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Caution: DRAFT—NOT FOR FILING
This is an early release draft of an IRS tax form, instructions, or publication,
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collection through the Federal Register process; for more info, click here.2022 Department of the Treasury
Internal Revenue Service
Instructions for Form 1042-S
Foreign Person's U.S. Source Income Subject to Withholding
DRAFT AS OF
Section references are to the Internal Revenue withholding requirements that apply to (C), taxpayers may generally rely on the
Code unless otherwise noted. brokers effecting transfers of interests in proposed regulations until final
PTPs. The section 1446(f) regulations regulations are issued. Specifically, for
Future Developments also revise certain requirements under purposes of these instructions, a
For the latest information about section 1446(a) relating to withholding withholding agent may rely on the
developments related to Form 1042-S and reporting on distributions made by following provisions in connection with
and its instructions, such as legislation
October 28, 2021
PTPs, including by expanding the completing Form 1042-S.
enacted after they were published, go to entities permitted to act as nominees for • Withholding and reporting in a
IRS.gov/Form1042S. PTP distributions to include certain subsequent year. A partnership or
qualified intermediaries and U.S. trust that is permitted to withhold in a
General Instructions branches of foreign persons that agree subsequent year with respect to a
to act as U.S. persons. foreign partner's or beneficiary's share
What’s New Withholding on transfers of interests of income for the prior year may
in PTPs and the revisions included in designate the deposit of the withholding
Income code 56. New income code 56 the section 1446(f) regulations relating as attributable to the preceding year and
was added to address section 871(m) to withholding on PTP distributions in some cases a partnership is provided
transactions resulting from combining under section 1446(a) apply to transfers an extended due date for filing and
transactions under Regulations section and distributions that occur on or after furnishing Form 1042-S. See the
1.871-15(n) (including as modified by January 1, 2022. The provisions of the instructions for Box 7c, later.
transition relief under Notice 2020-2, section 1446(f) regulations relating to • Adjustments to overwithholding
2020-3 I.R.B. 327, available at withholding and reporting on transfers of under the reimbursement and set-off
IRS.gov/irb/2020-03_IRB#NOT-2020-2, interests in partnerships that are not procedures. A withholding agent may
when applicable). Income code 56 PTPs generally apply to transfers make adjustments to overwithholding
should be used for any dividend occurring after January 29, 2021. See using either the reimbursement or
equivalent payment pursuant to a Pub. 515 for an additional discussion of set-off procedures until the extended
transaction that is a section 871(m) section 1446(f) withholding. due date for filing Form 1042-S (unless
transaction as a result of combining the Form 1042-S has already been filed
transactions, even if another income Chapter 3 status code 38. New or furnished). Additionally, a withholding
code could apply to the dividend chapter 3 status code 38 has been agent may use the extended due date
equivalent payment. See Box 1, Income added to report a payment to or from a for filing a Form 1042 to claim a credit
Code, later, for additional information. PTP. See Publicly Traded Partnerships for any adjustments made to
(Section 1446 Withholding Tax), later. overwithholding. See the instructions for
Income code 57. New income code 57 The IRS intends to provide further
was added for use by brokers that are Box 9, later.
guidance on how to report on transfers
required to report or withhold on the of PTP interests and distributions made Box 12f (country code). If the
transfer of interests in publicly traded by PTPs, including requirements withholding agent is a U.S. person or a
partnerships (PTPs), including applicable to payments to qualified foreign branch of a U.S. person, filers
distributions made by PTPs. intermediaries (QIs). must now enter “US” in box 12f (even
Specifically, new income code 57 was though “US” is not a code on the list at
added to report the payment of an Limitation on benefits (LOB) code IRS.gov/CountryCodes). See the
amount realized subject to section 12. New LOB code 12 has been added instructions for Box 12f, Country code,
1446(f). Section 1446(f) generally to report that there is no LOB code in later, for details.
requires that if any portion of a gain on the applicable treaty that qualifies the
any disposition of an interest in a taxpayer for a treaty benefit. See Box Withholding rates. The rate of
partnership would be treated under 13j, LOB Code, later, for general withholding under section 1446 by a
section 864(c)(8) as effectively information about LOB codes. PTP on a distribution of income
connected gain, the transferee effectively connected to a U.S. trade or
purchasing an interest in such a Reminders business is 21% for corporate partners
partnership from a non-U.S. transferor and 37% for all other partners.
Reliance on proposed regulations The rate of withholding by a qualified
must withhold a tax equal to 10% of the
reducing burden under FATCA and investment entity (QIE) on a distribution
amount realized on the disposition
chapter 3. On December 18, 2018, the to a nonresident alien or foreign
unless an exception to withholding
IRS and the Department of the Treasury corporation that is treated as gain from
applies. T.D. 9926 (84 FR 21198),
issued proposed regulations the sale or exchange of a U.S. real
published on November 30, 2020,
(REG-132881-17) to reduce taxpayer property interest by the shareholder is
contains final regulations (section
burden with respect to certain 21%.
1446(f) regulations) relating to the
requirements under chapters 3 and 4 of
withholding and reporting required Qualified derivatives dealers
the Code. The proposed regulations
under section 1446(f), which include (QDDs). These instructions provide
provide that, under section 7805(b)(1)
Oct 27, 2021 Cat. No. 64278Aguidance on how to report payments on permitted to combine all payments of covered expatriates that are subject to
Form 1042-S that are made to and by income on a single substitute Form withholding under section 877A. See
QDDs. See Payments by U.S. 1042-S. For more information, see Box 1, Income Code, later.
Withholding Agents and Amounts Paid Substitute Forms, later.
by Qualified Intermediaries, later. For Use Form 1042-S to report certain
Filing Information Returns Electroni- distributions that are made by publicly
more information on the withholding and
cally (FIRE) System. For files traded trusts and QIEs (as defined
reporting requirements associated with
submitted on the FIRE System, it is the under section 897(h)(4)(A)). See
payments made to and by QDDs, see
responsibility of the filer to check the Distributions Attributable to Dispositions
DRAFT AS OF
Rev. Proc. 2017-15, available at
status within 5 business days to verify of U.S. Real Property Interests by
IRS.gov/irb/2017-03_IRB#RP-2017-15.
the results of the transmission. The IRS Publicly Traded Trusts and Qualified
See also Notice 2020-2, 2020-3 I.R.B.
will not mail error reports for files that Investment Entities, later.
