Instructions for Form 1042

2025

Instructions for Form 1042

Annual Withholding Tax Return for U.S. Source Income of Foreign Persons

Section references are to the Internal Revenue Code

unless otherwise noted.

Future Developments

For the latest information about developments related to

Form 1042 and its instructions, such as legislation

enacted after they were published, go to IRS.gov/

Form1042.

What’s New

Claim for credit or refund of amounts withheld on

certain borrow fees. On October 23, 2025, Notice

2025-63, 2025-46 I.R.B. 709, available at IRS.gov/IRB/

2025-46_IRB#NOT-2025-63, was released announcing

that the Department of the Treasury and the IRS intend to

issue proposed regulations providing that certain borrow

fees, as defined in the notice, are sourced based on the

residence of the recipient. Notice 2025-63 provides that

taxpayers can rely on the sourcing rule described in the

notice with respect to securities lending transactions and

sale-repurchase transactions entered into before the

forthcoming proposed regulations are published. A

withholding agent relying on Notice 2025-63 to claim a

collective refund permitted under an applicable agreement

with the IRS for amounts that it withheld on borrow fees

(for example, a QI claiming a collective refund under its QI

agreement) must attach copies of the Form(s) 1042-S

received to support such claim, and attach a statement

indicating reliance on Notice 2025-63 as the reason for

the claim and include the amount of income that was

subject to withholding for each payment of a borrow fee

associated with a securities lending transaction or

sale-repurchase transaction. For claims for credit or

refund by the beneficial owner of an applicable borrow fee,

see the Instructions for Form 1040-NR and the

Instructions for Form 1120-F.

Direct deposit and electronic payments. If you have

access to U.S. banking services or electronic payment

systems, you should use direct deposit for any refunds.

The IRS added another option for withholding agents to

make federal tax deposits and make balance due

payments using IRS Direct Pay. Go to IRS.gov/Payments

to see all your payment options.

New direct deposit lines. You can have your refund

directly deposited into your checking or savings account

at any U.S. bank or other financial institution instead of

having a check sent to you. Line 71 has been expanded

by adding lines 71b, 71c, and 71d for direct deposit

information.

Credit forward framework. After December 31, 2024,

withholding agents (including a QSL) may no longer use

the credit forward framework set forth in Notice 2010-46,

2010-24 I.R.B. 757, for substitute dividends paid in a

Nov 10, 2025

series of security loans or stock repurchase agreements.

See FAQ 26 under the General compliance section of

FATCA - FAQs general, available at IRS.gov/

FATCAFAQsGeneral.

Reminders

Electronic filing. Beginning for tax year 2023 (Forms

1042 filed in 2024), electronic filing requirements apply to

Form 1042. For general information about electronic filing,

see Pub. 4163, Modernized e-File (MeF) Information for

Authorized IRS e-File Providers for Business Returns.

Also see Where and When To File, later, for more

information on the electronic filing requirements for Form

1042.

Reliance on proposed regulations reducing burden

under FATCA and chapter 3. On December 18, 2018,

the IRS and the Department of the Treasury issued

proposed regulations (83 FR 64757) to reduce the burden

on taxpayers of certain requirements under chapters 3

and 4 of the Internal Revenue Code. The proposed

regulations provide that, under section 7805(b)(1)(C),

taxpayers may generally rely on the proposed regulations

until final regulations are issued. Specifically, for purposes

of these instructions, a withholding agent may rely on the

following provisions of these proposed regulations in

connection with completing Form 1042.

• Withholding and reporting in a subsequent year.

A partnership or trust that is permitted to withhold in a

subsequent year with respect to a foreign partner’s or

beneficiary’s share of income for the prior year may

designate the deposit of the withholding as

attributable to the preceding year and report the

associated amounts on Forms 1042 and 1042-S for

the preceding year. See Foreign partners of U.S.

partnerships and foreign beneficiaries of U.S. trusts,

later.

• Adjustments to overwithholding under the

reimbursement and set-off procedures. A

withholding agent may make adjustments to

overwithholding using either the reimbursement or

set-off procedure until the extended due date for filing

Form 1042-S (unless the Form 1042-S has already

been filed or furnished). Additionally, a withholding

agent may use the extended due date for filing a Form

1042 to claim a credit for any adjustments made to

overwithholding.

Centralized partnership audit regime. Section 1101 of

the Bipartisan Budget Act (BBA) of 2015 repealed the

TEFRA partnership procedures and the electing large

partnership (ELP) provisions and replaced them with a

new centralized partnership audit regime effective for

partnership tax years beginning on or after January 1,

2018. The new regime provides for determination,

Instructions for Form 1042 (2025) Catalog Number 54843T

Department of the Treasury Internal Revenue Service www.irs.gov

assessment, and collection of underpayments at the

partnership level unless certain elections are made by the

partnership. Under these rules, a partnership (or a

pass-through partner) may be required to withhold under

chapter 3 or 4 when there has been an adjustment under

the centralized partnership audit regime to an item of

income or gain allocable to a foreign person (or any other

person subject to withholding). If the adjustment is to an

amount subject to withholding that is reportable on Form

1042, the partnership (or pass-through partner) should

report the withholding on Form 1042 for the year in which

it pays the tax required to be withheld. See section

6241(9).

Section 871(m) transition. On September 12, 2022,

Notice 2022-37, 2022-37 I.R.B. 234, available at

IRS.gov/irb/2022-37_IRB#NOT-2022-37, was published

announcing the Department of the Treasury and the IRS

intention to amend the section 871(m) regulations to

further delay the effective/applicability date of certain rules

in those final regulations and certain requirements of a

qualified derivatives dealer (QDD), generally through

2024. Notice 2024-44, 2024-25 I.R.B. 1737, available at

IRS.gov/irb/2024-25_IRB#NOT-2024-44, extends the

transition relief in Notice 2022-37 for an additional 2 years.

General Instructions

Purpose of Form

Use Form 1042 to report the following.

• The tax withheld under chapter 3 (excluding

withholding under sections 1445 and 1446 except as

indicated below) on certain income of foreign persons,

including nonresident aliens, foreign partnerships,

foreign corporations, foreign estates, and foreign

trusts.

• The tax withheld under chapter 4 on withholdable

payments. For the withholding requirements of

chapter 4, see Regulations sections 1.1471-2(a),

1.1471-4(b), and 1.1472-1(a).

• The tax withheld pursuant to section 5000C on

specified federal procurement payments.

• The tax withheld under section 877A on payments of

eligible deferred compensation items or distributions

from nongrantor trusts to a covered expatriate.

• Payments that are reported on Form 1042-S under

chapter 3 or 4. See Regulations section 1.1474-1(d)

(2)(i) for the definition of a chapter 4 reportable

amount (which are amounts required to be reported

on Form 1042-S for chapter 4 purposes) and

Regulations section 1.1461-1(c)(2) for amounts

subject to reporting for chapter 3 purposes.

Certain distributions subject to section 1445 withholding tax. Publicly traded trusts, real estate investment

trusts (REITs), and regulated investment companies that

are qualified investment entities (as defined under section

897(h)(4)) must withhold section 1445 tax on certain

distributions and report such amounts on Form 1042. For

more information, see Regulations section 1.1445-8 and

the Instructions for Form 1042-S.

Publicly traded partnerships (section 1446 withholding tax). For purposes of reporting on Form 1042, a

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publicly traded partnership (PTP) must withhold section

1446(a) tax on distributions of effectively connected

taxable income (ECTI) or amounts realized on

distributions for section 1446(f) purposes made to its

foreign partners. A nominee that receives a distribution of

ECTI from a PTP and is treated as the withholding agent

for section 1446 purposes must use Form 1042 to report

the tax withheld. For purposes of section 1446(f), starting

for the 2023 year, a broker is generally required to

withhold on an amount realized from the sale of a PTP

interest that it effects for a foreign person that is the

transferor of the interest. Absent an applicable exception

to the withholding, a broker is required to withhold at a

10% rate on the amount realized and report the amount

realized and withholding on Forms 1042 and 1042-S. See

Regulations sections 1.1461-1(c)(2)(i)(Q) and (R) for

further information on this reporting. A broker is also

required to withhold under section 1446(f) on an amount

realized on a PTP distribution. For this purpose, a

nominee is a person that holds an interest in the PTP on

behalf of one or more foreign partners and that is a

domestic person, a qualified intermediary (QI) that

assumes primary responsibility for the distribution, or a

U.S. branch of a foreign person that agrees to be treated

as a U.S. person. For more information, see Regulations

sections 1.1446-4 and 1.1446(f)-4; the QI agreement in

Rev. Proc. 2022-43, 2022-52 I.R.B. 570, available at

IRS.gov/irb/2022-52_IRB#REV-PROC-2022-43; and Pub.

515, Withholding of Tax on Nonresident Aliens and

Foreign Entities.

