The IRS has released the new version of Form 1042-S, which is used to report U.S. source income earned by foreign persons and the withholding associated with that income. Below is a breakdown of the updates made to the 2025 Form (used to report income earned in 2024):
1. New Box 7d
A new checkbox has been added to indicate when a form is being filed to correct a previous withholding amount for a specific recipient. This mostly affects intermediaries and foreign partnerships or trusts.
2. New Status Codes
Two new codes have been added for different types of entities:
- Chapter 3 Status Code 40: For Qualified Derivatives Dealers (QDD) partnerships.
- Chapter 3 Status Code 41: For U.S. government or tax-exempt entities. This code is exclusively used to indicate the Chapter 3 status of the withholding agent in Box 12b.
3. New Income Codes
Three new income codes are introduced for reporting specific types of payments:
- Code 59: Consent fees
- Code 60: Loan syndication fees
- Code 61: Settlement payments
These codes are optional for 2025 reporting but will be important if they apply to your business.
4. Extension for Filing Statements
If you need more time to submit recipient statements, you can now request a 30-day extension. To do this, you’ll need to file IRS Form 15397 by fax to the IRS Technical Services Operations line at (877) 477-0572.
5. Changes to Country Codes
The code “US” is now valid in Box 12f or 13b for reporting purposes.
6. Exemption Codes Update Coming in 2026
Starting in 2026, the IRS will require that exemption codes (or reduced withholding tax codes) be included for any tax withheld below 30%. For now, these codes are only needed if no tax is withheld at all.
View 2025 Form 1042-S here and 2025 form instructions here.
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