Entities that pay foreign workers for contract labor that would normally be reported on a 1099 if they were US citizens, must report these amounts on Form 1042 series. Form 1042-S reports each individual’s payments and withholding (like the 1099); Form 1042-T is the “cover page” (like the 1096 is for 1099’s). This form is needed whether or not the payment is taxable. It can be used to
– Exempt wages under a tax treaty
– Wages earned as an independent contractor
– Other income such as royalties, scholarships or fellowship grants
The benefit of the Form is that it notifies foreign workers of income received and taxes withheld (if any). The worker uses the information to file an income tax return. Some workers will receive both a Form W-2 and a 1042-S. The deadline for issuing Form 1042 is March 15th. However, the
1042 forms can be extended automatically for 30 days using Form 8809. If you need another extension, you can file Form 8809 again, but it’s not automatic.
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