Who Must File

Every withholding agent or intermediary who receives,

controls, has custody of, disposes of, or pays a

withholdable payment (to which chapter 4 withholding

applies) or an amount subject to withholding, must file an

annual return for the preceding calendar year on Form

1042 unless an exception to filing applies. Also, any PTP

or nominee making a distribution of ECTI under section

1446, or any entity required to report a distribution on

Form 1042-S that is subject to withholding under section

1445, must file Form 1042 for the preceding calendar

year.

You must file Form 1042 if any of the following apply.

• You are required to file or otherwise file Form(s)

1042-S for purposes of either chapter 3 or 4 (whether

or not any tax was withheld or was required to be

withheld to the extent reporting is required). File Form

1042 even if you file Form(s) 1042-S electronically.

• You file Form(s) 1042-S to report to a recipient tax

withheld by your withholding agent.

• You pay gross investment income to foreign private

foundations that are subject to tax under section

4948(a).

• You pay any foreign person specified federal

procurement payments that are subject to withholding

under section 5000C.

• You pay an eligible deferred compensation item to a

covered expatriate or you are a trustee making a

distribution from a nongrantor trust to a covered

expatriate under section 877A.

• You are a QI, withholding foreign partnership (WP),

withholding foreign trust (WT), participating foreign

Instructions for Form 1042 (2025)

financial institution (FFI), or reporting Model 1 FFI

making a claim for a collective refund under your

respective agreement with the IRS. See Regulations

section 1.1471-1(b)(114) for the definition of a

reporting Model 1 FFI.

Withholding Agent

A withholding agent is a U.S. or foreign person that has

control, receipt, custody, disposal, or payment of any item

of income of a foreign person that is subject to

withholding. A withholding agent may be an individual,

trust, estate, partnership, corporation, nominee,

government agency, association, or tax-exempt

foundation, whether domestic or foreign. For purposes of

chapter 4, a withholding agent includes a participating FFI

(PFFI) or registered deemed-compliant FFI (RDCFFI) to

the extent such FFI is required to withhold tax. See

Regulations section 1.1473-1(d) for the definition of a

withholding agent for purposes of chapter 4.

Liability for tax. As a withholding agent, you are

personally liable for any tax required to be withheld as well

as interest and any applicable penalties. A withholding

agent acting through an agent is liable for any failure of the

agent to deposit any tax required to be withheld and

deposited even if the agent is also a withholding agent

and is itself separately liable for the failure to comply with

the provisions of chapter 3 or 4.

For purposes of chapter 3, if you fail to withhold and the

foreign payee fails to satisfy its U.S. tax liability, then both

you and the foreign person are liable for tax, as well as

interest and any applicable penalties. The applicable tax

will be collected only once. If the foreign person satisfies

its U.S. tax liability, you are not liable for the tax but remain

liable for any interest and penalties for failure to withhold.

Intermediary

An intermediary is a person who acts as a custodian,

broker, nominee, or otherwise as an agent for another

person, regardless of whether that other person is the

beneficial owner of the amount paid, a flow-through entity,

or another intermediary.

QI. A QI is a foreign intermediary (or a QDD) that is a

party to a QI agreement with the IRS described in

Regulations section 1.1441-1(e)(5)(iii) or (e)(6). For

information on the QI agreement, go to IRS.gov/QISystem.

WP or WT. A WP or WT is a foreign partnership or trust

that has entered into a withholding agreement with the

IRS described in Regulations sections 1.1441-5(c)(2) and

(e)(5) in which it agrees to assume primary withholding

responsibility under chapters 3 and 4 for all payments that

are made to it for its direct partners, beneficiaries, or

owners.

Nonqualified intermediary (NQI). An NQI is any

intermediary that is not a U.S. person and that is not a QI.

Nonwithholding foreign partnership (NWP). An NWP

is a foreign partnership that is not a WP.

Nonwithholding foreign trust (NWT). An NWT is a

foreign trust that is a simple trust or grantor trust and is not

a WT.

Instructions for Form 1042 (2025)

QDD. A QDD is a QI that is an eligible entity that agrees

to assume the requirements of a QDD and the other

requirements in the QI agreement. Any applicable home

office or branch that seeks to be a QDD must qualify and

be approved for QDD status. A QDD must document itself

to a withholding agent with a Form W-8 IMY, Certificate of

Foreign Intermediary, Foreign Flow-Through Entity, or

Certain U.S. Branches for United States Tax Withholding

and Reporting, indicating that it is acting as a QDD for

payments with respect to potential section 871(m)

transactions and underlying securities that it receives in a

principal capacity, separately identify the home office or

branch as the recipient on a withholding statement (if

necessary), and indicate on the form that it will assume

primary chapters 3 and 4 withholding responsibilities and

primary Form 1099 reporting and backup withholding

responsibilities for certain payments it makes and receives

as a QDD, as well as including any other information

required by the QI agreement. See Regulations section

1.1441-1(e)(6) and the QI agreement in Rev. Proc.

2022-43 for more information. See also Notice 2022-37

and Notice 2024-44, described in Section 871(m)

transition, earlier.

Schedule Q (Form 1042). If the taxpayer, or any branch

of the taxpayer, is a QDD, the taxpayer must attach to

Form 1042 at least one Schedule Q (Form 1042), Tax

Liability of Qualified Derivatives Dealer (QDD), for each

QDD. See the Schedule Q (Form 1042) for additional

information.

Qualified securities lender (QSL). A QSL is an FFI

that is a bank, custodian, broker-dealer, or clearing

organization subject to regulatory supervision in its home

jurisdiction and that is:

1. Regularly engaged in the business of borrowing

securities of U.S. corporations and lending such

securities to unrelated customers; and

2. Subject to audit by the IRS under section 7602 or, in

the case of a QI, an external auditor.

For further information about requirements for QSL

status and the withholding requirements for substitute

dividend payments, see Notice 2010-46, 2010-24 I.R.B.

757, available at IRS.gov/irb/2010-24_IRB#NOT-2010-46.

While Notice 2010-46 is obsoleted, an entity may claim

QSL status and be treated as a recipient for substitute

dividend payments made before January 1, 2027. See

Notice 2022-37 and Notice 2024-44.

FFI. An FFI is a foreign entity described in Regulations

section 1.1471-5(d).

RDCFFI. An RDCFFI (as defined in Regulations section

1.1471-5(f)(1)) is an FFI that is deemed to satisfy the

requirements of section 1471(b). This includes a reporting

Model 1 FFI or branch of an FFI that is a reporting Model 1

FFI (see Regulations section 1.1471-1(b)(114) for the

definition of a reporting Model 1 FFI).

PFFI. A PFFI is an FFI that has agreed to satisfy the

obligations of an FFI agreement under chapter 4 with

respect to all of its branches of the FFI, other than a

branch that is a reporting Model 1 FFI or a U.S. branch.

This includes a reporting Model 2 FFI (that has entered

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into an FFI agreement with respect to a branch) and a QI

branch of a U.S. financial institution unless such branch is

a reporting Model 1 FFI.

Nonparticipating FFI. A nonparticipating FFI is an FFI

that is not a PFFI, deemed-compliant FFI, or exempt

beneficial owner.

Recalcitrant account holder. Generally, a recalcitrant

account holder is an account holder of a participating or

deemed-compliant FFI that failed to provide the

documentation required under chapter 4 to determine the

account holder’s status or to enable the FFI to report the

account as a U.S. account. See Regulations section

1.1471-5(g).

Passive nonfinancial foreign entity (NFFE). A passive

NFFE is a nonfinancial foreign entity other than an

excepted NFFE, including a WP, WT, QI, or direct

reporting NFFE. See Regulations sections 1.1471-1(b)

(80) and 1.1472-1(b).

Caution: For chapter 4 purposes, an intermediary must

provide its chapter 4 status to a withholding agent to

determine whether withholding applies to the payment.

Thus, a chapter 4 status must be provided for a

withholdable payment made to a foreign entity.

Where and When To File

Paper filing. Mail Form 1042 by the 15th day of the 3rd

month after the end of the calendar year (March 15) to:

Internal Revenue Service

P.O. Box 409101

Ogden, UT 84409

Note: If the due date falls on a Saturday, Sunday, or legal

holiday, file by the next business day.

Electronic filing. Electronic filing of Form 1042 is

required for a withholding agent that is a financial

institution. Additionally, electronic filing of Form 1042 is

required for withholding agents that are required to file 10

or more information returns, as described in Regulations

section 301.6011-2, during the year or that is a

partnership with more than 100 partners. For general

information about electronic filing, see Pub. 4163.

Extension of time to file. If you need more time to file

Form 1042, you may submit Form 7004, Application for

Automatic Extension of Time To File Certain Business

Income Tax, Information, and Other Returns.

Form 7004 does not extend the time for payment of tax.

