Section 1—Record — Instruction 1042

Lines 1 through 60. Except as otherwise provided in these instructions, include the tax liability for the period in which the income was paid or distributed regardless of whether the liability is under chapter 3 or 4 and regardless of whether the liability was satisfied through withholding or was paid by the withholding agent (see the instructions for box 11 of Form 1042-S). Do not enter any negative amounts on these lines. If you are required to report a reduction to liability on line 59 (because you made a repayment under the reimbursement or set-off procedure), and this results in a negative amount of tax liability for the period corresponding to line 59, you should instead report any negative amount for the next earlier period(s) so that

you are not reporting any negative amounts on lines 1 through 60. See Adjustment for Overwithholding , later.

Caution: Lines 1 through 60 must show the withholding agent’s record of federal tax liability for payments made during the applicable quarter-monthly period. Withholding agents should report the tax liability for each period, rather than the amount of tax actually deposited with the IRS. As such, the sum of lines 5, 10, 15, 20, 25, 30, 35, 40, 45, 50, 55, and 60 should be reported on lines 64b through 64d, as applicable (see the instructions for lines 64b through 64d, later).

Caution: Withholding and depositing of tax is not required under both chapters 3 and 4 for the same payment. In the case of a payment for which withholding is required under chapters 3 and 4, a withholding agent may credit the withholding applied under chapter 4 against its liability for any tax due under section 1441, 1442, or 1443. For a payment subject to withholding under section 1445 or 1446, withholding under chapter 4 does not apply.

Foreign partners of U.S. partnerships and foreign beneficiaries of U.S. trusts. To the extent that a domestic partnership has not distributed a foreign partner’s distributive share of income subject to withholding under section 1441, 1442, or 1443, or under chapter 4, it should not include any tax liability on lines 1 through 60 for tax relating to the partner’s distributive share in the year the partnership earns the income, subject to Regulations section 1.1441-2(e)(7) for certain amounts with respect to section 871(m) transactions and the rule for QDDs in the QI agreement. For distributive shares not actually distributed, the partnership must include any tax liability on lines 1 through 60 of the Form 1042 for the following year. Include the tax liability on the line that represents the earlier of the following dates.

The date on which the Schedule K-1 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc., is sent or otherwise furnished to the foreign partner.
The due date for furnishing Schedule K-1 (Form 1065) to the partner.

Include such tax liability for the period that includes the date the tax was required to be withheld. See Regulations section 1.1441-5(b)(2)(i)(A).

A domestic trust should report on lines 1 through 60 in the same manner as a U.S. partnership to the extent that it is required to distribute, but has not actually distributed, a foreign beneficiary’s share of distributable net income subject to withholding under section 1441, 1442, or 1443, or under chapter 4, before the date (without extensions) on which the income is required to be reported on Form 1042-S. See Regulations section 1.1441-5(b)(2)(ii).

Example. In 2025, USP, a U.S. partnership, has foreign partners that are individuals and for which it has obtained valid documentation to establish their foreign status. The withholding tax under section 1441 relating to the distributive shares of the foreign partners was $120. USP made no distributions in 2025. On the 2025 Form 1042, USP did not enter any amount as tax liability on lines 1 through 60 because it did not distribute any amounts.

Instructions for Form 1042 (2025) 7

USP made a distribution on February 11, 2026, that related to the 2025 distributive shares of the foreign partners. USP withheld $100 at the time of the distribution. USP sent the 2025 Schedules K-1 (Form 1065) to its partners on April 2, 2026.

On the 2026 Form 1042, USP entered $100 on line 7. This is the tax liability for the period (February 8 through 15) during which it made a distribution. USP entered $20 on line 16. This is the tax liability for the period (April 1 through 7) during which it furnished the Schedules K-1 (Form 1065) to the partners.

Tip: For other than a PTP, use Form 8804, Annual Return for Partnership Withholding Tax (Section 1446) , to report withholding tax liability on the partnership’s income effectively connected with a U.S. trade or business.

Note: For rules that apply to withholding on section 871(m) transactions, see Regulations section 1.1441-2(e). For rules that apply to withholding by QDDs, see the QI agreement.

