U.S. International Tax Reporting Forms

by Kreig Mitchell, Tax Attorney

U.S. persons are usually required to report to the IRS payments made to foreign persons. There are a number of IRS tax Forms that are used for this purpose. Some of these Forms include the following:

1. Forms 1042, 1042-S, and 1042-T. Form 1042 is used to report yearly cumulative amounts of tax withheld from income paid to foreign persons. The instructions for Form 1042-S specify that “amounts paid to foreign persons that are ‘subject to withholding,’ even if no amount is deducted and withheld from the payment because of a treaty or Code exception to taxation.”

Form 1042-S is used to report certain U.S.-source payments made to foreign persons that are subject to withholding. Form 1042-S is equivalent to the IRS Form 1099 or W-

2. Form 1042-T is used by payors to transmit paper Forms 1042-S to the IRS. The payor is to attach Forms 1042-S to one Form 1042-T and remit them to the IRS each year. Taxpayers may now be required to submit Forms 1042-S to the IRS electronically, rather than submitting paper tax returns to the IRS.

2. Form W-8BEN. Form W-8BEN is used by nonresident alien individuals and foreign corporations to claim an exemption from withholding for U.S.-source income that is not connected with a U.S. trade or business. This Form is used to claim an exemption from withholding pursuant to a tax treaty.

3. Form W-8ECI. Form W-8ECI is used by nonresident alien individuals and foreign corporations to claim an exemption from withholding for U.S.-source income that is connected with a U.S. trade or business. Form W-8ECI is used to claim an exemption from withholding pursuant to a tax treaty.

4. Form 8233. Form 8233 is used by nonresident alien individuals to claim an exemption from withholding for independent and dependent personal services performed in the U.S. Form 8233 is used to claim an exemption from withholding pursuant to a tax treaty.

5. Form W-9. Form W-9 is used to report that a U.S. person is not subject to backup withholding. Form W-9 can be used by a U.S. citizen who resides in a foreign country to claim an exemption from withholding pursuant to a tax treaty.

6. Form 8833. Form 8833 is used by a taxpayer to report a treaty based tax return position. A treaty based return position is a position that a treaty of the United States overrules or modifies a provision of the Tax Code and thereby causes (or potentially causes) a reduction of tax on the taxpayer’s tax return. The Regulations now waive this reporting requirement in many cases.

Failure to use the proper form can draw IRS scrutiny, trigger tax audits, and even result in significant IRS penalties. Taxpayers who make payments to foreign persons should consult with an experienced international tax attorney to assess their U.S. tax reporting obligations.

About the Author
Tax Attorney Kreig Mitchell helps taxpayers report and structure taxable international transactions. You can learn more about Mr. Mitchell at http://www.irstaxtrouble.com.