327, available at IRS.gov/irb/
are bad. See Pub. 1187, Specifications
2020-03_IRB#NOT-2020-2, which Use Form 1042-S to report
for Electronic Filing of Form 1042-S,
extends the phase-in period provided in distributions of effectively connected
Foreign Person’s U.S. Source Income
Notice 2018-72, 2018-40 I.R.B. 522,
October 28, 2021
Subject to Withholding. income (ECI) by a PTP or nominee. See
available at IRS.gov/irb/ Publicly Traded Partnerships (Section
2018-40_IRB#NOT-2018-72, for certain Unique form identifier. Withholding 1446 Withholding Tax), later.
provisions of the section 871(m) agents must assign a unique identifying
regulations for 2 years, including for number to each Form 1042-S they file. Beginning in 2022, use Form 1042-S
certain requirements of a QDD. This identifying number is used, for to report amounts realized on the
example, to identify which information transfer of PTP interests subject to
Foreign Account Tax Compliance
return is being corrected or amended section 1446(f). See Publicly Traded
Act (FATCA). Form 1042-S reports
when multiple information returns are Partnerships (Section 1446 Withholding
payments and amounts withheld under
filed by a withholding agent with respect Tax), later.
the provisions commonly known as
to the same recipient. The unique
FATCA or chapter 4 of the Internal Every person required to deduct
identifying number cannot be the
Revenue Code (chapter 4) in addition to ! and withhold any tax under
recipient's U.S. or foreign TIN. The
those amounts required to be reported CAUTION chapter 3 or chapter 4 is liable
unique identifying number must be
under chapter 3 of the Internal Revenue for such tax.
numeric. The length of a given
Code (chapter 3). Form 1042-S requires
identifying number must be exactly 10
the reporting of an applicable exemption Do not use Form 1042-S to report an
digits. The identifying number must be
to the extent withholding under item required to be reported on any of
unique to each original Form 1042-S
chapter 4 did not apply to a payment of the following forms.
filed for the current year. The identifying
U.S. source fixed or determinable
number can be used on a new original • Form W-2 (wages and other
annual or periodical (FDAP) income compensation made to employees
form in a subsequent year.
(including deposit interest) that is (other than compensation for dependent
reportable on Form 1042-S. For List of foreign country codes. Form personal services for which the
payments to intermediaries, 1042-S filers must use the same list of beneficial owner is claiming treaty
flow-through entities, and recipients, country codes used on other IRS forms benefits), including wages in the form of
Form 1042-S requires that the chapter 3 (for example, Forms 926, 1118, 3520, group-term life insurance).
status (or classification) and, when the and 8805). This list of foreign country • Form 1099.
payment reported is a withholdable codes may be found at IRS.gov/ • Form 8288-A, Statement of
payment, the chapter 4 status, be CountryCodes. Withholding on Dispositions by Foreign
reported on the form according to the Persons of U.S. Real Property Interests,
codes provided in these instructions. Note. Although the list of country codes or Form 8805, Foreign Partner's
For the requirement of a withholding is maintained by Modernized e-File, Information Statement of Section 1446
agent to file a Form 1042-S for Form 1042-S filers who file Withholding Tax. Withholding agents
chapter 4 purposes, see Regulations electronically will continue to use the otherwise required to report a
section 1.1474-1(d). FIRE System. See the instructions for distribution partly on a Form 8288-A or
Electronic Reporting, later. Also, if Form 8805 and partly on a Form 1042-S
Substitute forms. A substitute form applicable, the option to file Form
furnished to a recipient must conform in may instead report the entire amount on
1042-S by paper is still available. Form 8288-A or Form 8805.
format and size to the official IRS form
and contain the exact same information • Form 8966, FATCA Report. Foreign
Purpose of Form financial institutions (FFIs), sponsoring
as the copy filed with the IRS. However,
Use Form 1042-S to report income entities of certain FFIs and other foreign
the size of the form may be adjusted if
described under Amounts Subject to entities, and withholding agents are
the substitute form is presented on a
Reporting on Form 1042-S, later, and to required to report on Form 8966 certain
landscape oriented page instead of
report amounts withheld under account holders and payees. An FFI or
portrait. Only one Form 1042-S may be
chapter 3 or chapter 4. withholding agent may also be required
submitted per page, regardless of
orientation. Withholding agents that to file Form 1042-S to report payments
Use Form 1042-S to report specified of U.S. source FDAP income made to
furnish a substitute Form 1042-S (Copy federal procurement payments paid to
B, C, or D) to the recipient must furnish such persons and to report tax
foreign persons that are subject to deducted and withheld, if any.
a separate substitute Form 1042-S for withholding under section 5000C.
each type of payment of income (as
determined by the income code in Box Use Form 1042-S to report payments Who Must File
1). Withholding agents are no longer of eligible deferred compensation items Every withholding agent (defined in
or distributions from nongrantor trusts to Definitions, later) must file an
-2- Instructions for Form 1042-S (2022)information return on Form 1042-S to Copy A is filed with the IRS. Send all Internal Revenue Service
report amounts paid during the paper Forms 1042-S with Form 1042-T, Technical Services Operation
preceding calendar year that are Annual Summary and Transmittal of Attn: Extension of Time
described under Amounts Subject to Forms 1042-S, to the address in the Coordinator
Reporting on Form 1042-S, later. Form 1042-T instructions. You must use Fax: 877-477-0572
However, withholding agents who are Form 1042-T to transmit paper Forms (International 304-579-4105)
individuals are not required to report a 1042-S. Use a separate Form 1042-T to
payment on Form 1042-S if they are not transmit each type of Form 1042-S. See The letter must include:
DRAFT AS OF
making the payment as part of their Payments by U.S. Withholding Agents, 1. Your name,
trade or business and no withholding is later, and the Form 1042-T instructions
required to be made on the payment. for more information. 2. Your TIN,
For example, an individual making a 3. Your address,
Electronic filing requirement.
payment of interest that qualifies for the 4. Type of return (Form 1042-S),
Financial institutions must file Forms
portfolio interest exception from
1042-S electronically. The IRS 5. A statement that your extension
withholding is not required to report the
October 28, 2021
encourages all other filers of Form request is for providing statements to
payment if the portfolio interest is paid
1042-S to file them electronically; recipients,
on a loan that is not connected to the
however, they are not required to do so 6. Reason for delay, and
individual's trade or business. However,
unless the number of forms they are
an individual who is a withholding agent 7. The signature of the payer or
required to file exceeds a certain
paying an amount that actually has been authorized agent.
threshold. See Electronic Reporting,
subject to withholding is required to
later, for details. Your request must be received no later
report the payment. Also, an individual
paying an amount on which withholding Attach only Copy A to Form than the date the Forms 1042-S are due
is required must report the payment, TIP 1042-T. Provide Copies B, C, to the recipients. If your request for an
whether or not the individual actually and D to the recipient of the extension is approved, generally you
withholds. See Multiple Withholding income. The withholding agent should will be granted a maximum of 30 extra
Agent Rule, later, for exceptions to keep Copy E. All copies must match the days to furnish the recipient statements.
reporting when another person has copy filed with the IRS. Any differences See Extension to provide statements to
reported the same payment to the between the copy of the form issued to recipients in Pub. 515, Withholding of
recipient. recipients and the copy filed with the Tax on Nonresident Aliens and Foreign
IRS will lead to delays in processing the Entities.