Additional Information

Income Tax Withholding on Wages,

Pensions, Annuities, and Certain

Other Deferred Income

Use Form 941, Employer’s QUARTERLY Federal Tax

Return, to report income tax withheld and social security

and Medicare taxes on wages paid to a nonresident alien

employee.

Payments of pensions, annuities, and certain other

deferred income paid to a foreign person are subject to

withholding under section 1441 (rather than section

3405). Report these payments on Forms 1042 and

1042-S.

Use Schedule H (Form 1040), Household Employment

Taxes, to report income tax withheld and social security

and Medicare taxes on wages paid to a nonresident alien

household employee.

Election To Withhold Under Section

3406

If you are a PFFI that has made an election to withhold

under section 3406 instead of withholding under

chapter 4, use Form 945, Annual Return of Withheld

Federal Income Tax, to report tax withheld on a

withholdable payment that is also a reportable payment

made to any of your recalcitrant account holders that are

also U.S. nonexempt recipients subject to backup

withholding. Also, use Form 945 to report tax withheld on

a withholdable payment that is also a reportable payment

made to recalcitrant account holders of a PFFI or RDCFFI

that is an NQI, NWP, or NWT, or a QI that elects to be

withheld upon under section 1471(b)(3), and from whom

you received a withholding statement that indicates that

such FFI has elected for withholding under section 3406

to apply instead of withholding under chapter 4 with

respect to one or more recalcitrant account holders. See

Regulations sections 1.1471-4(b) and 1.1474-1(d)(4)(i)

(B). A withholding QI, WP, or WT that is an FFI should also

use Form 945 if it elects to withhold under section 3406 on

withholdable payments made to certain recalcitrant

account holders.

Deposit Requirements

You are required to use either the Electronic Federal Tax

Payment System (EFTPS) or IRS Direct Pay, discussed

later, to deposit the tax withheld and required to be shown

on Form 1042 (regardless of whether withholding was

applied under chapter 3 or 4 or with respect to a specified

federal procurement payment).

For details on the withholding of tax, see Pub. 515,

available at IRS.gov/Pub515.

Caution: To avoid a penalty, do not mail your deposits

directly to the IRS.

Need Assistance?

The amount of tax you are required to withhold

determines the frequency of your deposits. The following

rules explain how often deposits must be made.

If you need help completing Form 1042, call

267-941-1000 (not a toll-free number) from 6:00 a.m. to

11:00 p.m. Eastern time or write to:

Internal Revenue Service

International Accounts

Philadelphia, PA 19255-0725

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Note: If you are requesting an extension of time to file

using Form 7004, follow these rules to see if you must

make a deposit of any balance due or if you can pay it with

Form 7004. See Form 7004 and its instructions for more

information.

Instructions for Form 1042 (2025)

1. If at the end of any quarter-monthly period the total

amount of undeposited taxes is $2,000 or more, you

must deposit the taxes within 3 business days after

the end of the quarter-monthly period. (A

quarter-monthly period ends on the 7th, 15th, 22nd,

and last day of the month.) A business day is any day

other than a Saturday, Sunday, or legal holiday in the

District of Columbia.

2. If at the end of any month the total amount of

undeposited taxes is at least $200 but less than

$2,000, you must deposit the taxes within 15 days

after the end of the month. If you make a deposit of

$2,000 or more during any month except December

under rule 1, earlier, carry over any end-of-the-month

balance of less than $2,000 to the next month. If you

make a deposit of $2,000 or more during December,

any end-of-December balance of less than $2,000

should be remitted with your Form 1042 by March 15

of the following calendar year.

3. If at the end of a calendar year the total amount of

undeposited taxes is less than $200, you may either

pay the taxes with your Form 1042 or deposit the

entire amount by March 15 of the following year.

Electronic deposit requirement. You must make

electronic deposits of all depository tax liabilities using

EFTPS or IRS Direct Pay. If you fail to use EFTPS or IRS

Direct Pay, you may be subject to a 10% penalty. To enroll

in or get more information about EFTPS, call

800-555-4477 or go to EFTPS.gov. To contact EFTPS

using Telecommunications Relay Services (TRS) for

people who are deaf, hard of hearing, or have a speech

disability, dial 711 and then provide the TRS assistant the

EFTPS number above or 800-733-4829.

IRS Direct Pay is a free service that allows you to make

tax payments online directly from your bank account to the

IRS. For more information about IRS Direct Pay, go to

IRS.gov/DirectPay.

Depositing on time. For deposits made by EFTPS to

be on time, you must submit the deposit by 8 p.m. Eastern

time the day before the date the deposit is due. If you use

a third party to make deposits on your behalf, they may

have different cutoff times.

Same-day payment option. EFTPS accepts same-day

payments for business tax payments that meet the

following criteria.

1. Payment is $1 million or less.

2. Payment is submitted prior to 3:00 p.m. Eastern time

on a business day.

Business tax payments that do not meet the criteria

above must be scheduled at least one calendar day

before the tax due date by 8:00 p.m. Eastern time to reach

the IRS on time. On the date you select, the funds will be

moved to Treasury from your banking account, and your

records will be updated at the IRS.

Same-day wire payment option. If you fail to initiate a

deposit transaction on EFTPS by 8 p.m. Eastern time the

day before the date a deposit is due, you can still make

your deposit on time by using the Federal Tax Collection

Service (FTCS). If you ever need the same-day wire

Instructions for Form 1042 (2025)

payment method, you will need to make arrangements

with your financial institution ahead of time. Check with

your financial institution regarding availability, deadlines,

and costs. Your financial institution may charge you a fee

for payments made this way. To learn more about the

information you will need to provide to your financial

institution to make a same-day wire payment, go to

IRS.gov/SameDayWire to download the Same-Day Wire

Taxpayer Worksheet.

Note: All payments should be made in U.S. dollars.

Escrow procedure. See the instructions for lines 1

through 60, later, if you are using the escrow procedure

under Regulations section 1.1471-2(a)(5)(ii) or

1.1441-3(d) (and are not depositing the amount of tax

withheld with the IRS during the year). Under Regulations

section 1.1471-2(a)(5)(ii) or 1.1441-3(d), if a withholding

agent is not able to determine the portion of a payment

subject to withholding (for example, because it is unable

to determine the source of the income at the time of the

payment), a withholding agent can follow the escrow

procedures by withholding 30% on the entire payment and

depositing the amount withheld in an escrow account

instead of depositing such amounts with the IRS. With

respect to such payment, the withholding will be due the

earlier of the date a determination is made with respect to

the amount subject to withholding or 1 year from the date

the amount is placed in escrow. To the extent that

withholding is not required, the escrowed amount must be

repaid to the payee.

Note: Generally, an amount placed in escrow during 1

calendar year will be reported on a Form 1042 the

following year.

Deposits made during subsequent year. If you are

making a deposit of tax withheld in the year following the

calendar year in which the related payment was made (to

the extent permitted under an applicable regulation

section in chapter 3 or 4), you must designate the deposit

at the time that it is made as attributable to the calendar

year in which the payment was made. In such a case, you

should report the tax paid on line 65b.

For example, if a REIT declares a dividend to

shareholders of record in October, November, or

December of 2025, but pays the dividend in January of

2026, under section 857(b)(9), the dividend is treated as

having been paid by the REIT and received by each

shareholder on December 31, 2025. If the REIT chooses

to withhold when it pays the dividend in January of 2026

(pursuant to the procedures for adjusting

underwithholding in Regulations section 1.1461-2(b) or

1.1474-2(b)), it should report the liability with respect to

the distribution on its 2025 Form 1042 and should

designate the deposit of such tax as being made for 2025

(if the deposit is made by March 16, 2026).

Additionally, under proposed regulations (83 FR

64757), a partnership or trust that is permitted to withhold

in a subsequent year with respect to a foreign partner’s or

beneficiary’s share of income may designate the deposits

of the withholding as attributable to the preceding

calendar year. See Foreign partners of U.S. partnerships

and foreign beneficiaries of U.S. trusts, later.

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Interest and Penalties

If you file Form 1042 late, or fail to pay or deposit the tax

when due, you may be liable for penalties and interest

unless you can show that the failure to file or pay was due

to reasonable cause and not willful neglect.

Tip: You do not have to figure the amount of any interest

or penalties you may owe. Because figuring these

amounts can be complicated, the IRS will do it for you and

send you a bill for any amount due.

If you include interest or penalties with your payment,

identify and enter the amount in the bottom margin of

Form 1042. Do not include interest or penalties in the

balance due on line 69.

Interest. Interest is charged on taxes not paid by the due

date, even if an extension of time to file is granted. Interest

is also charged on penalties imposed for failure to file,

negligence, fraud, and substantial understatements of tax

from the due date (including extensions) to the date of

payment. Interest is figured at a rate determined under

section 6621.

Late filing of Form 1042. The penalty for not filing Form

1042 when due (including extensions) is 5% of the unpaid

tax for each month or part of a month the return is late, up

to a maximum of 25% of the unpaid tax.

