United States

Reminders for non-citizens and those who pay them, courtesy of the IRS

TAX ALERT  | 

In a news release and related fact sheet, the IRS has issued compliance reminders for non-U.S. individuals and U.S. persons making payments to non-U.S. individuals.

In the first release, the IRS reminds non-citizens that they must file a U.S. tax return if they are engaged in a trade or business in the United States and notes that students, trainees and other temporary workers may have a filing obligation. Non-citizens who are also nonresidents would file Form 1040NR (or, in some cases, Form 1040NR-EZ). Form 1040NR filers generally must attach one copy of each Form 1042-S they receive to their return.

This release also contains reminders for U.S. payers of income to non-U.S. persons (U.S. withholding agents), focusing on common errors made by withholding agents on Forms 1042-S (used to report payments of income and withholding to non-U.S. fact persons). Specific items highlighted here, or in the accompanying fact sheet, include:

  • Withholding agents must provide five copies of the Form 1042-S. All five copies must be identical, and if substitute forms are used, then all five copies must be in the same physical format.
  • Only one recipient may be listed on a single Form 1042-S. This applies even when a reportable payment is made to a joint account.
  • Filers of Forms 1042-S can request an automatic 30-day extension to file these forms with the IRS (but not to furnish them to recipients). An additional 30-day extension may be requested, but is not automatic, and will only be granted by the IRS under extenuating circumstances.

In addition to the items highlighted by the IRS, withholding agents should remember that if they are required to file more than 250 Forms 1042-S, or are financial institutions, then the Forms 1042-S must be filed electronically.

These releases demonstrate that non-U.S. taxpayers may have unanticipated U.S. filing obligations so it is important for non-U.S. persons with any kind of U.S. activity or U.S. source income to consider whether they must file U.S. tax returns. Similarly, persons that have made payments of U.S. source income may also have a filing obligation, and therefore, should also assess their situation.

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