You must file a Form 1042-S even if recipient's tax return. The IRS may See Pub. 1187 for more
you did not withhold tax under chapter 3 disallow claims for refund or credit for information about filing
because the income was exempt from amounts withheld reported on Form
!
CAUTION extension requests
tax under a U.S. tax treaty or the Code, 1042-S if the form attached to such electronically instead of on a paper
including the exemption for income that claims differs from the copy that was Form 8809.
is effectively connected with the filed with the IRS.
conduct of a trade or business in the
Electronic Reporting
United States, or you released the tax With respect to a withholdable
withheld to the recipient. For Forms 1042-S filed for tax year 2022
payment, the recipient copy should be
exceptions, see Amounts That Are Not must be filed electronically if:
provided to the intermediary or
Subject to Reporting on Form 1042-S, flow-through entity named as a recipient
• You are a person (including a
later. corporation, partnership, individual,
with respect to a chapter 4 reporting
trust, or estate) that is required to file
Amounts paid to an individual that is pool, if applicable.
250 or more Forms 1042-S, or
a bona fide resident of a U.S. Extension of time to file. To request • You are a financial institution
possession or territory are not subject to an extension of time to file Forms (whether U.S. or foreign) regardless of
reporting on Form 1042-S if the 1042-S, file Form 8809, Application for the number of Forms 1042-S required to
beneficial owner of the income is a U.S. Extension of Time To File Information be filed.
citizen, national, or resident alien (such Returns. See the Form 8809
Section 6011(e), which was
amounts may be subject to Form 1099 instructions for where to file that form.
! most recently amended by the
reporting). You should request an extension as CAUTION Taxpayer First Act of 2019,
If you file Form 1042-S, you also soon as you are aware that an
enacted July 1, 2019, authorizes the
must file Form 1042, Annual extension is necessary, but no later than
! IRS and Treasury to issue regulations
CAUTION Withholding Tax Return for U.S.
the due date for filing Form 1042-S. By
that could change some of the above
Source Income of Foreign Persons. See filing Form 8809, you will get an
rules. If those regulations are issued
Form 1042 and its instructions for more automatic 30-day extension to file Form
and effective for 2022 tax year returns,
information. 1042-S. If you need more time, you may
we will post an article at IRS.gov/
submit a second Form 8809 before the
Form1042S explaining the changes.
end of the initial extended due date. See
Where, When, and How To Form 8809 for more information.
Electronic submissions are filed
File Recipient copies. You may request using the FIRE System. The FIRE
Forms 1042-S, whether filed on paper an extension of time to provide the System operates 24 hours a day, 7 days
or electronically, must be filed with the statements to recipients by faxing a a week, at fire.irs.gov. For more
IRS by March 15, 2023. You must also letter to: information, see Pub. 1187.
furnish Form 1042-S to the recipient of
the income by March 15, 2023.
Instructions for Form 1042-S (2022) -3-The electronic filing requirement with the IRS. The withholding agent's substitute Form 1042-S for each type of
applies separately to original and EIN cannot be truncated on any copy. payment of income (as determined by
amended returns. For a withholding the income code in box 1).
Need assistance? For additional
agent other than a financial institution,
information and instructions on filing All of the fields on the substitute
the filing requirement applies
Forms 1042-S electronically, extensions ! form must match the copy filed
individually to each reporting entity as
of time to file (Form 8809), and hardship CAUTION with the IRS and must comply
defined by its separate taxpayer
waivers (Form 8508), see Pub. 1187. with IRS standards (see Pub. 1179).
identification number (TIN). For
You also can call the Information Any differences between the substitute
DRAFT AS OF
example, if you have 300 original Forms
Reporting Program at 866-455-7438 form issued to recipients and the copy
1042-S, they must be filed
(toll free) or 304-263-8700 (not a filed with the IRS will lead to delays in
electronically. However, if 200 of those
toll-free number). Do not call the processing the recipient's tax return.
forms contained erroneous information,
Information Reporting Program for tax The IRS may disallow claims for refund
the amended returns may be filed on
law questions. The Information or credit for amounts withheld reported
paper forms because the number of
Reporting Program can also be reached on Form 1042-S if the substitute form
amended Forms 1042-S is less than the
October 28, 2021
by fax at 877-477-0572 (toll free) and attached to such claims differs from the
250-or-more filing requirement.
international fax at 304-579-4105 (not a copy that was filed with the IRS.
If you file electronically, do not toll-free number).
! file the same returns on paper. If you have tax law questions Penalty for filing incorrect
CAUTION Duplicate filing may cause substitute form. Privately printed
pertaining to Form 1042-S, call
penalty notices to be generated. 267-941-1000 (not a toll-free number). substitute Forms 1042-S must be exact
copies of both the format and content of
Note. Even though as many as 249 Additional Information the official Form 1042-S. If you file a
Forms 1042-S may be submitted on For more information on the withholding substitute for Form 1042-S, Copy A,
paper, the IRS encourages filers to of tax, see Pub. 515. To order this with the IRS that is not an exact copy of
transmit forms electronically. publication and other publications and the official Form 1042-S, Copy A, you
forms, call 800-TAX-FORM may be subject to a penalty for failure to
Hardship waiver. To receive a (800-829-3676). You can download or file a correct information return. See
hardship waiver from filing Forms print some of the forms and publications Penalties, later.
1042-S electronically, submit Form you may need on IRS.gov/Forms.
8508, Request for Waiver From Filing Account-by-Account Reporting
Otherwise, you can go to IRS.gov/
Information Returns Electronically. OrderForms to place an order and have by Certain Financial Institutions
Waiver requests should be filed at least forms mailed to you. You should receive A U.S. financial institution or U.S.