Late payment of tax. The penalty for not paying tax

when due is usually one-half of 1% of the unpaid tax for

each month or part of a month the tax is unpaid. The

penalty cannot exceed 25% of the unpaid tax.

Other penalties. Penalties may be imposed for

negligence, substantial understatement of tax, and fraud.

See sections 6662 and 6663.

Avoid Common Errors

To ensure that your Form 1042 can be correctly

processed, be sure that you do the following.

• Carefully read the information provided in Pub. 515

and these instructions.

• Complete all required information for the withholding

agent including the withholding agent’s name,

address, chapter 3 and chapter 4 status codes, and

the EIN, QI-EIN, WP-EIN, or WT-EIN. Note that you

must include the withholding agent’s chapter 3

and chapter 4 status codes regardless of the

types of payments being reported on Form 1042.

• Ensure that the correct EIN is provided. If you are filing

Form 1042 as a QI, WP, or WT, enter your QI-EIN, WPEIN, or WT-EIN.

• Lines 1 through 60, Record of Federal Tax Liability,

must show the federal tax liability for payments made

during the applicable quarter-monthly period. This

section reports the tax liability, not the tax deposited

by the withholding agent.

• The sum of the monthly totals in Section 1 (lines 5, 10,

15, 20, 25, 30, 35, 40, 45, 50, 55, and 60) must match

the amount of total tax liability reported on lines 64b,

64c, and 64d.

• Do not include amounts reported as adjustments on

line 64a in the Record of Federal Tax Liability (lines 1

through 60).

6

• You must designate the tax liability as either a

chapter 3 tax liability or a chapter 4 tax liability. Report

the portion of the tax liability for the calendar year that

is a chapter 3 tax liability on line 64b. Report the

portion of the tax liability for the calendar year that is a

chapter 4 tax liability on line 64c.

• You must complete Section 2—Reconciliation of

Payments of U.S. Source FDAP Income. Section 2

must be completed even if you have not withheld any

amounts under chapter 4.

Specific Instructions

Caution: File only one Form 1042 consolidating all Form

1042-S recipient information for both chapter 3 and 4

purposes regardless of the number of different clients,

branches, divisions, or types of income for which you are

the withholding agent. However, if you are acting in more

than one capacity (for example, you are acting as a QI for

certain designated accounts and as an NQI for other

accounts), file a separate Form 1042 for each capacity in

which you are acting.

A U.S. branch of a PFFI that is required to report

amounts under chapter 4 must file a separate Form 1042.

Rounding off to whole dollars. You must round off

cents to whole dollars. To round off amounts to the

nearest dollar, drop amounts under 50 cents and increase

amounts from 50 to 99 cents to the next dollar. For

example, $1.39 becomes $1 and $2.50 becomes $3. If

you have to add two or more amounts to figure the amount

to enter on a line, include cents when adding and only

round off the total.

Employer identification number (EIN). You are

required to enter your EIN. If you are filing Form 1042 as a

QI, WP, or WT, enter your QI-EIN, WP-EIN, or WT-EIN.

If you are a QSL that is also a QI, enter your QI-EIN.

Otherwise, enter the EIN you have been assigned.

If you are, for chapter 4 purposes, a PFFI or other

financial institution that has been issued a global

intermediary identification number (GIIN) for chapter 4

reporting purposes, you must nevertheless get an EIN to

file Form 1042 (or use your existing EIN, such as a QI-EIN

in the case of a QI if filing in such capacity).

If you are a PFFI or other financial institution filing this

form on behalf of a branch other than your U.S. branch,

you cannot use the EIN of the U.S. branch to file this form

and you must get a separate EIN to file this form on behalf

of all your branches other than your U.S. branch.

If you do not have an EIN, go to IRS.gov/EIN for

information on how to apply. File amended Forms 1042-S

when you receive your EIN.

To get a QI-EIN, WP-EIN, or WT-EIN, submit Form

SS-4, Application for Employer Identification Number, with

your application for that status with the Qualified

Intermediary, Withholding Foreign Partnership,

Withholding Foreign Trust Application and Accounts

Management System (QAAMS) at IRS.gov/QISystem. Do

not send an application for a QI-EIN, WP-EIN, or WT-EIN

to the addresses listed in the Instructions for Form SS-4.

For questions regarding the QI application process,

Instructions for Form 1042 (2025)

contact the Foreign Intermediaries Program at

lbi.fi.qiwpissues@irs.gov.

you are not reporting any negative amounts on lines 1

through 60. See Adjustment for Overwithholding, later.

Address. Include the suite, room, or other unit number

after the street address. If your post office does not deliver

mail to the street address and you have a P.O. box, show

the box number instead of the street address. Enter the

country code from the list at IRS.gov/CountryCodes.

Caution: Lines 1 through 60 must show the withholding

agent’s record of federal tax liability for payments made

during the applicable quarter-monthly period. Withholding

agents should report the tax liability for each period,

rather than the amount of tax actually deposited with the

IRS. As such, the sum of lines 5, 10, 15, 20, 25, 30, 35,

40, 45, 50, 55, and 60 should be reported on lines

64b through 64d, as applicable (see the instructions

for lines 64b through 64d, later).

Chapter 3 and 4 status codes of withholding agent.

Enter your chapter 3 and chapter 4 status codes from the

list of “Type of Recipient, Withholding Agent, Payer, or

Intermediary Code” on Form 1042-S. You must enter both

a chapter 3 and a chapter 4 withholding agent status code

regardless of the type of payment being made. See pages

2 and 3 of these Form 1042 instructions for definitions of

intermediary, qualified intermediary (QI), withholding

foreign partnership (WP), withholding foreign trust (WT),

nonqualified intermediary (NQI), qualified securities

lender (QSL), participating FFI (PFFI), and registered

deemed-compliant FFI (RDCFFI). See the Form 1042-S

instructions for definitions of U.S. branch of a PFFI or

RDCFFI treated as a U.S. person, territory financial

institution (FI) treated as a U.S. person, and flow-through

entity.

Caution: Withholding agents should use the applicable

code that is most specific to your status (for example,

chapter 3 status code 12 (qualified intermediary)).

Withholding agents are to use specified chapter 4

status codes on Forms 1042-S for payments made. See

the 2025 Instructions for Form 1042-S. A U.S. financial

institution should continue to use its own withholding

agent chapter 4 status code (code 01) for purposes of

completing Form 1042 if there are any payments made by

the U.S. home office reflected on the form. Otherwise, use

chapter 4 status code 50 (U.S. withholding agent—foreign

branch of FI) unless a more specific status code applies

(for example, chapter 4 status code 07 (registered

deemed-compliant FFI—reporting Model 1 FFI)).

A QI that is a QDD should use the withholding agent

chapter 3 status code for a QI (code 12) for purposes of

filing its Form 1042, regardless of the types of payments it

made for the calendar year. However, a QI that is a QDD

should use the withholding agent chapter 3 status code

for a QDD (code 35) for purposes of reporting on Form

1042-S a payment that it made in its capacity as a QDD.

Section 1—Record of Federal Tax

Liability

Lines 1 through 60. Except as otherwise provided in

these instructions, include the tax liability for the period in

which the income was paid or distributed regardless of

whether the liability is under chapter 3 or 4 and regardless

of whether the liability was satisfied through withholding or

was paid by the withholding agent (see the instructions for

box 11 of Form 1042-S). Do not enter any negative

amounts on these lines. If you are required to report a

reduction to liability on line 59 (because you made a

repayment under the reimbursement or set-off procedure),

and this results in a negative amount of tax liability for the

period corresponding to line 59, you should instead report

any negative amount for the next earlier period(s) so that

Instructions for Form 1042 (2025)

Caution: Withholding and depositing of tax is not

required under both chapters 3 and 4 for the same

payment. In the case of a payment for which withholding is

required under chapters 3 and 4, a withholding agent may

credit the withholding applied under chapter 4 against its

liability for any tax due under section 1441, 1442, or 1443.

For a payment subject to withholding under section 1445

or 1446, withholding under chapter 4 does not apply.

Foreign partners of U.S. partnerships and foreign

beneficiaries of U.S. trusts. To the extent that a

domestic partnership has not distributed a foreign

partner’s distributive share of income subject to

withholding under section 1441, 1442, or 1443, or under

chapter 4, it should not include any tax liability on lines 1

through 60 for tax relating to the partner’s distributive

share in the year the partnership earns the income,

subject to Regulations section 1.1441-2(e)(7) for certain

amounts with respect to section 871(m) transactions and

the rule for QDDs in the QI agreement. For distributive

shares not actually distributed, the partnership must

include any tax liability on lines 1 through 60 of the Form

1042 for the following year. Include the tax liability on the

line that represents the earlier of the following dates.

• The date on which the Schedule K-1 (Form 1065),

Partner’s Share of Income, Deductions, Credits, etc.,

is sent or otherwise furnished to the foreign partner.

