAP income reportable under claim a credit for any adjustments to chapter 4 and paid by the withholding Line 2c. Enter the amounts of U.S. overwithholding. agent during the calendar year with the source FDAP income that are not Overwithholding discovered at a later total amount of U.S. source FDAP income withholdable payments because they are date. If you discover after March 15 of the reported on all Forms 1042-S filed by the payments related to grandfathered following calendar year that you withholding agent for the calendar year obligations (for example, obligations overwithheld tax for the prior year, do not (including amounts reported under both outstanding on July 1, 2014). See adjust the amount of tax liability reported chapter 3 and chapter 4). You must Regulations section 1.1471-2(b). The on Form 1042 or on any deposit or complete this section even if you did not amount reported on this line should payment for that prior year. Do not repay make any payments subject to chapter 4 generally equal the aggregate amount the beneficial owner or payee the amount withholding during the calendar year. This reported in box 2 on all of the overwithheld unless you are a QI, WP, section also allows reporting of the

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Forms 1042-S you filed for the calendar 1042) even if the QDD has zero tax Do not amend Form 1042 to recover year for which the exemption code 13, liability. taxes overwithheld in the prior year. For Grandfathered payment, was included in more information, see Adjustment for box 4a. Note. In addition to filing a separate Overwithholding, earlier. Schedule Q (Form 1042) for each QDD, if Line 2d. Enter the amounts of U.S. the taxpayer has a tax year other than the Privacy Act and Paperwork Reduction source FDAP income that are not calendar year, the taxpayer must file Act Notice. We ask for the information on withholdable payments because they are separate Schedules Q (Form 1042) — one this form to carry out the Internal Revenue payments of effectively connected for the portion of the calendar year in the laws of the United States. Sections 1441, income. The amount reported on this line first tax year and a second one for the 1442, 1446 (for PTPs), and 1471–1474 should generally equal the aggregate portion in the second tax year. require withholding agents to report and amount reported in box 2 on all of the pay over to the IRS taxes withheld from Forms 1042-S you filed for the calendar Third Party Designee certain U.S. source income of foreign year for which the exemption code 14, If you want to allow any individual, persons. Form 1042 is used to report the Effectively connected income, was amount of withholding that must be paid included in box 4a. corporation, firm, organization, or partnership to discuss your 2020 Form over. Form 1042-S is used to report the Line 2e. Enter the sum of all amounts 1042 with the IRS, check the “Yes” box in amount of income and withholding to the of U.S. source FDAP income required to the Third Party Designee section of the payee. Section 6109 requires you to be reported on Form 1042, but that are not return. Also, enter the designee's name, provide your identifying number on the required to be withheld upon under phone number, and any five digits the return. Routine uses of this information chapter 4 (sum of lines 2a through 2d). designee chooses as his or her personal include giving it to the Department of identification number (PIN). The Justice for civil and criminal litigation, and Line 4. Enter the sum of all amounts to cities, states, the District of Columbia, shown on Form 1042-S, box 2, that are authorization applies only to the tax form upon which it appears. and U.S. commonwealths and payments of U.S. source FDAP income possessions for use in administering their (including amounts reported under both If you check the “Yes” box, you are tax laws. We may also disclose this chapter 3 and chapter 4). The amount on authorizing the IRS to call the designee to information to other countries under a tax line 4 should equal the total gross answer any questions relating to the treaty or tax information exchange amounts reported on line 62c. information reported on your tax return. agreement, to federal and state agencies You are also authorizing the designee to: Line 5. The amount on line 5 should be to enforce federal nontax criminal laws, or Exchange information concerning your the total reported on line 4 (total amount • to federal law enforcement and tax return with the IRS; and reported on all Forms 1042-S) less the intelligence agencies to combat terrorism. Request and receive written tax return total reported on line 3 (total U.S. source • If you fail to provide this information in a information relating to your tax return, FDAP reportable under chapter 4). timely manner, you may be liable for including copies of specific notices, penalties. Line 6. If the amount reported on line 5 is correspondence, and account transcripts. other than zero, use this line to provide an You are not authorizing the designee to You are not required to provide the explanation for the variance. If additional receive any refund check, bind you to information requested on a form that is space is needed, attach a sheet to Form anything (including additional tax liability), subject to the Paperwork Reduction Act 1042 explaining the difference noted on or otherwise represent you before the IRS. unless the form displays a valid OMB line 5. If you want to expand the designee’s control number. Books or records relating authorization, see Pub. 947, Practice to a form or its instructions must be Section 3. Potential Before the IRS and Power of Attorney. retained as long as their contents may become material in the administration of Section 871(m) The authorization automatically expires any Internal Revenue law. Generally, tax 1 year from the due date (without any Transactions returns and return information are extensions) for filing your 2020 Form Check the box if you are a withholding confidential, as required by section 6103. agent that makes any payment under a 1042. If you or your designee desires to potential section 871(m) transaction terminate the authorization, a written The time needed to complete and file during the year, including a notional statement conveying your wish to revoke this form will vary depending on individual principal contract or other derivative the authorization should be submitted to circumstances. The estimated burden for contract that references, in whole or in the IRS service center where the return business taxpayers filing this form is part, a U.S. stock or underlying security. was processed. approved under OMB control number See Regulations section 1.871-15(a)(12) 1545-0123. The estimated burden for all for the definition of a potential section Amended Return other taxpayers who file this form is: 871(m) transaction. If you have to make changes to your Form Recordkeeping, 10 hr., 31 min.; 1042 after you submit it, file an amended Learning about the law or the form, 2 Section 4. Dividend Form 1042. Use a Form 1042 for the year hr., 25 min.; Preparing the form, 4 hr., 34 you are amending. Check the “Amended min.; and Copying, assembling, and Equivalent Payments by a Return” box at the top of the form. You sending the form to the IRS, 32 min. Qualified Derivatives must complete the entire form, including Dealer (QDD) all filing information for the calendar year, If you have comments concerning the and sign the return. Attach a statement accuracy of these time estimates or If a QI (whether the home office or any explaining why you are filing an amended suggestions for making this form simpler, branch) was a QDD during the tax year, return (for example, you are filing because we would be happy to hear from you. You check the box, enter the regular EIN (if the tax liability for May was incorrectly can send us comments from IRS.gov/ any) of the QDD (not the QI-EIN) in the reported due to a mathematical error). FormComments. Or you can write to the field provided, and attach a Schedule Q Internal Revenue Service, Tax Forms and If you are also amending Form(s) (Form 1042) for each QDD. You must Publications, 1111 Constitution Ave. NW, 1042-S, see Amended Return in the Form complete and attach Schedule Q (Form IR-6526, Washington, DC 20224. Do not 1042-S instructions.