45 days before the due date of the your order within 10 business days. branch of an FFI maintaining an account
returns. See Form 8508 for more within the United States is required to
information. Record Retention report payments of the same type of
Truncation of TIN Rules Withholding agents should retain a copy income (as determined by the income
of the information returns filed with the code in box 1) made to multiple financial
Withholding agents may truncate the IRS, or have the ability to reconstruct accounts held by the same recipient on
recipient's TIN (social security number the data, for at least 3 years after the a separate Form 1042-S for each
(SSN), individual taxpayer identification reporting due date. account. For this purpose, a financial
number (ITIN), or employer
account is an account described in
identification number (EIN)) on the Substitute Forms Regulations section 1.1471-5(b)(1). See
recipient's copy of Form 1042-S (that is, The official Form 1042-S is the standard the instructions for Box 13k, Recipient’s
Copies B, C, and D), including a for substitute forms. All substitute forms Account Number, later, for information
substitute form. To truncate the must comply with the rules set forth in on designating each account with a
recipient's TIN, only the last four digits Pub. 1179, General Rules and separate account number.
of a TIN must be displayed and the Specifications for Substitute Forms
remaining digits must be replaced with 1096, 1098, 1099, 5498, and Certain Combined Reporting
either asterisks (*) or Xs. For example, Other Information Returns. A substitute Procedures
an SSN or ITIN must be truncated on of Form 1042-S that is furnished to the Rev. Proc. 99-50 provides special
the recipient's copy as XXX-XX-nnnn. recipient (Copy B, C, or D) must procedures for successor entities to use
An EIN must be truncated as XX- conform in format and size to the official combined information reporting under
XXXnnnn. IRS form and must contain the exact chapter 3 in certain situations following
Withholding agents may also same information as the copy filed with a merger or acquisition. A withholding
truncate a recipient’s foreign tax the IRS. However, the size of the form agent may also use these procedures
identification number (FTIN) on the may be adjusted if the substitute form is for purposes of reporting under
recipient’s copy of Form 1042-S (Copies presented on a landscape-oriented chapter 4.
B, C, and D), including a substitute page instead of portrait. Only one Form
form. The same rules for truncating a 1042-S may be submitted per page, Deposit Requirements
recipient’s U.S. TIN stated above must regardless of orientation. You may be For information and rules concerning
be followed if truncating a recipient’s subject to a penalty for failure to furnish federal tax deposits, see Depositing
FTIN. a correct information return. See Withheld Taxes in Pub. 515 or Deposit
Penalties, later. Requirements in the Instructions for
Note. The recipient's TIN and FTIN Form 1042.
must not be truncated on Copy A filed Note. A withholding agent is required to
provide a recipient with a separate
-4- Instructions for Form 1042-S (2022)Definitions (as applicable) that is a transferor of the withholding is claimed under an income
interest. The amount realized on a PTP tax treaty, the beneficial owner of
Withholding agent. A withholding distribution is the amount of the income in most cases is the person who
agent is any person, U.S. or foreign, that distribution reduced by the portion of the is required under U.S. tax principles to
has control, receipt, or custody of an distribution that is attributable to the include the income in gross income on a
amount subject to withholding under cumulative net income of the tax return. A person is not a beneficial
chapter 3 who can disburse or make partnership (as determined under owner of income, however, to the extent
payments of an amount subject to Regulations section 1.1446(f)-4(c)(2) that person is receiving the income as a
withholding, or who makes a
DRAFT AS OF
(iii)). nominee, agent, or custodian, or to the
withholdable payment under chapter 4. extent the person is a conduit whose
The withholding agent may be an Amount subject to withholding.
participation in a transaction is
individual, corporation, partnership, Generally, an amount subject to
disregarded. In the case of amounts
trust, association, or any other entity. chapter 3 withholding is an amount from
paid that do not constitute income,
The term “withholding agent” also sources within the United States that is
beneficial ownership is determined as if
includes, but is not limited to, a qualified FDAP income. FDAP income is all
the payment were income.
October 28, 2021
intermediary (QI), a nonqualified income included in gross income,
including interest (as well as original Foreign partnerships, foreign simple
intermediary (NQI), a withholding
issue discount (OID)), dividends, rents, trusts, and foreign grantor trusts are not
foreign partnership (WP), a withholding
royalties, and compensation. Amounts the beneficial owners of income paid to
foreign trust (WT), a flow-through entity,
subject to chapter 3 withholding do not the partnership or trust. The beneficial
a U.S. branch that is treated as a U.S.
include amounts that are not FDAP, owners of income paid to a foreign
person under Regulations section
such as most gains from the sale of partnership in most cases are the
1.1441-1(b)(2)(iv)(A), a territory FI, a
property (including market discount and partners in the partnership, provided
nominee under section 1446, and an
option premiums), as well as other that the partner is not itself a
authorized agent. A person may be a
specific items of income (such as partnership, foreign simple or grantor
withholding agent even if there is no
interest on bank deposits and trust, nominee, or other agent. The
requirement to withhold from a payment
short-term OID). See Regulations beneficial owner of income paid to a
or if another person has already
section 1.1441-2. foreign simple trust (a foreign trust that
withheld the required amount from a
is described in section 651(a)) in most
payment. Authorized agent. An agent is an cases is the beneficiary of the trust, if
In most cases, the U.S. person who authorized agent for purposes of filing the beneficiary is not a foreign
pays (or causes to be paid) the item of Form 1042 or making tax deposits and partnership, foreign simple or grantor
U.S. source income to a foreign person payments on behalf of its principal trust, nominee, or other agent. The
(or to its agent) must withhold. However, (payer) only if all five of the following beneficial owner of a foreign grantor
other persons may be required to conditions apply. trust (a foreign trust to the extent that all
withhold. For example, if a payment is 1. There is a written agreement or a part of the income of the trust is
made by a QI (whether or not it between the payer and the person treated as owned by the grantor or
assumes primary withholding acting as agent. another person under sections 671
responsibility) and the QI knows that 2. A Form 8655, Reporting Agent through 679) is the person treated as
withholding was not done by the person Authorization, is filed with the IRS if the the owner of the trust. The beneficial
from which it received the payment, agent is filing Form 1042 (in its own owner of income paid to a foreign
then that QI is required to do the name) on behalf of the payer. complex trust (a foreign trust that is not
appropriate withholding. In addition, a foreign simple trust or foreign grantor
withholding must be done by any QI that 3. The books and records and
trust) is the trust itself.
assumes primary withholding relevant personnel of the agent are
available to the payer. The beneficial owner of income paid
responsibility under chapters 3 and 4, a
to a foreign estate is the estate itself.