• The due date for furnishing Schedule K-1 (Form 1065)

to the partner.

Include such tax liability for the period that includes the

date the tax was required to be withheld. See Regulations

section 1.1441-5(b)(2)(i)(A).

A domestic trust should report on lines 1 through 60 in

the same manner as a U.S. partnership to the extent that it

is required to distribute, but has not actually distributed, a

foreign beneficiary’s share of distributable net income

subject to withholding under section 1441, 1442, or 1443,

or under chapter 4, before the date (without extensions)

on which the income is required to be reported on Form

1042-S. See Regulations section 1.1441-5(b)(2)(ii).

Example. In 2025, USP, a U.S. partnership, has

foreign partners that are individuals and for which it has

obtained valid documentation to establish their foreign

status. The withholding tax under section 1441 relating to

the distributive shares of the foreign partners was $120.

USP made no distributions in 2025. On the 2025 Form

1042, USP did not enter any amount as tax liability on

lines 1 through 60 because it did not distribute any

amounts.

7

USP made a distribution on February 11, 2026, that

related to the 2025 distributive shares of the foreign

partners. USP withheld $100 at the time of the distribution.

USP sent the 2025 Schedules K-1 (Form 1065) to its

partners on April 2, 2026.

On the 2026 Form 1042, USP entered $100 on line 7.

This is the tax liability for the period (February 8 through

15) during which it made a distribution. USP entered $20

on line 16. This is the tax liability for the period (April 1

through 7) during which it furnished the Schedules K-1

(Form 1065) to the partners.

Tip: For other than a PTP, use Form 8804, Annual Return

for Partnership Withholding Tax (Section 1446), to report

withholding tax liability on the partnership’s income

effectively connected with a U.S. trade or business.

Note: For rules that apply to withholding on section

871(m) transactions, see Regulations section 1.1441-2(e).

For rules that apply to withholding by QDDs, see the QI

agreement.

Withholding and reporting in a subsequent year.

Proposed regulations issued on December 18, 2018 (83

FR 64757), would allow partnerships or trusts that are

permitted to withhold in a subsequent year with respect to

a foreign partner’s or beneficiary’s share of income for the

prior year to designate the deposit of the withholding as

attributable to the preceding year. In such a case, the

partnership or trust will be required to report the

associated amount and tax withheld on Forms 1042 and

1042-S for the preceding year. If a partnership withholds

on a foreign partner’s share of income after March 15 of

the subsequent year, the due date for filing the applicable

Form(s) 1042-S is September 15 of the subsequent year.

For example, if a partnership withholds on April 1, 2026,

with respect to a foreign partner’s share of undistributed

income for the 2025 calendar year, the partnership may

designate the deposit as made for 2025 and report the

liability and tax withheld on the 2025 Form 1042 and the

2025 Form 1042-S for the partner. The partnership or trust

must also ensure that its chapter 3 status code properly

reflects its status as a partnership or trust (including as a

WP or WT). The associated liability should be reported on

line 59, with the share of income to the partner or

beneficiary reported on line 62, and the amount withheld

reported on line 65b.

Note: Reporting in the preceding year is also permitted

when a partnership or trust allocates a share of income

allocable to a partner or beneficiary attributable to the

preceding year that was not distributed during that year,

provided that the partnership meets the previously

referenced due date of September 15, 2026, for the

applicable Form(s) 1042-S.

Note: A U.S. partnership or trust may rely on the

proposed regulations for 2025 in lieu of the reporting

described earlier. See Foreign partners of U.S.

partnerships and foreign beneficiaries of U.S. trusts,

earlier. The proposed regulations may also be applied by

a foreign partnership or trust that itself withholds as

described above.

8

Note: For rules that apply for WPs and WTs, see Rev.

Proc. 2017-21, 2017-6 I.R.B. 791, available at IRS.gov/irb/

2017-06_IRB#RP-2017-21.

Corporate distributions. Do not include on lines 1

through 60 any tax liability caused by adjustments of

underwithheld tax on corporate distributions made in

calendar year 2025 if the following apply.

• The distributing corporation made a reasonable

estimate of accumulated and current earnings and

profits under Regulations section 1.1441-3(c)(2)(ii)(A)

or 1.1474-6(c)(2)(ii).

• The distributing corporation or intermediary

immediately paid over the underwithheld tax by March

16, 2026.

Instead, include these payments of underwithheld tax

on line 64a.

Excise tax on specified federal procurement payments. Section 5000C imposes a 2% tax on any foreign

person that receives a specified federal procurement

payment. Include on lines 1 through 60 any withholding

obligation under section 5000C with respect to specified

federal procurement payments. Report the amount on the

line that corresponds with the date the deposit was due.

Specified federal procurement payment. A

“specified federal procurement payment” means any

payment made pursuant to a contract with the U.S.

Government entered into after January 1, 2011, for the

provision of goods, if such goods are manufactured or

produced in any country which is not a party to an

international procurement agreement with the United

States, or the provision of services, if such services are

provided in any country which is not a party to an

international procurement agreement with the United

States.

QIs with no primary chapters 3 and 4 withholding responsibility. If you are a QI that did not assume primary

withholding responsibility under both chapters 3 (including

sections 1446(a) and (f)) and 4, enter the total amount of

the tax liability of U.S. withholding agent(s) under both

chapters 3 and 4 on line 59. Report all other amounts on

the line that corresponds with the date the liability was

incurred.

Note: Reporting on line 59 as described above also

applies to any other entity that reports on Form 1042 to

the extent such entity claims a credit on line 67 for

amounts withheld by another withholding agent (whether

under chapter 3 or 4).

Adjustments to withholding. If you used procedures for

adjusting overwithholding or underwithholding, see

Adjustment for Overwithholding and Adjustment for

Underwithholding, later, for instructions on reporting on

lines 1 through 60.

Escrow procedure. A withholding agent that withheld

tax during calendar year 2025 and that was not required to

deposit with the IRS the amount of tax withheld during

calendar year 2025 pursuant to the escrow procedure

under Regulations section 1.1471-2(a)(5)(ii) or

1.1441-3(d) should not report such amount as a liability on

lines 1 through 60 or lines 64a through 64d and should not

report such amount as withheld on lines 63a through 63d.

Instructions for Form 1042 (2025)

An amount held in escrow is required to be reported on

the future calendar-year return for the year in which the

withholding agent is required to deposit the amount of tax

with the IRS.

Withholding after the time of payment. In limited

cases, the regulations under chapters 3 and 4 allow you to

withhold after the time that a payment has been made. In

such a case, you should include the tax liability for the

period in which you actually withheld with respect to the

payment. If you withheld in the year following the calendar

year in which the payment was made, include the tax

liability relating to the payment on line 59 for the year you

made the payment. For example, if a deemed distribution

under section 305(c) is made on August 15, 2025, but you

are not required to withhold with respect to the deemed

distribution until a subsequent payment of interest is made

on February 15, 2026 (see Proposed Regulations section

1.1441-2(d)(4)), report the tax liability related to the

deemed distribution on line 59.

You should report on line 63c(2) the amounts you

withheld in the following calendar year in which the

payment was made. You should also report deposits of

amounts withheld in the year following the calendar year in

which the payment was made on line 65b.

Line 61. Enter the number of Forms 1042-S filed on

paper and electronically.

Total Gross Amounts Reported

Lines 62a through 62c. Enter the amounts reported on

all Forms 1042-S for the calendar year (regardless of

whether the form was filed electronically or on paper) and

for all Forms 1000, Ownership Certificate.

Caution: Be sure to reconcile amounts on Form 1042

with amounts on Forms 1042-S (including Forms 1042-S

filed electronically) to avoid unnecessary correspondence

with the IRS.

Line 62a. The amount on line 62a should equal the

sum of all amounts shown in box 2 of Form 1042-S that

are payments of U.S. source Fixed, Determinable, Annual,

or Periodical (FDAP) income, less the sum of all amounts

that are U.S. source substitute payments reported on

line 62b.

Line 62b. The amount on:

• Line 62b(1) should equal the sum of all amounts

shown in box 2 of Form 1042-S that are U.S. source

substitute dividend payments, and

• The amount shown on line 62b(2) should equal all

amounts shown in box 2 of Form 1042-S that are U.S.

source substitute payments other than substitute

dividend payments.

See Regulations section 1.1441-2(b)(4) regarding

substitute payments.

Line 62c. The amount on line 62c should equal the

sum of all amounts of U.S. source FDAP income shown in

box 2 of Form 1042-S and all amounts shown as gross

interest paid on Forms 1000.

Line 62d. Enter gross amounts of U.S. source FDAP

income reportable on Forms 1000 and Forms 1042-S if

different from the total gross amounts actually reported on

Forms 1000 and Forms 1042-S (as shown on line 62c).

