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1042-S

2024 Tax code to form 1042-S income code mapping

Overview of 2024 changes for form 1042-S

For 2024, you need to report bank deposits for nonresident alien individuals in Ecuador. The IRS has eliminated Form 1042-S, Copy E (Withholding Agent) for tax year 2024. We have modified the
2024 1042-S Control
 screen as a result:
  • In the Schedule K-1/1042-S Options frame, we have revised the
    Print consolidated form for Copy E (Withholding Agent)
     checkbox to read
    Print consolidated form in ‘Miscellaneous
     section of the print file (tax returns only).
  • In the ‘IRS Form 1042-S Suppress Copy Options’ frame, we have removed the
    Suppress Copy E (Withholding Agent)
     checkbox.

Map ONESOURCE Trust Tax income codes to form 1042-S income codes

Use this table to map ONESOURCE Trust Tax income codes to from 1042-S income codes.
1042-S income code
Description
ONESOURCE Trust Tax code
Chapter 3 tax rate
Chapter 3 exemption code
Chapter 4 exemption code
01 Interest paid by U.S. obligors-general
Tax-exempt interest
11, 83, 85, 121, 123, 124, 136, 137, 447, 448, 497, 498
N/A
2-Exempt under IRC
15-Payee not subject to chapter 4 withholding
See Note 5 (page 7) for link.
01 Interest paid by U.S. obligors-general
Domestic non-portfolio interest
7, 8, 9, 13, 55, 86, 92, 107, 183, 184, 185, 186, 215, 216, 217, 218, 226, 228, 493, 494, 496 where the Asset Non-portfolio interest income flag was set
Rate determined from tax treaty table 1, Income Code Number 1 column. See Note 4 (page 7) for link.
No Exemption Code
15-Payee not subject to chapter 4 withholding
01 Interest paid by U.S. obligors-general
Domestic portfolio interest
See Note 1 (page 7).
7, 8, 9, 13, 55, 86, 92, 107, 183, 184, 185, 186, 215, 216, 217, 218, 226, 228, 493, 494, 496 where the Asset Non-portfolio interest income flag was not set
N/A
5-Portfolio interest exempt under IRC
15-Payee not subject to chapter 4 withholding
02 Interest paid on real property mortgages
Excess inclusion income
84
Rate is 30%
No Exemption Code
15-Payee not subject to chapter 4 withholding
04 Interest paid by foreign corporations
Foreign interest
See Note 2 (page 7).
10, 227, 495
N/A
3-Income is not from U.S. sources
15-Payee not subject to chapter 4 withholding
06 Dividends paid by U.S. corporations-general
U.S. Corporation dividends
See Note 1 (page 7).
1, 5, 6, 114, 132, 500, 502, 503, 599, 163
Rate determined from tax treaty table 1, Income Code Number 6 column.
See Note 4 (page 7) for link.
No Exemption Code
15-Payee not subject to chapter 4 withholding
06 Dividends paid by U.S. corporations-general
U.S. Corporation dividends from foreign source
2, 520
N/A
3-Income is not from U.S. sources
15-Payee not subject to chapter 4 withholding
06 Dividends paid by U.S. corporations-general
Dividends from 80/20 companies
98
N/A
2-Exempt under IRC
15-Payee not subject to chapter 4 withholding
See Note 5 (page 7) for link.
06 Dividends paid by U.S. corporations-general
Section 897 Capital Gains
164
Rate is 30%
No Exemption Code
15-Payee not subject to chapter 4 withholding
08 Dividends paid by foreign corporations
Foreign dividends
See Note 2 (page 7).
3, 501
N/A
3-Income is not from U.S. sources
15-Payee not subject to chapter 4 withholding
09 Capital gains
Distributed capital gains
System default is to populate only if the Include capital gains on Form 1042-S Compute-Federal option is selected. This includes all distributed capital gains (excluding those related to tax codes 99 and 157).
Rate is 30%
No Exemption Code
15-Payee not subject to chapter 4
See Note 5 for link.
09 Capital gains
302 Merger Delivery vs. Payment
99 (if distributed)
N/A
2-Exempt under IRC
15-Payee not subject to chapter 4 withholding
14 Real property income and natural resources royalties
Real property income and natural resources royalties
Passive rental/royalty income. Rental/royalty income with material participation may or may not be included depending on Compute-Federal option selection.
Rate is 30%
No Exemption Code
15-Payee not subject to chapter 4 withholding
23 Other income
Other income
44, 60, 89, 90, 472, 473 plus state overpayment applied. Also, any portfolio ordinary gain would be included in this amount.
Rate is 30%
No Exemption Code
15-Payee not subject to chapter 4 withholding
27 Publicly traded partnership distributions subject to IRC section 1446
Partnership income
Ordinary income from a publicly traded partnership.
See Note 6 for link.
Rate is 37%
No Exemption Code
15-Payee not subject to chapter 4 withholding
29 Deposit interest
Deposit interest
See Note 3.
51
N/A