WP, a WT, a U.S. branch that agrees to 4. The payer remains fully liable for
be treated as a U.S. person under the acts of its agent and does not assert A payment to a U.S. partnership,
Regulations section 1.1441-1(b)(2)(iv) any of the defenses that may otherwise U.S. trust, or U.S. estate is not subject
(A), or an authorized agent. Finally, if a be available. to withholding under chapter 3 or 4. A
payment is made by an NQI or a U.S. partnership, trust, or estate should
5. If the agent is filing Form 1042 (in
flow-through entity that knows, or has provide the withholding agent with a
its own name) on behalf of the payer,
reason to know, that withholding was Form W-9, Request for Taxpayer
the agent is reported as the withholding
not done, that NQI or flow-through entity Identification Number and Certification.
agent in boxes 12a through 12i and
is required to withhold since it also falls In most cases, these beneficial owner
information about the payer is reported
within the definition of a withholding rules apply for purposes of section
in boxes 16a through 16e of the Form
agent. 1446; however, there are exceptions.
1042-S.
Account holder. Generally, the 1. Chapter 3 withholding rate pool.
A sponsoring entity is a reporting A payment of a single type of income,
account holder is the person that holds agent with respect to withholdable
the account. See Regulations section determined in accordance with the
payments and must fulfill the above income codes used to file Form 1042-S,
1.1471-5(a). conditions to be an authorized agent. that is subject to a single rate of
Amount realized. An amount realized For more information on these withholding and a single chapter 4
on the transfer of a PTP interest is the conditions, see Regulations sections exemption code.
amount of gross proceeds (as defined in 1.1441-7(c) and 1.1474-1(a)(3)(ii). 2. Chapter 4 withholding rate pool.
Regulations section 1.6045-1(d)(5)) A pool of account holders or payees
paid or credited to a partner or broker Beneficial owner. For payments other
than those for which a reduced rate of provided on an FFI withholding
Instructions for Form 1042-S (2022) -5-statement (or a chapter 4 withholding Expatriate. A person is considered an Nonparticipating FFI. A
statement) that is described in expatriate if he or she relinquishes U.S. nonparticipating FFI is an FFI that is not
Regulations section 1.1471-1(b)(20). citizenship or, in the case of a long-term a participating FFI, deemed-compliant
resident of the United States, ceases to FFI, or exempt beneficial owner.
Disregarded entity. A business entity be a lawful permanent resident as
that has a single owner and is not a Participating FFI. A participating
defined in section 7701(b)(6). FFI is an FFI that has agreed to comply
corporation under Regulations section
301.7701-2(b) is disregarded as an Fiscally transparent entity. An entity with the terms of an FFI agreement with
entity separate from its owner. is treated as fiscally transparent with respect to all branches of the FFI, other
DRAFT AS OF
respect to an item of income for which than a branch that is a reporting Model 1
Dividend equivalent. To the extent treaty benefits are claimed to the extent FFI or a U.S. branch. The term
specified in section 871(m), and the that the interest holders in the entity “participating FFI” also includes a
regulations thereunder, a dividend must, on a current basis, take into reporting Model 2 FFI and a QI branch
equivalent is a payment (within the account separately their shares of an of a U.S. financial institution, unless
meaning of Regulations section item of income paid to the entity, such branch is a reporting Model 1 FFI.
October 28, 2021
1.871-15(i)) that, directly or indirectly, is whether or not distributed, and must
contingent on, or determined by Foreign person. A foreign person
determine the character of the items of includes a nonresident alien individual,
reference to, the payment of a dividend income as if they were realized directly
from U.S. sources, including pursuant to a foreign corporation, a foreign
from the sources from which realized by partnership, a foreign trust, a foreign
a securities lending or sale-repurchase the entity. For example, partnerships,
transaction or a specified notional estate, and any other person that is not
common trust funds, and simple trusts a U.S. person. The term also includes a
principal contract or a specified or grantor trusts in most cases are
equity-linked instrument. foreign branch or office of a U.S.
considered to be fiscally transparent financial institution or U.S. clearing
In addition, certain other payments with respect to items of income received organization if the foreign branch is a
made by the withholding agent to satisfy by them. QI. A payment to a U.S. branch of a
a tax liability with respect to a dividend foreign person is treated as a payment
equivalent by the party receiving the Flow-through entity. A flow-through
entity is a foreign partnership (other than to a foreign person for purposes of Form
dividend equivalent are dividend 1042-S.
equivalents. See Regulations section a WP), a foreign simple or grantor trust
1.871-15(c) for additional information, (other than a WT), or, for any payments Global intermediary identification
including the definitions of specified for which a reduced rate of withholding number (GIIN). The GIIN is the
notional principal contract and specified under an income tax treaty is claimed, identification number that is assigned to
equity-linked instrument. any entity to the extent the entity is a participating FFI (including a reporting
considered to be fiscally transparent Model 2 FFI), registered
Exempt beneficial owner. An exempt under section 894 with respect to the deemed-compliant FFI (including a
beneficial owner means a person that is payment by an interest holder's reporting Model 1 FFI), or other entity
described in Regulations section jurisdiction. for chapter 4 reporting purposes.
1.1471-6 and includes a foreign
government, a political subdivision of a Financial institution. A financial Intermediary. An intermediary is a
foreign government, a wholly owned institution generally means an entity that person that acts as a custodian, broker,
instrumentality or agency of a foreign is a depository institution, custodial or nominee, or otherwise as an agent for
government or governments, an institution, investment entity, or an another person, regardless of whether
international organization, a wholly insurance company (or holding that other person is the beneficial owner
owned agency or instrumentality of an company of an insurance company) that of the amount paid, a flow-through
international organization, a foreign issues cash value insurance or annuity entity, or another intermediary.
central bank of issue, a government of a contracts. See Regulations section
1.1471-5(e). Qualified intermediary (QI). A QI
U.S. possession, certain retirement
is an intermediary or eligible entity that
funds, and certain entities wholly owned Foreign financial institution (FFI). An is a party to a withholding agreement
by one or more exempt beneficial FFI is an entity described in Regulations with the IRS. A QI that is a financial
owners. In addition, an exempt section 1.1471-5(d) or an entity treated institution must have a chapter 4 status
beneficial owner includes any person as a financial institution under an described in Regulations section
treated as an exempt beneficial owner Intergovernmental Agreement (IGA). 1.1441-1(e)(5)(ii). An entity must
under an applicable Model 1 IGA or
Deemed-compliant FFI. Under indicate its status as a QI on a Form
Model 2 IGA.
section 1471(b)(2), certain FFIs are W-8IMY submitted to a withholding
Exempt recipient. An exempt recipient deemed to comply with the regulations agent. For information on a QI
is any payee that is exempt from the under chapter 4 without the need to withholding agreement, see Rev. Proc.