Withholding and reporting in a subsequent year. Proposed regulations issued on December 18, 2018 (83 FR 64757), would allow partnerships or trusts that are permitted to withhold in a subsequent year with respect to a foreign partner’s or beneficiary’s share of income for the prior year to designate the deposit of the withholding as attributable to the preceding year. In such a case, the partnership or trust will be required to report the associated amount and tax withheld on Forms 1042 and 1042-S for the preceding year. If a partnership withholds on a foreign partner’s share of income after March 15 of the subsequent year, the due date for filing the applicable Form(s) 1042-S is September 15 of the subsequent year. For example, if a partnership withholds on April 1, 2026, with respect to a foreign partner’s share of undistributed income for the 2025 calendar year, the partnership may designate the deposit as made for 2025 and report the liability and tax withheld on the 2025 Form 1042 and the 2025 Form 1042-S for the partner. The partnership or trust must also ensure that its chapter 3 status code properly reflects its status as a partnership or trust (including as a WP or WT). The associated liability should be reported on line 59, with the share of income to the partner or beneficiary reported on line 62, and the amount withheld reported on line 65b.

Note: Reporting in the preceding year is also permitted when a partnership or trust allocates a share of income allocable to a partner or beneficiary attributable to the preceding year that was not distributed during that year, provided that the partnership meets the previously referenced due date of September 15, 2026, for the applicable Form(s) 1042-S.

Note: A U.S. partnership or trust may rely on the proposed regulations for 2025 in lieu of the reporting described earlier. See Foreign partners of U.S. partnerships and foreign beneficiaries of U.S. trusts , earlier. The proposed regulations may also be applied by a foreign partnership or trust that itself withholds as described above.

Note: For rules that apply for WPs and WTs, see Rev. Proc. 2017-21, 2017-6 I.R.B. 791, available at IRS.gov/irb/ 2017-06_IRB#RP-2017-21 .

Corporate distributions. Do not include on lines 1 through 60 any tax liability caused by adjustments of underwithheld tax on corporate distributions made in calendar year 2025 if the following apply.

The distributing corporation made a reasonable estimate of accumulated and current earnings and profits under Regulations section 1.1441-3(c)(2)(ii)(A) or 1.1474-6(c)(2)(ii).
The distributing corporation or intermediary immediately paid over the underwithheld tax by March 16, 2026.

Instead, include these payments of underwithheld tax on line 64a.

Excise tax on specified federal procurement pay- ments. Section 5000C imposes a 2% tax on any foreign person that receives a specified federal procurement payment. Include on lines 1 through 60 any withholding obligation under section 5000C with respect to specified federal procurement payments. Report the amount on the line that corresponds with the date the deposit was due.

Specified federal procurement payment. A “specified federal procurement payment” means any payment made pursuant to a contract with the U.S. Government entered into after January 1, 2011, for the provision of goods, if such goods are manufactured or produced in any country which is not a party to an international procurement agreement with the United States, or the provision of services, if such services are provided in any country which is not a party to an international procurement agreement with the United States.

QIs with no primary chapters 3 and 4 withholding re- sponsibility. If you are a QI that did not assume primary withholding responsibility under both chapters 3 (including sections 1446(a) and (f)) and 4, enter the total amount of the tax liability of U.S. withholding agent(s) under both chapters 3 and 4 on line 59. Report all other amounts on the line that corresponds with the date the liability was incurred.

Note: Reporting on line 59 as described above also applies to any other entity that reports on Form 1042 to the extent such entity claims a credit on line 67 for amounts withheld by another withholding agent (whether under chapter 3 or 4).

Adjustments to withholding. If you used procedures for adjusting overwithholding or underwithholding, see Adjustment for Overwithholding and Adjustment for Underwithholding , later, for instructions on reporting on lines 1 through 60.

Escrow procedure. A withholding agent that withheld tax during calendar year 2025 and that was not required to deposit with the IRS the amount of tax withheld during calendar year 2025 pursuant to the escrow procedure under Regulations section 1.1471-2(a)(5)(ii) or 1.1441-3(d) should not report such amount as a liability on lines 1 through 60 or lines 64a through 64d and should not report such amount as withheld on lines 63a through 63d.

8 Instructions for Form 1042 (2025)

An amount held in escrow is required to be reported on the future calendar-year return for the year in which the withholding agent is required to deposit the amount of tax with the IRS.

Withholding after the time of payment. In limited cases, the regulations under chapters 3 and 4 allow you to withhold after the time that a payment has been made. In such a case, you should include the tax liability for the period in which you actually withheld with respect to the payment. If you withheld in the year following the calendar year in which the payment was made, include the tax liability relating to the payment on line 59 for the year you made the payment. For example, if a deemed distribution under section 305(c) is made on August 15, 2025, but you are not required to withhold with respect to the deemed distribution until a subsequent payment of interest is made on February 15, 2026 (see Proposed Regulations section 1.1441-2(d)(4)), report the tax liability related to the deemed distribution on line 59.

You should report on line 63c(2) the amounts you withheld in the following calendar year in which the payment was made. You should also report deposits of amounts withheld in the year following the calendar year in which the payment was made on line 65b.

