FATCA - Instructions for Form 1042-S re-released; withholding and reporting foreign person’s U.S. income paid in 2014 

July 22:  The IRS has re-posted final instructions for Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding.

KPMG observation

A version of the Form 1042-S instructions was released in late June 2014. It appears that the IRS re-released these instructions to correct a couple of errors. For example, see the references to line 17—the former version of the instructions mistakenly had this line listed as recipient country code and not recipient GIIN.

New version of instructions

The 26-page instructions [PDF 395 KB] explain that Form 1042-S for 2014 has been revised to add the reporting of payments and amounts withheld under the FATCA provisions of chapter 4 as well as amounts required to be reported under the withholding rules of chapter 3.

Form 1042-S requires the reporting of an applicable exemption to the extent withholding under chapter 4 did not apply to a payment of U.S source fixed or determinable annual or periodical (FDAP) income (including deposit interest) that is reportable on Form 1042-S.

When a financial institution reports a payment made to its financial account, Form 1042-S also requires the reporting of additional information about a recipient of the payment—e.g., the recipient's account number, date of birth, and foreign taxpayer identification number.

For withholding agents, intermediaries, flow-through entities, and recipients, Form 1042-S requires that the chapter 3 status (or classification) and, when the payment reported is a “withholdable payment,” the chapter 4 status be reported.

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