Form 1099 reporting requirements. enter into an FFI agreement with the 2017-15, and IRS.gov/
IRS. However, certain QualifiedIntermediary.
Exempt recipients are not
exempt from withholding under deemed-compliant FFIs are required to A branch of a financial institution may
!
CAUTION chapter 3 of the Internal register with the IRS and obtain a GIIN. not act as a QI in a country that does not
Revenue Code unless they are U.S. These FFIs are referred to as have approved know-your-customer
persons or foreign persons entitled to an “registered deemed-compliant FFIs”. (KYC) rules. Countries having approved
exemption from withholding under See Regulations section 1.1471-5(f)(1). KYC rules are listed at IRS.gov/
chapter 3. Registered deemed-compliant FFIs also businesses/international-businesses/
include certain FFIs that satisfy the list-of-approved-kyc-rules. Branches
requirements of an applicable IGA. that operate in non-KYC approved
jurisdictions as intermediaries are
-6- Instructions for Form 1042-S (2022)required to act as NQIs. See the more information on resident and home office or branch as a recipient on
Instructions for Form W-8IMY for more nonresident alien status. a withholding statement (if required).
information on the definition of a QI. Each home office or branch that obtains
Even though a nonresident alien
QDD status is treated as a separate
Nonqualified intermediary (NQI). ! individual married to a U.S.
CAUTION citizen or resident alien may
QDD. See Regulations section
An NQI is any intermediary that is not a 1.1441-1(e)(6) and Rev. Proc. 2017-15
U.S. person and that is not a QI. choose to be treated as a resident alien
for more information.
for certain purposes (for example, filing
Private arrangement intermediary a joint income tax return), such Qualified securities lender (QSL). A
DRAFT AS OF
(PAI). A QI that is an FFI may enter into individual is still treated as a QSL is a FFI that satisfies all of the
a contractual agreement with another nonresident alien for withholding tax following.
intermediary under which the other purposes. • It is a bank, custodian, broker-dealer,
intermediary generally agrees to or clearing organization that is regulated
perform all of the obligations of the QI Payee. Except as otherwise provided, by the government in its home
with respect to the accounts maintained the payee is the person to whom a jurisdiction and that regularly borrows
October 28, 2021
directly by the other intermediary. See payment is made, regardless of whether and lends the securities of U.S.
the QI agreement for the requirements such person is the beneficial owner of corporations to unrelated customers.
of a PAI and a QI's agreement with a the amount or treated as the recipient of • It is subject to audit by the IRS under
PAI. the payment for purposes of reporting section 7602 or by an external auditor if
Nonfinancial foreign entity (NFFE). on Form 1042-S. See Regulations it is a QI.
An NFFE is a foreign entity or an entity section 1.1471-3(a). • It provides to the withholding agent
incorporated or organized under the Presumption rules. For withholdable an annual certification of its QSL status.
laws of any U.S. territory that is not a payments and for amounts subject to • It meets the requirements to qualify
financial institution. withholding under chapter 3, the as a QSL provided in Notice 2010-46 for
presumption rules are those rules that a the transition period. See Notice
Excepted NFFE. The term 2010-46 at IRS.gov/irb/
“excepted NFFE” means an NFFE that withholding agent must follow to
determine the status of a beneficial 2010-24_IRB#NOT-2010-46. While
is described in Regulations section Notice 2010-46 was obsoleted, Notice
1.1472-1(c)(1) and generally includes a owner or payee (for example, as a U.S.
person or a foreign person) when it 2020-2, 2020-3 I.R.B. 327, permits
publicly traded corporation, certain withholding agents to apply the
affiliated entities related to a publicly cannot reliably associate a payment
with valid documentation. See, for transition rules described in Notice
traded corporation, certain territory 2010-46 for payments made in 2021
entities, active NFFEs, and entities example, Regulations sections
1.1441-1(b)(3), 1.1441-4(a), and 2022.
excluded from the definition of FFI
(excluded FFIs) described in 1.1441-5(d) and (e), 1.1441-9(b)(3), Recalcitrant account holder.
Regulations section 1.1471-5(e)(5). 1.1446-1(c)(3), and 1.6049-5(d). Also Generally, a recalcitrant account holder
see Pub. 515. For a withholdable is an account holder of a participating or
Nonexempt recipient. A nonexempt payment (defined in Regulations section registered deemed-compliant FFI that
recipient is any person who is not an 1.1473-1(a)), the withholding agent failed to provide the documentation
exempt recipient under chapter 61 of must also follow the presumption rules required under chapter 4 to determine
the Code. under Regulations sections 1.1471-3(f) the account holder's status or to report
Nonresident alien individual. Any and, for an FFI, 1.1471-4(c)(4)(i) to the account as a U.S. account. See
individual who is not a citizen or resident determine the chapter 4 status of the Regulations section 1.1471-5(g).
of the United States is a nonresident payee when it cannot reliably associate
a payment with valid documentation. Recipient. For chapter 3 purposes, a
alien individual. An alien individual recipient includes any of the following.
meeting either the green card test or the Publicly traded partnership (PTP). A • A beneficial owner of income.
substantial presence test for the PTP is any partnership in which • A QI.
calendar year is a resident alien. Any interests are regularly traded on an • A WP or WT.
person not meeting either test is a established securities market or are • A U.S. branch that is treated as a
nonresident alien individual. readily tradable on a secondary market U.S. person under Regulations section
Additionally, an alien individual who is (regardless of the number of its 1.1441-1(b)(2)(iv)(A).
treated as a nonresident alien pursuant partners). However, it does not include • A foreign partnership or a foreign trust
to Regulations section 301.7701(b)-(7) a PTP treated as a corporation under (other than a WP or WT), but only to the
for purposes of figuring out the section 7704. extent the income is effectively
individual’s U.S. tax liability, or an alien connected with its conduct of a trade or
individual who is a bona fide resident of Qualified derivatives dealer (QDD).
