According To The IRS, the First 2 Of The 10 Most Common Errors Made
Filling out Form 1042-S is so challenging that the IRS has an entire page titled: Ten most common errors for completing the Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding. The IRS assures that they want to do their best to deal with globalization and the international community effectively and that the page is designed to help you. This might be the case, but the page is also quite intimidating to a nonprofessional who lacks the required experience and expertise.
Let us provide you with the first two of the ten common errors the IRS wants you to avoid when completing Form 1042-S:
- Invalid income code entered in Box 1 (Income Code field). An entry is required in this box. The income code must accurately reflect the type of income paid. DO NOT leave blank or enter “00.”
- Invalid tax rate entered in Box 5 (Tax Rate field). An entry is required in this box. Enter the correct rate of withholding that applies to the income reported in Box 2 (Gross Income field) or Box 4 (Net Income field), as appropriate. Enter the tax rate using the following format: two digits, a decimal, and two digits (e.g., 04.95 for 4.95% or 30.00 for 30%).
Confusing jargon. What type of income are your payments in the hands of the recipient? What is your valid tax rate, and how do you figure this out? Then again, the IRS is trying to enhance the processing of Chapter Three Withholding (CTW) Program information returns. The Internal Revenue Service is trying to help, but these are complicated issues.
You don’t want to make mistakes by working with an inexperienced accountant who does not know everything about IRS foreign reporting and withholding requirements. Your tax representative should not lack experience filling out Form 1042-S. You always need an experienced tax professional to deal with the Internal Revenue Service.
LSL CPAs have the knowledge and experience to guide you through filling out Form 1042-S without making any errors and knowing how to maximize your savings. For more information about Form 1042-S and what LSL CPAs can do for you, please call Yana Weaver at 714.569.1000.
Link to the “Foreign Person’s U.S. Source Income Subject to Withholding” Form 1042-S