Instructions for Form 1042 (2025)

Total Tax Reported as Withheld or Paid

Lines 63a through 63e. Except as noted directly below,

enter for each line the amounts reported for all Forms

1042-S (regardless of whether the form was filed

electronically or on paper) and for all Forms 1000.

Line 63a. The amounts reported on line 63a should be

the amounts actually withheld by the withholding agent

before any applicable adjustments reported on lines

63c(1) and 63c(2).

Line 63c(1). The amounts reported on line 63c(1)

should be amounts you repaid to the beneficial owner or

payee in the year following the calendar year of

overwithholding pursuant to either the reimbursement or

set-off procedure (and should also be reported as a

reduction in tax liability on line 59). See Adjustment for

Overwithholding, later. The total of the amounts reported

on line 63c(1) should equal the sum of all amounts

reported in box 9 of the corresponding Forms 1042-S.

Line 63c(2). The amounts reported on line 63c(2)

should be amounts that you withheld in the year following

the calendar year of underwithholding from future

payments made to a beneficial owner or from other

property or additional contributions of a beneficial owner

that you hold in custody or otherwise control. See

Adjustment for Underwithholding, later. Also report on

line 63c(2) any other amounts that you withheld in the year

following the calendar year in which the related payments

were made (to the extent permitted under an applicable

regulation section in chapter 3 or 4). See Withholding after

the time of payment, earlier, for how to report the tax

liability related to such payments.

Note: The total of the amounts reported on lines 63a and

63c(2) should equal the sum of all amounts withheld by

the withholding agent and reported in box 7a of the

corresponding Forms 1042-S.

Note: The total of the amounts reported on lines 63b(1)

and 63b(2) should equal the sum of all amounts reported

in box 8 of all Forms 1042-S sent to recipients.

Line 63d. The amounts reported on line 63d should be

the amounts paid by the withholding agent from its own

funds rather than through withholding from the payment to

the recipient. The amount on line 63d should equal the

sum of all amounts reported in box 11 of all Forms 1042-S

sent to recipients.

Note: Amounts withheld and held in escrow (and not

deposited with the IRS) pursuant to the escrow procedure

under Regulations section 1.1471-2(a)(5)(ii) or 1.14413(d) are not reported on lines 63a through 63d until the

year they are deposited with the IRS. See the instructions

for lines 1 through 60, earlier. Therefore, amounts that are

reported as held in escrow (see box 7b of Form 1042-S)

are not taken into account for purposes of reconciling lines

63a through 63d with the corresponding Forms 1042-S.

Total Net Tax Liability

Line 64a. Include on line 64a any adjustments to total net

tax liability. For example, report any adjustment to liability

when:

• A distributing corporation made a reasonable estimate

of accumulated and current earnings and profits under

9

Regulations section 1.1441-3(c)(2)(ii)(A) or

1.1474-6(c)(2)(ii); and

• A distributing corporation or intermediary paid over

any underwithheld tax with respect to the distribution

by March 16, 2026.

Note: The amount reported on line 64a must not be

included in the Record of Federal Tax Liability (lines 1

through 60).

Lines 64b and 64c. Enter the sum of the amounts

reported on the Record of Federal Tax Liability (that is, the

sum of lines 5, 10, 15, 20, 25, 30, 35, 40, 45, 50, 55, and

60) that are attributable to liability under chapter 3 (on

line 64b) and chapter 4 (on line 64c). The amounts shown

on lines 64b and 64c should not include any amounts

shown on lines 64a and 64d. Do not make any other

adjustments to this line.

another withholding agent on substitute dividends paid in

a series of stock loans or stock repurchase agreements.

See FAQ 26 under the General compliance section of

FATCA - FAQs general.

Line 69. If you have a balance due, the IRS recommends

paying electronically whenever possible. Go to IRS.gov/

Payments to see all your payment options.

Lines 70a and 70b. Enter on line 70a any overpayment

attributable to payments subject to withholding under

chapters 3 and 4. Enter on line 70b any overpayment

attributable to payments subject to the excise tax on

specified federal procurement payments. Do not include

on these lines any overpayment attributable to amounts

that were actually withheld from the beneficial owner

(unless such amounts were repaid pursuant to the

reimbursement or set-off procedure).

Line 64d. Enter on line 64d amounts reported on the

Record of Federal Tax Liability that are attributable to

liability for specified federal procurement payments under

section 5000C.

Overpayment credit. If you are claiming the credit,

check the appropriate box on line 71a. If you claim a

credit, it can reduce your required deposits of withheld tax

for 2026.

Line 64e. The amount on line 64e should equal the sum

of lines 64a through 64d.

Note: If you repaid the recipient overwithheld amounts

after year-end 2025 using the reimbursement or set-off

procedure, you are not able to claim a refund for such an

amount on the 2025 Form 1042. Instead, you must

indicate on line 71a that you are claiming a credit to be

applied to the 2026 calendar year. See Adjustment for

Overwithholding, later.

Reporting of Taxes Paid and Overpayment or

Balance Due

Line 65. Enter the total tax deposits you made for the

year (including amounts paid with an extension of time to

file). Enter deposits of tax withheld during the calendar

year in which the related payment was made on line 65a.

Enter deposits of tax withheld during the year following the

calendar year in which the related payment was made (to

the extent permitted under an applicable regulation

section in chapter 3 or 4) on line 65b. See Withholding

and reporting in a subsequent year, earlier.

Line 66. Enter any overpayment reported on the 2024

Form 1042 that you are applying as a credit on the 2025

Form 1042. See Lines 71b through 71d, later.

Line 67. You are permitted to take a credit for amounts

withheld by other withholding agents that relate to the total

net tax liability reported on lines 64b and 64c. For

example, you are a QI and the amount you entered on

line 64b includes amounts withheld by a U.S. withholding

agent under chapter 3 with respect to payments made to

you as an intermediary on behalf of your account holders.

You may take a credit on line 67 for the amounts that were

withheld by the U.S. withholding agent. The amount on

line 67 should equal the sum of box 8 of all Forms 1042-S

that you file for the year.

All withholding agents (including QIs, WPs, WTs, NQIs,

NWPs, and NWTs) must substantiate entries on lines 67a

and 67b by attaching a supporting Form(s) 1042-S or

1099 to verify the credit amounts claimed for withholding

by other withholding agents. Failure to do so will result in

the denial of the refund or credit being claimed. If you are

a PTP or a nominee withholding under section 1446, the

tax paid for a payee may only be claimed as a credit by the

payee.

However, a withholding agent (including a QSL) may

not claim on line 67b a credit for prior withholding by

10

Line 71a. You may claim an overpayment (the sum of

lines 70a and 70b) as a refund or a credit.

Lines 71b through 71d. Direct deposit of refund. If

you elect to have the refund directly deposited into your

checking or savings account at any U.S. bank or other

financial institution instead of having a check sent to you,

complete lines 71b through 71d.

Line 71b. The routing number must be nine digits.

Line 71c. Check the appropriate box for the type of

account. Do not check more than one box. If unknown,

leave blank.

Line 71d. The account number can be up to 17

characters (both numbers and letters). Include hyphens

but omit spaces and special symbols. Enter the number

from left to right and leave any unused boxes blank.

Adjustment for Overwithholding

What to do if you overwithheld tax depends on when you

discover the overwithholding.

Overwithholding discovered by March 15 of the following calendar year. If you discover that you

overwithheld tax by March 15 of the following calendar

year, you may use any undeposited amount of tax to make

any necessary adjustments between you and the recipient

of the income before you make a deposit. Repay the

recipient and reduce the amount of your total deposit.

Report the reduced tax liability on lines 1 through 60 for

the period(s) for which you repaid the overwithheld tax.

If the undeposited amount is not enough to make any

adjustments, or if you discover the overwithholding after

the entire amount of tax has been deposited, you can use

Instructions for Form 1042 (2025)

either the reimbursement or set-off procedure to adjust the

overwithholding.

Tip: If March 15 is a Saturday, Sunday, or legal holiday,

the next business day is the final date for these actions.

Reimbursement procedure. Under the

reimbursement procedure, you repay the beneficial owner

or payee the amount overwithheld. You use your own

funds for this repayment and may reimburse yourself for

an amount repaid by reducing the amount of any

subsequent deposit of tax made during the calendar year

or the subsequent calendar year. You must make the

repayment by the earlier of:

• The date you actually file Form 1042-S for the

calendar year in which the amount was overwithheld;

or

• The due date for filing Form 1042-S for the calendar

year (generally, March 15 of the year after the

calendar year in which the amount is overwithheld).

The reimbursement amount may not be more than the

amount you actually repaid. The amount of the reduced

tax liability for amounts repaid to the beneficial owner or

payee during the calendar year must be reflected on the

line for the period you reduced your liability. The amount

reported on line 59 for the calendar year for which you

overwithheld tax must reflect the amount of the reduced

tax liability for amounts you repaid the beneficial owner or

payee in the subsequent calendar year, if applicable.

