Guide to Global Payroll Management - 2020 - D-90

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Guide to Global Payroll Management

the highest rate of withholding). If,
however, any one of the owners
requests its own Form 1042-S, you
must furnish a Form 1042-S to the
person who requests it. If the request is
made after a Form 1042-S was filed
reporting the payment and tax withheld
to only one of the joint owners, you
should amend the originally filed Form
1042-S to allocate the payment and tax
withheld among the joint owners
accordingly and provide copies of the
amended forms to each recipient. If
more than one Form 1042-S is issued
for a single payment, the aggregate
amount paid and tax withheld that is
reported on all Forms 1042-S cannot
exceed the total amounts paid to joint
owners and the tax withheld on those
payments. In any event, each Form
1042-S can only include the recipient
information (Boxes 13a through 13d) for
one of the beneficial owners. Form
1042-S must not be completed with
more than one of the joint owners as the
recipient.

In the case of joint owners,
Form 1042-S can only list one of
CAUTION the owners as the recipient in
Box 13a. Form 1042-S must not be
completed with more than one of the
joint owners as the recipient.

Example 1. WA, a U.S. withholding
agent, makes a withholdable payment
of U.S. source dividends to A, a foreign
individual from whom it has received a
Form W-8BEN and who is not eligible
for a reduced rate of chapter 3
withholding under a treaty. WA must file
a Form 1042-S for A, enter "3" in Box 3,
"06" in Box 1 (income code), "00" in Box
3a (chapter 3 exemption code), "30.00"
in Box 3b (chapter 3 tax rate), "15" in
Box 4a (payee not subject to chapter 4
withholding), "00.00" in Box 4b
(chapter 4 tax rate), "16" in Box 13f
(individual), and "23" in Box 13g
(individual).
See Appendix C for a

TIP comprehensive analysis of this

Example 1 fact pattern,
including a step-by-step guide on how
to complete Form 1042-S in its entirety.
Payments to a qualified intermediary
(including a qualified derivatives
dealer), withholding foreign partnership, or withholding foreign trust. A
U.S. withholding agent that makes
payments to a QI (whether or not the QI
assumes primary withholding
responsibility), a QI acting as a QDD
with respect to a payment, a withholding
foreign partnership (WP), or a
withholding foreign trust (WT) should

complete Form 1042-S in most cases,
treating the QI, QDD, WP, or WT as the
recipient.
If a payment is being made to a QI
that is acting as a QDD with respect to
the payment, a U.S. withholding agent
should report the QDD as the recipient
showing the QDD as the recipient in
Box 13a (including any branch identifier
included on the withholding certificate
provided by the QDD) and using
recipient code 35 (qualified derivatives
dealer) as the chapter 3 status code.
See Payments allocated, or presumed
made, to U.S. nonexempt recipients,
later, for exceptions.
A QI that does not assume primary
withholding responsibility is required to
provide information regarding the
allocations of income subject to a
particular withholding rate to the
withholding agent on the withholding
statement associated with its Form
W-8IMY. In such a case, the U.S.
withholding agent must complete a
separate Form 1042-S for each
withholding rate pool associated with
the QI. For purposes of chapter 4, a QI
may provide a single pool of recalcitrant
account holders (rather than separate
pools for each class). In such a case,
the withholding agent may use
chapter 4 pooled reporting code 49
(QI-Recalcitrant Pool-General). A QI
that assumes primary withholding
responsibility, a WP, or a WT is not
required to provide withholding rate pool
information to a withholding agent but
will report such information directly to
the IRS.
A U.S. withholding agent making a
withholdable payment to an FFI that is a
QI (that assumes primary withholding
responsibility), a WP, or a WT must use
recipient code 12 (qualified
intermediary), 09 (withholding foreign
partnership), or 11 (withholding foreign
trust) as the chapter 3 status code and
must use recipient code 05
(participating FFI - other), 06
(participating FFI - reporting Model 2
FFI), 07 (registered deemed-compliant
FFI - reporting Model 1 FFI), 09
(registered deemed-compliant FFI other) for an FFI treated as
deemed-compliant under an IGA, 31
(nonreporting IGA FFI) or, for a payment
to a QI, 27 (exempt beneficial owner) as
the chapter 4 status code. A U.S.
withholding agent must use chapter 4
recipient code 48 (U.S. Payees Pool)
when reporting a reportable amount
allocated to a chapter 4 withholding rate
pool of U.S. payees of a QI and report
the chapter 3 recipient code 12
-12-

D-90

(qualified intermediary). A U.S.
withholding agent must not use any
chapter 3 pooled reporting code (codes
27 through 32) as such codes are only
to be used by a withholding agent that is
a QI, QSL, WP, or WT. See Amounts
Paid by Qualified Intermediaries, later,
and the instructions for Boxes 13f and
13g, later. Use of an inappropriate
recipient code may cause a notice to be
generated.

A QI is required to act in such
capacity only for designated
CAUTION accounts. Therefore, such an
entity also may provide a Form W-8IMY
in which it certifies that it is acting as an
NQI for other accounts and, if it is an FFI
that is receiving a withholdable
payment, that it is a participating FFI,
registered deemed-compliant FFI, or
FFI treated as deemed-compliant under
an IGA. A U.S. withholding agent that
receives a Form W-8IMY on which the
foreign person providing the form
indicates that it is not acting as a QI may
not treat the foreign person as a
recipient except as otherwise provided
in these instructions. A withholding
agent must not use the EIN that a QI
provides in its capacity as such to report
payments that are treated as made to
an entity in its capacity as an NQI. In
that case, use the GIIN, if any, and EIN
that is provided by the entity on its Form
W-8IMY in which it claims that it is
acting as an NQI or flow-through entity.

Note. A withholding agent is required to
use chapter 4 reporting pool codes as
the chapter 4 status code in the case of
withholdable payments made to:
* A QI that does not assume primary
withholding responsibility;
* A participating FFI or registered
deemed-compliant FFI that is an NQI,
NWP, or NWT; or
* An NQI, NWP, or NWT (other than a
nonparticipating FFI) that provides a
pool of nonparticipating FFIs,
if the QI, NQI, NWP, or NWT provides
chapter 4 withholding rate pool
information in the withholding statement
associated with its Form W-8IMY. See
Amounts paid to a nonqualified
intermediary or flow-through entity, later,
and the presumption rules under
Regulations section 1.1471-3(f) when
such information is not provided for a
withholdable payment made to an
entity.
Example 2. WA, a U.S. withholding
agent, makes a withholdable payment
of U.S. source dividends to QI, a
qualified intermediary that does not
assume primary chapters 3 and 4

Instructions for Form 1042-S (2020)

Guide to Global Payroll Management - 2020

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