Line 61. Enter the number of Forms 1042-S filed on paper and electronically.

Total Gross Amounts Reported

Lines 62a through 62c. Enter the amounts reported on all Forms 1042-S for the calendar year (regardless of whether the form was filed electronically or on paper) and for all Forms 1000, Ownership Certificate.

Caution: Be sure to reconcile amounts on Form 1042 with amounts on Forms 1042-S (including Forms 1042-S filed electronically) to avoid unnecessary correspondence with the IRS.

Line 62a. The amount on line 62a should equal the sum of all amounts shown in box 2 of Form 1042-S that are payments of U.S. source Fixed, Determinable, Annual, or Periodical (FDAP) income, less the sum of all amounts that are U.S. source substitute payments reported on line 62b.

Line 62b. The amount on:

Line 62b(1) should equal the sum of all amounts shown in box 2 of Form 1042-S that are U.S. source substitute dividend payments, and
The amount shown on line 62b(2) should equal all amounts shown in box 2 of Form 1042-S that are U.S. source substitute payments other than substitute dividend payments.

See Regulations section 1.1441-2(b)(4) regarding substitute payments.

Line 62c. The amount on line 62c should equal the sum of all amounts of U.S. source FDAP income shown in box 2 of Form 1042-S and all amounts shown as gross interest paid on Forms 1000.

Line 62d. Enter gross amounts of U.S. source FDAP income reportable on Forms 1000 and Forms 1042-S if different from the total gross amounts actually reported on Forms 1000 and Forms 1042-S (as shown on line 62c).

Total Tax Reported as Withheld or Paid

Lines 63a through 63e. Except as noted directly below, enter for each line the amounts reported for all Forms 1042-S (regardless of whether the form was filed electronically or on paper) and for all Forms 1000.

Line 63a. The amounts reported on line 63a should be the amounts actually withheld by the withholding agent before any applicable adjustments reported on lines 63c(1) and 63c(2). Line 63c(1). The amounts reported on line 63c(1) should be amounts you repaid to the beneficial owner or payee in the year following the calendar year of overwithholding pursuant to either the reimbursement or set-off procedure (and should also be reported as a reduction in tax liability on line 59). See Adjustment for Overwithholding, later. The total of the amounts reported on line 63c(1) should equal the sum of all amounts reported in box 9 of the corresponding Forms 1042-S.

Line 63c(2). The amounts reported on line 63c(2) should be amounts that you withheld in the year following the calendar year of underwithholding from future payments made to a beneficial owner or from other property or additional contributions of a beneficial owner that you hold in custody or otherwise control. See Adjustment for Underwithholding , later. Also report on line 63c(2) any other amounts that you withheld in the year following the calendar year in which the related payments were made (to the extent permitted under an applicable regulation section in chapter 3 or 4). See Withholding after the time of payment, earlier, for how to report the tax liability related to such payments.

Note: The total of the amounts reported on lines 63a and 63c(2) should equal the sum of all amounts withheld by the withholding agent and reported in box 7a of the corresponding Forms 1042-S.

Note: The total of the amounts reported on lines 63b(1) and 63b(2) should equal the sum of all amounts reported in box 8 of all Forms 1042-S sent to recipients.

Line 63d. The amounts reported on line 63d should be the amounts paid by the withholding agent from its own funds rather than through withholding from the payment to the recipient. The amount on line 63d should equal the sum of all amounts reported in box 11 of all Forms 1042-S sent to recipients.

Note: Amounts withheld and held in escrow (and not deposited with the IRS) pursuant to the escrow procedure under Regulations section 1.1471-2(a)(5)(ii) or 1.14413(d) are not reported on lines 63a through 63d until the year they are deposited with the IRS. See the instructions for lines 1 through 60, earlier. Therefore, amounts that are reported as held in escrow (see box 7b of Form 1042-S) are not taken into account for purposes of reconciling lines 63a through 63d with the corresponding Forms 1042-S.

Total Net Tax Liability

Line 64a. Include on line 64a any adjustments to total net tax liability. For example, report any adjustment to liability when:

A distributing corporation made a reasonable estimate of accumulated and current earnings and profits under

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Regulations section 1.1441-3(c)(2)(ii)(A) or 1.1474-6(c)(2)(ii); and

A distributing corporation or intermediary paid over any underwithheld tax with respect to the distribution by March 16, 2026.

Note: The amount reported on line 64a must not be included in the Record of Federal Tax Liability (lines 1 through 60).