2-Exempt under IRC
15-Payee not subject to chapter 4 withholding
30 Original issue discount (OID)
Original issue discount
169, 192, 193, 196, 197, 506
N/A
5-Portfolio interest exempt under IRC
15-Payee not subject to chapter 4 withholding
33 Substitute payment-interest
Substitute payment-interest
95
Rate/exemption same as for portfolio interest
N/A
15-Payee not subject to chapter 4 withholding
34 Substitute payment-dividends
Substitute payment-dividends
96
Rate determined from tax treaty table 1, Income Code Number 6 column.
See Note 4 for link.
No Exemption Code
15-Payee not subject to chapter 4 withholding
35 Substitute payment-other
Substitute payment-other
97
Rate is 30%
No Exemption Code
15-Payee not subject to chapter 4 withholding
36 Capital gains distributions
Capital gain not subject to NRA Withholding
156, 157 (if distributed)
N/A
2-Exempt under IRC
15-Payee not subject to chapter 4 withholding
See Note 5 for link.
37 Return of capital
Nondividend distributions
4
N/A
2-Exempt under IRC
15-Payee not subject to chapter 4 withholding See Note 5 for link.
40 Other dividend equivalents under IRC section 871(m) (formerly 871(l))
871M dividend
134
Rate determined from tax treaty table 1, Income Code Number 6 column.
No Exemption Code
15-Payee not subject to chapter 4 withholding
57 Amount realized under IRC section 1446(f)
§1446(f) proceeds subject to withholding
526, 527
See Note 6 for link.
Rate is 10%
No Exemption Code
15-Payee not subject to chapter 4 withholding
57 Amount realized under IRC section 1446(f)
§1446(f) proceeds not subject to withholding
528, 529
See Note 6 for link.
N/A
Exemption code based on recipient Chapter 3 status
15-Payee not subject to chapter 4 withholding
57 Amount realized under IRC section 1446(f)
Additional excess of cumulative net income (ECNI)
530
If simple/complex trust or estate, selection §1446(f) checkbox on sales screen may also be used.
See Note 6 for link.
Rate is 10%
No Exemption Code
15-Payee not subject to chapter 4 withholding
58 Publicly traded partnership distributions – undetermined
Publicly traded partnership distributions – undetermined
139
See Note 6 for link.
Rate is 37%
No Exemption Code
15-Payee not subject to chapter 4 withholding
Note 1
Include interest and dividend amounts from your Schedule K-1s.
Note 2
You won't report interest paid by foreign corporations (income code 04) and dividends paid by foreign corporations (income code 08) on Form 1042-S if you selected the
Suppress reporting of foreign interest and dividends
 option in the 1042-S Control settings.
Note 3
You must report bank deposit interest to any nonresident alien individual who resides in a country with which the United States has agreed to exchange tax information under an income tax treaty, other convention, or bilateral agreement.
ONESOURCE Trust Tax automatically reports bank deposit interest on Form 1042-S for nonresident individuals whose country of residence meets these requirements. The list of countries is included in Revenue Procedure 2023-36.
To report bank deposit interest for all nonresident alien individuals, regardless of their country of residence, select the
Report bank deposit interest paid to nonresident individuals on Form 1042-S even if reporting is not required based on country of residence
 Compute-Federal option.
Note 4
The "Tax Treaties" section of IRS Publication 515 includes the following link to the tax treaty tables: https://www.irs.gov/individuals/international-taxpayers/tax-treaty-tables.
Note 5
You can set the Chapter 4 exemption code for these income types to 21 (Other payment not subject to chapter 4 withholding). See the following
Chapter 4 status code
 for additional information.
Note 6
You'll receive a separate Form 1042-S for each type of reportable income associated with a given publicly traded partnership (PTP). The system uses information from the PTP asset record (name, EIN, etc.) to populate box 16 (Payer information) of each Form 1042-S generated. We do not make any assumptions about the payer Chapter 3 and 4 status. The system does not automatically assume the Chapter 3 status for a payer is 38.
Example: If you receive $100 of partnership income (tax code 12) and $20 of PTP distributions – undetermined (tax code #139) from PTP A, and you also receive $400 of partnership income (tax code 12) from PTP B, the system generates three Form 1042-S for you as follows:
  • 1st 1042-S – Income code 27 with gross income of $100, withholding at 37%.
  • 2nd 1042-S – Income code 58 with gross income of $20, withholding at 37%.
  • 3rd 1042-S – Income code 27 with gross income of $400, withholding at 37%.

