Form 1042-S reports certain US source income paid to foreign persons and the tax withheld on it. Employers meet it mainly when a nonresident alien employee claims a tax treaty exemption on their pay.
In shortForm 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, is an information return filed by a withholding agent. It is used by a withholding agent to report certain income, and the tax withheld on it, as set out in the form’s instructions. Typical income on it includes interest, dividends, royalties, scholarships and compensation for personal services. For employers, the main case is a nonresident alien employee who claims a tax treaty exemption for their wages, usually with Form 8233. The instructions tell withholding agents not to use Form 1042-S for wages and other compensation paid to employees, which go on Form W-2, except for compensation for dependent personal services for which the employee is claiming treaty benefits. So treaty-exempt pay goes on Form 1042-S, and any pay that is not exempt goes on Form W-2. The instructions also say a Form 1042-S must be filed even if no tax was withheld because the income was exempt under a treaty. The form must be filed with the IRS and given to the recipient by March 15 of the following year, moved to the next business day if the 15th falls on a weekend or holiday. Form 8809 gives an automatic 30-day extension to file, and a separate one-time 30-day extension can be requested for recipient copies.
W-2 or 1042-S for a nonresident employee
Where the pay is reported
Pay
Form
Note
Wages not exempt under a treaty
Form W-2
Normal withholding rules
Wages exempt under a treaty, claimed by the employee
Form 1042-S
Even if no tax was withheld
Both in the same year
Both forms
Split by the treaty limit
See Form 8233 for how the employee claims the treaty exemption, and Form 8809 for extensions.
Pay under the treaty limit goes on Form 1042-S. Pay above it goes on Form W-2.
Worked example: a treaty limit in the middle of the year
A visiting researcher with a $5,000 exemption
A lab hires a nonresident alien research assistant whose home country’s tax treaty exempts up to $5,000 of pay for this kind of work in a year. She gives the lab a Form 8233 for the tax year, and the lab accepts it.
She earns $1,250 a month from September to December 2026, a total of $5,000. All of it fits under the treaty limit, so the lab withholds no federal income tax on it.
Because the pay was exempt under a treaty, the lab reports it on Form 1042-S, not on Form W-2, and files the form and gives her a copy by March 15, 2027, even though nothing was withheld. If she had earned $6,000, the first $5,000 would go on the 1042-S and the other $1,000 on a W-2, with normal withholding on that part. The lab keeps a fresh Form 8233 on file for each tax year she claims the exemption.
Mistakes that are specific to Form 1042-S
Reporting treaty-exempt wages on Form W-2 instead of Form 1042-S.
Skipping the form because no tax was withheld.
Applying a treaty exemption without a current Form 8233 for the tax year.
Missing March 15 because it is later than the January deadline for W-2s and easy to forget.
Putting all of a year’s pay on one form when it went over the treaty limit.
Year-end steps for nonresident employees
List every nonresident alien employee who claimed a treaty exemption during the year.
Split each person’s pay into treaty-exempt amounts for Form 1042-S and other wages for Form W-2.
Check that a valid Form 8233 was on file for the period the exemption was applied.
File Form 1042-S and send recipient copies by March 15, or the next business day.
Request a new Form 8233 for the next tax year if the employee will claim the exemption again.
An employee who leaves partway through the year still needs a Form 1042-S for the treaty-exempt pay. Keep a current address so the copy reaches them.
Second example: an employee who left in October
A university lab’s nonresident research assistant claims a treaty exemption for her pay and leaves in October 2026 to return home, after earning $4,200, all within the treaty limit.
The lab still files Form 1042-S for the $4,200 by March 15, 2027 and sends her copy to the foreign address she gave when she left. Because all of her pay was treaty exempt, she receives no Form W-2 from the lab for 2026.
Track the treaty limit like a running totalSet up a running total of treaty-exempt pay for each employee who files Form 8233. When it gets close to the treaty limit, payroll knows to start normal withholding on the next check instead of finding out in March.
Questions people ask
Who gets a Form 1042-S?
Foreign persons who received certain US source income, such as treaty-exempt wages, scholarships, royalties, interest or dividends.
When is Form 1042-S due?
It must be filed with the IRS and given to the recipient by March 15 of the following year.
What is the difference between Form W-2 and Form 1042-S?
Form W-2 reports wages to employees. Form 1042-S reports income paid to foreign persons, including wages a nonresident employee claims are exempt under a treaty.
Do I need to file Form 1042-S if no tax was withheld?
Yes. The instructions say it must be filed even if no tax was withheld because the income was exempt under a treaty.
Does a nonresident employee get both a W-2 and a 1042-S?
If part of their pay is treaty exempt and part is not, yes: the exempt part goes on Form 1042-S and the rest on Form W-2.
Who files Form 1042-S, the employer or the employee?
The employer, as the withholding agent, files it with the IRS and gives a copy to the employee.
Disclaimer: What you read here about Form 1042-S is general information, not legal, payroll or tax advice, so confirm the current rule where you operate; the examples are fictional.