Amounts reported on line 63c(1) should be limited to

amounts repaid to the beneficial owner or payee in the

subsequent calendar year (before the earlier of the filing of

the associated Form 1042-S or the due date for such

form). On line 71a, indicate that you are claiming a credit

to be applied in the 2026 calendar year for amounts you

repay the beneficial owner or payee in the subsequent

calendar year (note that you may not claim a refund for

such an amount).

For example, if you overwithhold tax in 2025, you must

repay the beneficial owner by March 16, 2026 (or the date

on which you filed the associated Form 1042-S with the

IRS, if earlier). You must keep a receipt showing the date

and amount of the repayment and provide a copy of the

receipt to the beneficial owner if you repaid the beneficial

owner. If you repaid the beneficial owner after year-end

2025, you must report the repayment on line 63c(1). You

must reduce your federal tax liability on line 59 of your

2025 Form 1042 by the amount of the repayment and

claim a credit on line 71a for the difference between your

tax liability and your deposits with the IRS. You may

reimburse yourself by reducing any subsequent deposits

you make before the end of calendar year 2026 (the year

after the calendar year in which the amount was

overwithheld).

Set-off procedure. Under the set-off procedure, you

repay the beneficial owner or payee the amount

overwithheld by reducing the amount you would have

been required to withhold on later payments you make to

that person but only if made before the earlier of:

• The date you actually file Form 1042-S for the

calendar year in which the amount was overwithheld;

or

Instructions for Form 1042 (2025)

• The due date for filing Form 1042-S for the calendar

year (generally, March 15 of the year after the

calendar year in which the amount is overwithheld).

The reductions that you applied pursuant to the set-off

procedure during the calendar year must be reflected on

the line for the period you reduced your liability. The

amount reported on line 59 for the calendar year for which

you overwithheld tax must reflect reductions that you

applied pursuant to the set-off procedure during the

subsequent calendar year, if applicable. Amounts

reported on line 63c(1) should be limited to amounts

repaid to the beneficial owner or payee (by reducing the

withholding on a later payment) in the subsequent

calendar year (before the earlier of the filing of the

associated Form 1042-S or the due date for such form).

On line 71a, indicate that you are claiming a credit to be

applied to the 2026 calendar year for amounts you set off

in the subsequent calendar year (note that you may not

claim a refund for such an amount).

For 2025, a withholding agent may rely on proposed

regulations (83 FR 64757), which allow adjustments to

overwithholding using the reimbursement or set-off

procedure until the extended due date for filing Form

1042-S (unless a Form 1042-S has already been filed with

the IRS or furnished to the recipient). A withholding agent

may also use the extended due date for filing Form 1042

to claim a credit for any adjustments to overwithholding.

Overwithholding discovered at a later date. If you

discover after March 15 of the following calendar year that

you overwithheld tax for the prior year, do not adjust the

amount of tax liability reported on Form 1042 or on any

deposit or payment for that prior year. Do not repay the

beneficial owner or payee the amount overwithheld unless

you are a QI, WP, WT, PFFI, or reporting Model 1 FFI

making a claim for a collective refund under your

respective agreement with the IRS. See Regulations

section 1.1471-1(b)(114) for the definition of a reporting

Model 1 FFI.

In this situation, the recipient will have to file a U.S.

income tax return (Form 1040-NR or Form 1120-F) or, if a

tax return has already been filed, a claim for refund (Form

1040-X or amended Form 1120-F) to recover the amount

overwithheld.

Adjustment for Underwithholding

Under the procedures for adjusting underwithholding (see

Regulations sections 1.1461-2(b) and 1.1474-2(b)), you

may withhold from future payments made to a beneficial

owner the tax that should have been withheld, or satisfy

the tax from property or additional contributions of the

beneficial owner that you hold in custody or otherwise

control, before the date (without extensions) that the Form

1042 is required to be filed. You should report the liability

related to such withholding on lines 1 through 60 for the

period during the year in which you adjusted

underwithholding by withholding additional tax. If you

adjust underwithholding by withholding in the year

following the calendar year of underwithholding, you

should report the increased liability on line 59 for the year

in which the underwithholding occurred. Amounts

reported on line 63c(2) should be limited to amounts

withheld in the year following the calendar year of

11

underwithholding (before the date that the Form 1042 is

required to be filed without extensions). You should report

deposits of amounts withheld in the year following the

calendar year of underwithholding pursuant to these

procedures on line 65b. See Deposits made during

subsequent year, earlier, for how to designate such

deposits as attributable to the year of underwithholding.

Section 2—Reconciliation of U.S.

Source FDAP Income

This section is used by the withholding agent to reconcile

the amount of U.S. source FDAP income reportable under

chapter 4 and paid by the withholding agent during the

calendar year with the total amount of U.S. source FDAP

income reported on all Forms 1042-S filed by the

withholding agent for the calendar year (including

amounts reported under both chapter 3 and chapter 4).

You must complete this section even if you did not make

any payments subject to chapter 4 withholding during the

calendar year. This section also allows reporting of the

amounts of U.S. source FDAP income for which chapter 4

withholding is required and reporting of the amounts for

which withholding is not required according to the

exemption from chapter 4 withholding applicable to each

such amount.

Note: The amounts of U.S. source FDAP income

reportable for chapter 4 are:

• Payments of U.S. source FDAP income for which

withholding under chapter 4 was applied to the

payment, plus

• Payments of U.S. source FDAP income for which

withholding under chapter 4 was not required but that

are subject to reporting for chapter 3 purposes on

Forms 1042-S.

Line 1. Enter the amounts of U.S. source FDAP income

required to be withheld upon under chapter 4, including

amounts withheld upon but for which no deposit has been

made under an escrow procedure.

Line 2. Enter amounts of U.S. source FDAP income not

required to be withheld upon under chapter 4 on lines 2a

through 2d according to the exception to withholding that

applied to each payment reportable on Form 1042-S. The

amount on line 2e should equal the sum of lines 2a

through 2d.

Line 2a. Enter the amounts of U.S. source FDAP

income that are withholdable payments, but for which the

withholding agent has obtained documentation that

establishes a chapter 4 status that does not require

withholding under chapter 4 (for example, PFFI).

The amount reported on this line should generally

equal the aggregate amount reported in box 2 of all of the

Forms 1042-S you filed for the calendar year for which the

following chapter 4 exemption codes were reported in

box 4a.

• Code 15 (payee not subject to chapter 4 withholding).

• Code 17 (foreign entity that assumes primary

withholding responsibility).

• Code 18 (U.S. payees of participating FFI or

registered deemed-compliant FFI).

• Code 19 (exempt from withholding under IGA).

• Code 20 (dormant account).

12

• Code 21 (other payment not subject to chapter 4

withholding).

Line 2b. Enter the amounts of U.S. source FDAP

income that are not withholdable payments because they

are nonfinancial type payments (for example, royalties,

services, rents). The amount reported on this line should

generally equal the aggregate amount reported in box 2 of

all of the Forms 1042-S you filed for the calendar year for

which exemption code 16 (excluded nonfinancial

payment) was included in box 4a.

Line 2c. Enter the amounts of U.S. source FDAP

income that are not withholdable payments because they

are payments related to grandfathered obligations (for

example, obligations outstanding on July 1, 2014). See

Regulations section 1.1471-2(b). The amount reported on

this line should generally equal the aggregate amount

reported in box 2 of all of the Forms 1042-S you filed for

the calendar year for which exemption code 13

(grandfathered payment) was included in box 4a.

Line 2d. Enter the amounts of U.S. source FDAP

income that are not withholdable payments because they

are payments of effectively connected income (ECI). The

amount reported on this line should generally equal the

aggregate amount reported in box 2 of all of the Forms

1042-S you filed for the calendar year for which exemption

code 14 (effectively connected income) was included in

box 4a.

Line 2e. Enter the sum of all amounts of U.S. source

FDAP income required to be reported on Form 1042 but

that are not required to be withheld upon under chapter 4

(sum of lines 2a through 2d).

Line 4. Enter the sum of all amounts shown in box 2 of

Form 1042-S that are payments of U.S. source FDAP

income (including amounts reported under both chapter 3

and chapter 4). The amount on line 4 should equal the

total gross amounts of U.S. source FDAP income reported

on line 62c.

Line 5. The amount on line 5 should be the total reported

on line 4 (total amount of U.S. source FDAP income

reported on all Forms 1042-S) less the total reported on

line 3 (total U.S. source FDAP income reportable under

chapter 4).

Line 6. If the amount reported on line 5 is other than

zero, use this line to provide an explanation for the

variance. If additional space is needed, attach a sheet to

Form 1042 explaining the difference noted on line 5.

Section 3—Potential Section 871(m)

Transactions

Check the box if you are a withholding agent that makes

any payment under a potential section 871(m) transaction

during the year, including a notional principal contract or

other derivative contract that references, in whole or in

part, a U.S. stock or underlying security. See Regulations

section 1.871-15(a)(12) for the definition of a potential

section 871(m) transaction and Regulations section

1.871-15(i) for the meaning of certain payments with

respect to a section 871(m) transaction.