Tax rate comments

  • The system applies a Chapter 3 tax rate of 30% to all reportable income not subject to an exemption, including portfolio interest, when you mark the
    Documentation not available or invalid
     check box for the recipient, as instructed in IRS Publication 515 (see Presumption Rules). This action takes precedence over the recipient Chapter 3 status code checks. Refer to the
    Chapter 4 comments
     when you set the recipient Chapter 4 status code to
    15-Nonparticipating FFI
    .
  • The system applies a Chapter 3 tax rate of 30% to all income otherwise subject to treaty rates when you mark the
    No election made to receive treaty rates
     check box for the recipient.
  • The system applies Chapter 3 exemption code 04 (Exempt under tax treaty) with no withholding required, resulting in a 0% dividend withholding rate, when you select the
    Recipient eligible for special treaty dividends benefits
     check box and when U.S. corporate dividends is subject to reduced treaty rates based on the recipient country.
  • The system doesn't add a tax rate when you set the recipient Chapter 3 status code to 19 (International Organization), 20 (Tax-exempt organization (Section 501(c) entities), 36 (Foreign Government-Integral Part), or 37 (Foreign Government-Controlled Entity).
  • The system applies a Chapter 3 tax rate of 4% when you set the recipient Chapter 3 status code to 18 (Private Foundation).
  • The system applies a default tax rate of 30% when none of the above exceptions are met and the recipient country is not listed in the Publication 515 table.

Exemption logic exceptions

  • The Chapter 3 exemption code is set to 24 (Exempt under section 892) when the recipient Chapter 3 status code is set to 19 (International Organization), 36 (Foreign Government-Integral Part), or 37 (Foreign Government-Controlled Entity).
  • The Chapter 3 exemption code is set to 2 (Exempt under IRC) when the recipient Chapter 3 status code is 20 (Tax-exempt organization (Section 501(c) entities)).
  • The Chapter 3 exemption code is set to 7 (WFP or WFT) when the recipient Chapter 3 status code is 09 (Withholding Foreign Partnership) or 11 (Withholding Foreign Trust).

