US Tax Reporting

All funds withheld by custodians, such as brokers or bankers, are paid to the US Government. This is generally done on a weekly basis by the custodian. Once the funds are remitted the agent can only get refunds from the IRS under special circumstances.  Generally, reporting on investment income is due to both you, the owner, and to the US government – the IRS on March 15th for the previous calendar year.  Reporting for business income is due to you and the IRS on April 15th for the previous calendar year. If you own an interest in a partnership or LLC – even one that is publicly traded on the stock exchange you will likely receive multiple US tax reports.

Form 1042S

Form 1042S is used to report several types of income to non – US persons.

• Interest
• Corporate Distributions (Dividends)
• Mutual Fund Distributions (L/T Capital gains)
• Rents
• Royalties
• Compensation for Services performed in the US assumes you are in the US less than 30 days as a general rule – there are exceptions.
• Payments in lieu
• Gambling winnings
• Annuities
• Pension and deferred income
• Distributions attributable to dispositions of
• US real Property by Publicly traded trusts and Qualified Investment entities
• The reporting is complex in this area and pertains primarily to REITs and RICs

Not all income that is subject to reporting is subject to withholding. Earlier we discussed investment interest. This is income that is reported but it is not subject to withholding. Form 8805 reports business income.

It is likely that you will receive multiple forms 1042S annually. The form reports only one type of income – and associated withholding if applicable – per form. Codes are used to indicate the type of income.

Example Income Type Codes

• Interest – US obligators
• 06 Dividends
• 28 Gambling winnings
• 29 Deposit interest
• 33 Payments in lieu

The code for certain items like payments in lieu, is determined by the type of payment it is substituting for.

Form 1042S reports all US tax withheld from the type of income being reported, if any tax was refunded or withheld by another agent than the reporter.  Remember that once the 1042S – is filed and reported to the US government – in March – the withholding agents cannot obtain refunds from the IRS.

Form 8805 reports operating income earned by a US trade or business that you may own directly such as a partnership (not publicly traded). Income and any withholding is reported and these forms are due April 15.

If you own an interest in a US passthrough entity, such as a partnership, S-Corporation or LLC, generally you may receive both an 8805 and a K-1 Partnership/S-corp income reporting. This applies to publicly traded partnerships as well as closely held partnerships. Depending on the income, withholding and type of entity you may be required to file a US non-resident tax return for this income.