A QDD is a QI that is an eligible entity business in the United States.
Puerto Rico, Guam, the Commonwealth • A payee who is not known to be the
of the Northern Mariana Islands, the that agrees to meet the requirements of
Regulations section 1.1441-1(e)(6)(i) beneficial owner, but who is presumed
U.S. Virgin Islands, or American Samoa to be a foreign person under the
is a nonresident alien individual. An and the QI agreement. An eligible entity
is defined in Regulations section presumption rules.
individual will not be treated as a U.S. • A PAI.
person for a tax year or any portion of a 1.1441-1(e)(6)(ii).
• A partner receiving a distribution of
tax year that the individual is a To act as a QDD, the home office or ECI from a PTP or nominee.
dual-resident taxpayer who is treated as branch, as applicable, must qualify and • A QSL.
a nonresident alien for purposes of be approved for QDD status and must
figuring his or her U.S. tax liability. See represent itself as a QDD on its Form For chapter 3 purposes, a recipient
Pub. 519, U.S. Tax Guide for Aliens, for W-8IMY and separately identify the does not include any of the following.
• An NQI.
Instructions for Form 1042-S (2022) -7-• A nonwithholding foreign partnership Specified U.S. person. A specified Withholding foreign partnership
(NWP), if the income is not effectively U.S. person is any U.S. person other (WP) or withholding foreign trust
connected with its conduct of a trade or than a person identified in Regulations (WT). A WP or WT is a foreign
business in the United States. section 1.1473-1(c). partnership or trust that has entered into
• A disregarded entity other than a a withholding agreement with the IRS in
hybrid entity claiming treaty benefits. Substantial U.S. owner. A substantial
which it agrees to assume primary
• A foreign trust that is described in U.S. owner is a specified U.S. person
withholding responsibility for all
section 651(a) (a foreign simple trust) if described in Regulations section
payments that are made to it for its
1.1473-1(b). For purposes of filing this
DRAFT AS OF
the income is not effectively connected partners, beneficiaries, or owners under
with the conduct of a trade or business form, a reporting Model 2 FFI reporting
chapter 3 (except for sections 1445 and
in the United States. an account held by a passive NFFE
1446) and under chapter 4. For
• A foreign trust to the extent that all or should substitute the term “controlling
information on these withholding
a part of the trust is treated as owned by person that is a specified U.S. person”
agreements, see Rev. Proc. 2017-21 at
the grantor or other person under for “substantial U.S. owner” and refer to
IRS.gov/irb/2017-06_IRB#RP-2017-21
sections 671 through 679 (a foreign the applicable Model 2 IGA for the
October 28, 2021
and Regulations section 1.1441-5.
grantor trust). definition of controlling person. A
• A U.S. branch that is not treated as a territory NFFE that is not an excepted Nonwithholding foreign
U.S. person unless the income is, or is NFFE determines its substantial U.S. partnership (NWP) or
treated as, effectively connected with owners by applying the 10% threshold nonwithholding foreign trust (NWT).
the conduct of a trade or business in the in Regulations section 1.1473-1(b)(1). An NWP or NWT is any partnership or
United States. Territory FI. A territory FI is a financial trust (other than a complex trust) that is
For chapter 4 purposes, a recipient institution that is incorporated or not a U.S. person and that is not a WP
also includes any of the following. organized under the laws of any U.S. or WT.
• A recalcitrant account holder not territory and is not an investment entity.
included in a chapter 4 reporting pool. See Regulations section 1.1471-5(e)(1) Amounts Subject to
• A QI. (iii) for the definition of investment entity. Reporting on Form 1042-S
• A WP or WT. U.S. branch treated as a U.S. person. Amounts subject to reporting on Form
• A PAI. A U.S. branch may agree to be treated 1042-S are amounts from U.S. sources
• A participating FFI or a registered as a U.S. person if it meets the paid to foreign persons (including
deemed-compliant FFI that is an NQI, requirements described in the persons presumed to be foreign) or
NWP, or NWT and provides chapter 4 regulations under chapter 3. See included in a U.S. payee pool that are
withholding rate pool information to the Regulations section 1.1441-1(b)(2)(iv) reportable under chapters 3 and 4, even
extent permissible. (A). Additionally, a territory FI may agree if no amount is deducted and withheld
• A participating FFI or to be treated as a U.S. person. from the payment because of a treaty or
deemed-compliant FFI that is the Code exception to taxation or if any
beneficial owner, including a The U.S. branch or territory FI must amount withheld was repaid to the
nonreporting FFI under a Model 1 or provide a Form W-8IMY evidencing that payee. Amounts subject to reporting are
Model 2 IGA. it is agreeing to be treated as a U.S. amounts from sources within the United
• A U.S. branch or territory FI treated person. States that constitute (a) FDAP income
as a U.S. person under Regulations A U.S. branch that is treated as (including deposit interest); (b) certain
section 1.1441-1(b)(2)(iv)(A). a U.S. person is treated as such gains from the disposal of timber, coal,
• An NFFE that is not a flow-through
!
CAUTION solely for purposes of or domestic iron ore with a retained
entity or acting as an intermediary. determining whether a payment is economic interest; and (c) gains relating
• A foreign partnership or a foreign trust subject to withholding. The branch is, to contingent payments received from
(other than a WP or WT), but only to the for purposes of information reporting, a the sale or exchange of patents,
extent the income is effectively foreign person, and payments to such a copyrights, and similar intangible
connected with its conduct of a trade or branch must be reported on Form property. A payment is also subject to
business in the United States. 1042-S. reporting if withholding under chapter 4
• A partner or beneficiary of a is applied (or required to be applied) to
flow-through entity that is an NFFE Withholdable payment. A the payment.
(other than a WP or WT). withholdable payment is generally any
• A nonparticipating FFI that is a payment of U.S. source FDAP income, Amounts subject to reporting on
beneficial owner. subject to certain exceptions. For Form 1042-S include, but are not limited
• An exempt beneficial owner that is exceptions and additional information, to, the following amounts to the extent
not a flow-through entity or acting as an see Pub. 515 and Regulations section they are from U.S. sources.
intermediary. 1.1473-1(a). • Interest on deposits paid to
certain nonresident aliens.