Box 3

According to the Form 1042-S Instructions, you must enter either 3 or 4 (but not both) on each Form 1042-S. If you don't report amounts in boxes 7 through 9, you should enter 3 in this box as per IRS guidelines.

Chapter 4

The system subjects all income to Chapter 4 reporting and applies a Chapter 4 tax rate of 30% when the recipient Chapter 4 status code is set to
15-Nonparticipating FFI
 and the
Documentation not available or invalid
" check box is marked. This includes bank deposit interest, and the recipient's country situs doesn't impact reporting for Chapter 4 purposes. The Chapter 3 exemption is set to 12 (Payee subjected to Chapter 4 withholding).
The system assumes all income to be subject to Chapter 3 if no Chapter 4 information (rate or exemption code) for a given income code is entered. In this case, either a Chapter 3 tax rate or exemption is applied. When the income is subject to Chapter 3 (the system default), 15 (Payee not subject to Chapter 4 withholding) is printed in Box 4a, and 00.00 is printed in Box 4b, unless otherwise indicated in Note 5.
The system prints 12 (Payee subjected to Chapter 4 withholding) in Box 3a and 00.00 in Box 3b if either a Chapter 4 tax rate or exemption code is entered.

Income codes 51, 52, 53, and 54

Use income codes 51, 52, 53, and/or 54 if you paid income (interest or dividends) and claim a reduced rate of withholding under an income tax treaty, but the recipient does not provide a U.S. or foreign TIN.
If the recipient doesn't have a TIN and you apply a Chapter 3 tax rate reduced to less than 30% under an income tax treaty, or if you use Chapter 3 exemption code 04 (Exempt under tax treaty), ONESOURCE Trust Tax will revise the income codes as follows:
  • Changes interest described by income code 01 (Interest paid by U.S. obligors-general) to income code 51.
  • Changes dividends described by income code 06 (Dividends paid by U.S. corporation-general) to income code 52.
  • Changes dividends described by income code 34 (Substitute payment-dividends) to income code 53.
  • Changes interest described by income code 33 (Substitute payment-interest) to income code 54.
Since the recipient's U.S. TIN is not valid and the withholding rate on the dividend income is less than 30%, you should use income code 52 (Dividends paid on certain actively traded or publicly offered securities) instead of income code 06 (Dividends paid by U.S. corporations-general).

Rounding

IRS Form 1042-S Instructions indicate "You must round off cents to whole dollars." All amounts reported on the actual Form 1042-S and consolidated Form 1042-S (if generated as a withholding agent copy or part of a projection) are rounded to whole dollars. Amounts filed with the IRS are rounded as well and are the same as those reported on the printed output. For example:
  • Asset A generates Dividends paid by U.S. corporations-general (income code 06) of $4.20.
  • Asset B generates Dividends paid by U.S. corporations-general (income code 06) of $6.40.
  • The recipient receives 100% of income. All dividends noted above are subject to 30% withholding. Asset-level detail for income is generated when the account is processed.
When the Compute-Federal option is set to prepare the return with dollars, the 1042-S form/filing indicates $10 of gross income (the dividend from each asset is rounded so that there is $4 for Asset A and $6 for Asset B). Withholding is then computed. The result is $3 (30% of $10).
When the Compute-Federal option is set to prepare the return with cents, the 1042-S form/filing indicates $11 of gross income (the total amount of $10.60 is rounded to $11). Withholding is then computed. The result is $3 (30% of $11, or $3.33 rounded to the nearest dollar).

Unique form identifier

The IRS requires withholding agents to assign a 10-digit numeric unique identifying number to each Form 1042-S they file, as stated in the Form 1042-S instructions. ONESOURCE Trust Tax automatically generates this unique number for each Form 1042-S. This number is printed on both the IRS substitute Form 1042-S and the consolidated Form 1042-S output (if generated), and it is included with the information filed with the IRS.