Instructions for Form 1042 (2025)

Section 4—Payments by a Qualified

Derivatives Dealer (QDD)

If a QI (whether the home office or any branch) was a

QDD during the tax year, check the box, enter the regular

EIN (if any) of the QI (not the QI-EIN) in the field provided,

and attach Schedule(s) Q (Form 1042) for each QDD. You

must complete and attach Schedule(s) Q (Form 1042)

even if the QDD has zero tax liability.

Note: If the QI has a tax year other than the calendar

year, the QI must file two Schedules Q (Form 1042) for

each QDD—one for the portion of the calendar year in the

first tax year and a second one for the portion in the

second tax year. See the Schedule Q (Form 1042) for

additional information.

Third Party Designee

If you want to allow any individual, corporation, firm,

organization, or partnership to discuss your 2025 Form

1042 with the IRS, check the “Yes” box in the Third Party

Designee section of the return. Also, enter the designee’s

name and phone number, and any five digits the designee

chooses as their personal identification number (PIN). The

authorization applies only to the tax form upon which it

appears.

If you check the “Yes” box, you are authorizing the IRS

to call the designee to answer any questions relating to

the information reported on your tax return. You are also

authorizing the designee to:

• Exchange information concerning your tax return with

the IRS; and

• Request and receive written tax return information

relating to your tax return, including copies of specific

notices, correspondence, and account transcripts.

You are not authorizing the designee to receive any

refund check, bind you to anything (including additional

tax liability), or otherwise represent you before the IRS. If

you want to expand the designee’s authorization, see Pub.

947, Practice Before the IRS and Power of Attorney.

The authorization automatically expires 1 year from the

due date (without any extensions) for filing Form 1042. If

you or your designee desires to terminate the

authorization, a written statement conveying your wish to

revoke the authorization should be submitted to the IRS

service center where the return was processed.

Paid Preparers

A withholding agent or intermediary may designate a

partner, a member, an owner, any corporate office

authorized to sign, or a fiduciary to sign Form 1042. The

paid preparer’s space should remain blank if the form is

completed by one of these individuals.

If the form is completed by a paid preparer with a valid

preparer tax identification number (PTIN), the paid

preparer should complete the paid preparer’s section.

Generally, anyone who is paid to prepare the return must

do the following.

• Sign the return in the space provided for the preparer’s

signature.

• Fill in the other blanks in the Paid Preparer Use Only

section of the return. A paid preparer cannot use a

Instructions for Form 1042 (2025)

social security number (SSN) in the Paid Preparer Use

Only section. The paid preparer must use a PTIN.

• Give the withholding agent or intermediary a copy of

the return in addition to the copy to be filed with the

IRS.

A paid preparer may sign original or amended returns

by rubber stamp, mechanical device, or computer

software program.

Amended Return

If you have to make changes to your Form 1042 after you

submit it, file an amended Form 1042. Use a Form 1042

for the year you are amending. Check the “Amended

Return” box at the top of the form. You must complete the

entire form, including all filing information for the calendar

year, and sign the return. Attach a statement explaining

why you are filing an amended return (for example, you

are filing because the tax liability for May was incorrectly

reported due to a mathematical error).

If you are a QI, WP, or WT revising the amounts

originally reported to a withholding rate pool and reporting

to a specific recipient in accordance with the provisions of

the QI agreement (Rev. Proc. 2022-43) or the WP/WT

agreement (Rev. Proc. 2017-21) after a Form 1042 has

been filed, you must amend Form 1042 to reflect the

revised number of Forms 1042-S filed for the calendar

year on line 61a or 61b.

If you are also amending Form(s) 1042-S, see

Amended Return in the Instructions for Form 1042-S.

Do not amend Form 1042 to recover taxes overwithheld

in the prior year. For more information, see Adjustment for

Overwithholding, earlier.

Privacy Act and Paperwork Reduction Act Notice. We

ask for the information on this form to carry out the Internal

Revenue laws of the United States. Sections 1441, 1442,

1446 (for PTPs), and 1471–1474 require withholding

agents to report and pay over to the IRS taxes withheld

from certain U.S. source income of foreign persons. Form

1042 is used to report the amount of withholding that must

be paid over. Form 1042-S is used to report the amount of

income and withholding to the payee. Section 6109

requires you to provide your identifying number on the

return. Routine uses of this information include giving it to

the Department of Justice for civil and criminal litigation,

and to cities, states, the District of Columbia, and U.S.

commonwealths and territories for use in administering

their tax laws. We may also disclose this information to

other countries under a tax treaty or tax information

exchange agreement, to federal and state agencies to

enforce federal nontax criminal laws, or to federal law

enforcement and intelligence agencies to combat

terrorism. If you fail to provide this information in a timely

manner, you may be liable for penalties.

You are not required to provide the information

requested on a form that is subject to the Paperwork

Reduction Act unless the form displays a valid OMB

control number. Books or records relating to a form or its

instructions must be retained as long as their contents

may become material in the administration of any Internal

Revenue law. Generally, tax returns and return information

are confidential, as required by section 6103.

13

The time needed to complete and file this form will vary

depending on individual circumstances. The estimated

burden for business taxpayers filing this form is approved

under OMB control number 1545-0123. The estimated

burden for all other taxpayers who file this form is:

Recordkeeping, 10 hr., 31 min.; Learning about the law

or the form, 2 hr., 25 min.; Preparing the form, 4 hr., 34

min.; and Copying, assembling, and sending the form

to the IRS, 32 min.

14

If you have comments concerning the accuracy of

these time estimates or suggestions for making this form

simpler, we would be happy to hear from you. You can

send us comments through IRS.gov/FormComments. Or

you can write to the Internal Revenue Service, Tax Forms

and Publications, 1111 Constitution Ave. NW, IR-6526,

Washington, DC 20224. Do not send the form to this

address. Instead, see Where and When To File, earlier.

Instructions for Form 1042 (2025)

Index

A

Adjustment for

Overwithholding 10

Overwithholding discovered at a

later date 11

Overwithholding discovered by

March 15 of the following

calendar year 10

Reimbursement procedure 11

Set-off procedure 11

Adjustment for

Underwithholding 11

Adjustments to withholding 8

Amended Return 13

Avoid Common Errors 6

C

Certain distributions subject to

section 1445 withholding tax 2

Corporate distributions 8

D

Deposit Requirements 4

Depositing on time 5

Deposits made during subsequent

year 5

Electronic deposit requirement 5

Escrow procedure 5

Same-day wire payment option 5

E

Election To Withhold Under

Section 3406 4

Escrow procedure 8

Excise tax on specified federal

procurement payments 8

F

Foreign partners of U.S.

partnerships and foreign

beneficiaries of U.S. trusts 7

Withholding and reporting in a

subsequent year 8

I

Income Tax Withholding on

Wages, Pensions, Annuities,

and Certain Other Deferred

Income 4

Interest and Penalties 6

Interest 6

Late filing of Form 1042 6

Late payment of tax 6

Other penalties 6

Intermediary 3

Foreign financial institution (FFI) 3

Nonparticipating FFI 4

Nonqualified intermediary (NQI) 3

Nonwithholding foreign

partnership (NWP) 3

Nonwithholding foreign trust

(NWT) 3

Participating FFI (PFFI) 3

Passive non-financial foreign entity

(NFFE) 4

Qualified derivatives dealer

(QDD) 3

Qualified intermediary (QI) 3

Qualified securities lender

(QSL) 3

Recalcitrant account holder 4

Registered deemed-compliant FFI

(RDCFFI) 3

Withholding foreign partnership

(WP) or withholding foreign trust

(WT) 3

P

Paid Preparers 13

Privacy Act and Paperwork

Reduction Act Notice 13

Publicly traded partnerships

(section 1446 withholding

tax) 2

Section 2—Reconciliation of U.S.

Source FDAP Income 12

Section 3—Potential Section

871(m) Transactions 12

Section 4—Payments by a

Qualified Derivatives Dealer

(QDD) 13

Specific Instructions 6

Address 7

Chapter 3 and 4 status codes of

withholding agent 7

Employer identification number

(EIN) 6

Rounding off to whole dollars 6

Specified federal procurement

payment 8

T

Third Party Designee 13

Total Gross Amounts Reported 9

Total Net Tax Liability 9

Total Tax Reported as Withheld or

Paid 9

W

Where and When To File 4

Electronic filing 4

Extension of time to file 4

Paper filing 4

Who Must File 2

Withholding after the time of

payment 9

Withholding Agent 3

Liability for tax 3

Q

QIs with no primary chapters 3

and 4 withholding

responsibility 8

R

Reporting of Taxes Paid and

Overpayment or Balance

Due 10

S

Section 1—Record of Federal Tax

Liability 7

15