For chapter 4 purposes, a recipient is Withholding certificate. The term Withholding agents must report certain
generally the same person that is a “withholding certificate” refers to Form interest described in section 871(i)(2)(A)
recipient for chapter 3 purposes. W-8 or Form W-9 in most cases. aggregating $10 or more paid with
Specified notional principal contract respect to a deposit maintained at an
(SNPC). An SNPC is any specified Note. Throughout these instructions, a office within the United States if such
notional principal contract within the reference to or mention of “Form W-8” is interest is paid to a nonresident alien
meaning of Regulations section a reference to Forms W-8BEN, individual who is a resident of a country
1.871-15(d). W-8BEN-E, W-8ECI, W-8EXP, and/or identified in Rev. Proc. 2019-23,
W-8IMY. 2019-38 I.R.B. 725, available at
-8- Instructions for Form 1042-S (2022)IRS.gov/irb/2019-38_IRB#REV- are presumed to be) effectively An excess inclusion allocated to the
PROC-2019-23 (or any superseding connected with the conduct of a trade or following foreign persons must be
revenue procedure that is effective as of business in the United States even if no included in that person's income at the
January 1, 2022). A payer may elect to withholding certificate is required. Note same time as other income from the
report interest described above paid to that bank deposit interest is subject to entity is included in income.
any nonresident alien individual by Form 1042-S reporting if it is ECI or • Shareholder of a real estate
reporting all such interest. otherwise reportable on Form 1042-S investment trust (REIT).
When completing Form 1042-S, use (see Interest on deposits, earlier). ECI of • Shareholder of a regulated
DRAFT AS OF
income code 29 in box 1 and exemption a PTP distributed to a foreign partner investment company (RIC).
code 02 in box 3a for chapter 3 must be reported on Form 1042-S. • Participant in a common trust fund.
purposes, and the applicable chapter 4 • Notional principal contract • Patron of a subchapter T cooperative
exemption code in box 4a (see the income. Income from notional principal organization.
instructions for Boxes 3a and 4a, later). contracts that the payer knows, or must • Students, teachers, and
• Interest on deposits subject to presume, is effectively connected with researchers. Amounts paid to foreign
the conduct of a U.S. trade or business students, trainees, teachers, or
October 28, 2021
chapter 4 withholding. Interest on
deposits from U.S. sources are is subject to reporting using income researchers as scholarship or fellowship
withholdable payments and, therefore, code 32. The amount to be reported is income, and compensation for personal
may be subject to withholding under the amount of cash paid on the contract services (whether or not exempt from
chapter 4. If payers withhold tax, they during the calendar year. Any amount of tax under an income tax treaty) must be
must report the interest and tax on Form interest determined under the provisions reported. However, amounts that are
1042-S. of Regulations section 1.446-3(g)(4) exempt from tax under section 117 are
• Corporate distributions. The entire (dealing with interest in the case of a not subject to reporting.
amount of a corporate distribution significant nonperiodic payment) is • Amounts paid to foreign
(whether actual or deemed) must be reportable as interest and not as governments, foreign central banks
reported, regardless of any estimate of notional principal contract income. See, of issue, and international
the part of the distribution that however, the separate reporting for organizations. These amounts are
represents a taxable dividend. Any dividend equivalent payments, later. subject to reporting even if they are
distribution, however, that is treated as • Insurance premiums. Insurance exempt from chapter 3 withholding
gain from the redemption of stock is not premiums from U.S. sources under section 892 or 895.
an amount subject to withholding. For (regardless of whether or not the • Foreign targeted registered
information on distributions from the premium payments are subject to the obligations. Interest paid on registered
disposition of a U.S. real property section 4371 excise tax) are obligations targeted to foreign markets
interest paid by a publicly traded trust or withholdable payments under chapter 4. paid by a U.S. person to a foreign
a QIE, see Distributions Attributable to If the payment is actually withheld upon person other than a financial institution
Dispositions of U.S. Real Property or should have been withheld upon (but or a member of a clearing organization
Interests by Publicly Traded Trusts and the withholding agent failed to withhold), is an amount subject to reporting.
Qualified Investment Entities, later. such amount must be reported on Form • Original issue discount (OID) from
• Interest. Interest subject to reporting 1042-S. Insurance premiums from U.S. the redemption of an OID obligation.
includes the part of a notional principal sources are amounts subject to The amount subject to reporting is the
contract payment that is characterized chapter 3 withholding (excluding amount of OID actually includible in the
as interest. amounts subject to the section 4371 gross income of the foreign beneficial
• Rents. excise tax) that must be reported on owner of the income, if known.
• Royalties. Form 1042-S. Otherwise, the withholding agent should
• Compensation for independent • REMIC excess inclusions. Excess report the entire amount of OID as if the
personal services performed in the inclusions from REMICs (income code recipient held the instrument from the
United States. 02) and withheld tax must be reported date of original issuance. See Pub.
• Compensation for dependent on Form 1042-S. A domestic 1212, Guide to Original Issue Discount
personal services performed in the partnership must separately state a (OID) Instruments.
United States (but only if the partner's allocable share of REMIC • Certain distributions attributable
beneficial owner is claiming treaty taxable income or net loss and the to dispositions of U.S. real property
benefits). excess inclusion amount on interests. See Distributions Attributable
• Annuities. Schedule K-1 (Form 1065). If the to Dispositions of U.S. Real Property
• Pension distributions and other partnership allocates all or some part of Interests by Publicly Traded Trusts and
deferred income. its allocable share of REMIC taxable Qualified Investment Entities, later.
• Most gambling winnings. Proceeds income to a foreign partner, the partner • Dividend equivalent payments.
from a wager placed in blackjack, must include the partner's allocated Dividend equivalent payments have
baccarat, craps, roulette, or big-6 wheel amount in income as if that amount was been divided into the following three
are not amounts subject to reporting. received on the earliest to occur of (1) income code reporting categories.
• Cancellation of indebtedness. the date of distribution by the 1. Substitute dividends that are
Agents must report income from the partnership, (2) the date the foreign dividend equivalents (income code 34
cancellation of indebtedness unless the partner disposes of its indirect interest in or 53).
withholding agent is unrelated to the the REMIC residual interest, or (3) the
last day of the partnership's tax year. 2. Dividend equivalents with respect
debtor and does not have knowledge of to transactions that are section 871(m)
the facts that give rise to the payment. transactions as a result of combining
The partnership must withhold tax on
• Effectively connected income the part of the REMIC amount that is an transactions under Regulations section
(ECI). ECI includes amounts that are (or 1.871-15(n) (income code 56).
excess inclusion.
Instructions for Form 1042-S (2022) -9-You can also read