Form 1042-S output

Publication 1179 instructs that you can't include multiple income types for the same recipient on Copies A, B, C, and D of Form 1042-S.
According to the IRS, you can only submit 1 Form 1042-S per page, regardless of orientation. Therefore, the substitute form includes only one Form 1042-S per page, rather than 2, and it generates in portrait orientation.
You can't generate or include the consolidated Form 1042-S format in the beneficiary packet when you process a tax return.
" "
  • Copy A (for the IRS) automatically generates unless you suppress it by selecting the Suppress Copy A (IRS) 1042-S Control option. You should select the option to suppress Copy A unless you plan to paper file the form with the IRS. If you generate it, the form is included in the Miscellaneous section of the print file.
  • Copy B (for the recipient) always generates and is included in the Beneficiary section of the print file.
  • Copy C (for the recipient to attach to the federal tax return) automatically generates unless you suppress it by selecting the Suppress Copy C (Recipient) 1042-S Control option. If you generate it, the form is included in the Beneficiary section of the print file.
  • Copy D (for the recipient to attach to the state tax return) automatically generates unless you suppress it by selecting the Suppress Copy D (Recipient) 1042-S Control option. If you generate it, the form is included in the Beneficiary section of the print file.
  • Form 1042-S recipient instructions is in the Beneficiary section for each recipient for whom you generated a Form 1042-S.

Corrections print

Form 1042-S AMENDED box
The
AMENDED
 box on Form 1042-S is marked when:
  • The
    Type of 1042-S (for printed form only)
     drop-down list is set to
    Amended
    . This drop-down list is in the
    Form 1042-S Recipient Information
     collapsible section on the
    Recipient Detail
     page.
  • An amendment number is indicated in the
    AMENDMENT NO.
     box on Form 1042-S.
Unique form identifier and amendment no. fields
The IRS requires you to assign a 10-digit Unique Form Identifier (UFI) to each Form 1042-S return that you file. The UFI is necessary for both original and amended Form 1042-S returns. When you file an amended Form 1042-S, it must have the same UFI as the original Form 1042-S you are amending. ONESOURCE Trust Tax automatically generates the UFI during processing.
The IRS also requires you to include an amendment number for any amended Form 1042-S you file. For corrections print, ONESOURCE Trust Tax determines the UFI and amendment number based on the following criteria:
  • No change
    : If there are no changes to an originally filed Form 1042-S then the UFI is the same as the originally filed Form 1042-S. The Form 1042-S AMENDMENT NO. box is blank.
  • Change to an originally filed Form 102-S
    : If there's a change to an originally filed Form 1042-S, then the 1042-S return generated in the corrections keeps the same UFI as the original.  A ‘1’ prints in the Form 1042-S AMENDMENT NO. box.
  • ONESOURCE Trust Tax defines the following as a change to an originally filed Form 1042-S:
    • Only amounts (gross income and/or withholding) have changed from the original filing.
    • Only the income code has changed from the original filing.
    • The income code and gross income are the same as the original filing.
  • New Form 1042-S
    : If there is a new Form 1042-S that wasn't originally filed then the new Form 1042-S generated in the corrections print has a different UFI. The AMENDMENT NO. box for the new Form 1042-S is blank. Any Form 1042-S generated during corrections print that doesn't meet the criteria included in the two bullet items preceding is considered a new Form 1042-S.

Printing corrected form 1042-S with no gross income

A corrected or revised form 1042-S with no gross income reportable for a given income code can be generated by selecting the Force 1042-S with No Gross Income (Corrections Only) check box, which is available under the 1042-S Income Overrides and 1042-S Additional Income collapsible sections on the Recipient Detail page.
You can generate a corrected or revised Form 1042-S with no gross income reportable for a given income code when you mark the
Force 1042-S with No Gross Income (Corrections Only)
 check box. This option is available under the
1042-S Income Overrides
 and
1042-S Additional Income
 sections on the
Recipient Detail
 page.

This article applies to:

  • Product: ONESOURCE Trust Tax