-10- Instructions for Form 1042 (2020) Page 11 of 12 Fileid: … ions/I1042/2020/A/XML/Cycle05/source 15:16 - 28-Oct-2020

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

send the form to this address. Instead, see Where and When To File, earlier.

Instructions for Form 1042 (2020) -11- Page 12 of 12 Fileid: … ions/I1042/2020/A/XML/Cycle05/source 15:16 - 28-Oct-2020

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Index

Qualified intermediary 2 Section 2. Reconciliation of A E Qualified securities U.S. Source FDAP Adjustment for Election To Withhold Under lender 3 Income 9 Overwithholding 8 Section 3406 3 Recalcitrant account Section 3. Potential Section Overwithholding discovered Escrow procedure 2, 4, 7 holder 3 871(m) Transactions 10 at a later date 9 Excise tax on specified federal Registered Section 4. Dividend Equivalent Overwithholding discovered procurement payments 6 deemed-compliant Payments by a Qualified by March 15 of the FFI 3 Derivatives Dealer following calendar Withholding foreign (QDD) 10 year 8 F partnership or Specific Instructions 5 Reimbursement Foreign partners of U.S. withholding foreign Address 5 procedure 8 partnerships and foreign trust 2 Chapter 3 and 4 status Set-off procedure 9 beneficiaries of U.S. codes of withholding Adjustment for trusts 6 agent 5 Underwithholding 9 P Employer identification Adjustments to Potential 871(m) number (EIN) 5 overwithholding 1 I transactions 1 Rounding off to whole Adjustments to withholding 7 Income Tax Withholding on Privacy Act and Paperwork dollars 5 Amended Return 10 Wages, Pensions, Reduction Act Notice 10 Specified federal procurement Avoid Common Errors 5 Annuities, and Certain Publicly traded partnerships payment 6 Other Deferred Income 3 (section 1446 withholding Interest and Penalties 4 tax) 2 C Interest 4 Certain distributions subject to Late filing of Form 1042 4 Third Party Designee 10 section 1445 withholding Late payment of tax 4 Q Total Gross Amounts tax 2 Other penalties 4 Qualified derivatives dealers Reported 7 Chapter 3 and 4 status Intermediary 2 (QDDs) 1 Total Net Tax Liability 7 codes 2 Foreign financial Qualified intermediaries with Total Tax Reported as Corporate distributions 6 institution 3 no primary chapters 3 and 4 Withheld or Paid 7 Nonparticipating FFI 3 withholding responsibility 6 Nonqualified D intermediary 2 W Deposit Requirements 3 Nonwithholding foreign R Where and When To File 3 Depositing on time 4 partnership 2 Reporting of Taxes Paid and Extension of time to file 3 Deposits made during Nonwithholding foreign Overpayment or Balance Who Must File 2 subsequent year 4 trust 3 Due 8 Withholding after the time of Electronic deposit Participating FFI 3 QSL claiming a credit payment 7 requirement 4 Passive non-financial forward 8 Withholding Agent 2 Escrow procedure 4 foreign entity (NFFE) 3 Liability for tax 2 Same-day wire payment Qualified derivatives dealer option 4 (QDD) 3 S Section 1. Record of Federal Tax Liability 5

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