Lines 64b and 64c. Enter the sum of the amounts reported on the Record of Federal Tax Liability (that is, the sum of lines 5, 10, 15, 20, 25, 30, 35, 40, 45, 50, 55, and 60) that are attributable to liability under chapter 3 (on line 64b) and chapter 4 (on line 64c). The amounts shown on lines 64b and 64c should not include any amounts shown on lines 64a and 64d. Do not make any other adjustments to this line.

Line 64d. Enter on line 64d amounts reported on the Record of Federal Tax Liability that are attributable to liability for specified federal procurement payments under section 5000C.

Line 64e. The amount on line 64e should equal the sum of lines 64a through 64d.

Reporting of Taxes Paid and Overpayment or Balance Due

Line 65. Enter the total tax deposits you made for the year (including amounts paid with an extension of time to file). Enter deposits of tax withheld during the calendar year in which the related payment was made on line 65a. Enter deposits of tax withheld during the year following the calendar year in which the related payment was made (to the extent permitted under an applicable regulation section in chapter 3 or 4) on line 65b. See Withholding and reporting in a subsequent year, earlier.

Line 66. Enter any overpayment reported on the 2024 Form 1042 that you are applying as a credit on the 2025 Form 1042. See Lines 71b through 71d , later.

Line 67. You are permitted to take a credit for amounts withheld by other withholding agents that relate to the total net tax liability reported on lines 64b and 64c. For example, you are a QI and the amount you entered on line 64b includes amounts withheld by a U.S. withholding agent under chapter 3 with respect to payments made to you as an intermediary on behalf of your account holders. You may take a credit on line 67 for the amounts that were withheld by the U.S. withholding agent. The amount on line 67 should equal the sum of box 8 of all Forms 1042-S that you file for the year.

All withholding agents (including QIs, WPs, WTs, NQIs, NWPs, and NWTs) must substantiate entries on lines 67a and 67b by attaching a supporting Form(s) 1042-S or 1099 to verify the credit amounts claimed for withholding by other withholding agents. Failure to do so will result in the denial of the refund or credit being claimed. If you are a PTP or a nominee withholding under section 1446, the tax paid for a payee may only be claimed as a credit by the payee.

However, a withholding agent (including a QSL) may not claim on line 67b a credit for prior withholding by

another withholding agent on substitute dividends paid in a series of stock loans or stock repurchase agreements. See FAQ 26 under the General compliance section of FATCA - FAQs general.

Line 69. If you have a balance due, the IRS recommends paying electronically whenever possible. Go to IRS.gov/ Payments to see all your payment options.

Lines 70a and 70b. Enter on line 70a any overpayment attributable to payments subject to withholding under chapters 3 and 4. Enter on line 70b any overpayment attributable to payments subject to the excise tax on specified federal procurement payments. Do not include on these lines any overpayment attributable to amounts that were actually withheld from the beneficial owner (unless such amounts were repaid pursuant to the reimbursement or set-off procedure).

Overpayment credit. If you are claiming the credit, check the appropriate box on line 71a. If you claim a credit, it can reduce your required deposits of withheld tax for 2026.

Note: If you repaid the recipient overwithheld amounts after year-end 2025 using the reimbursement or set-off procedure, you are not able to claim a refund for such an amount on the 2025 Form 1042. Instead, you must indicate on line 71a that you are claiming a credit to be applied to the 2026 calendar year. See Adjustment for Overwithholding, later.

Line 71a. You may claim an overpayment (the sum of lines 70a and 70b) as a refund or a credit.

Lines 71b through 71d. Direct deposit of refund. If you elect to have the refund directly deposited into your checking or savings account at any U.S. bank or other financial institution instead of having a check sent to you, complete lines 71b through 71d.

Line 71b. The routing number must be nine digits. Line 71c. Check the appropriate box for the type of account. Do not check more than one box. If unknown, leave blank.

Line 71d. The account number can be up to 17 characters (both numbers and letters). Include hyphens but omit spaces and special symbols. Enter the number from left to right and leave any unused boxes blank.

Adjustment for Overwithholding What to do if you overwithheld tax depends on when you discover the overwithholding.

Overwithholding discovered by March 15 of the fol- lowing calendar year. If you discover that you overwithheld tax by March 15 of the following calendar year, you may use any undeposited amount of tax to make any necessary adjustments between you and the recipient of the income before you make a deposit. Repay the recipient and reduce the amount of your total deposit. Report the reduced tax liability on lines 1 through 60 for the period(s) for which you repaid the overwithheld tax.

If the undeposited amount is not enough to make any adjustments, or if you discover the overwithholding after the entire amount of tax has been deposited, you can use

10 Instructions for Form 1042 (2025)

either the reimbursement or set-off procedure to adjust the overwithholding.

Tip: If March 15 is a Saturday, Sunday, or legal holiday, the next business day is the final date for these actions.

Reimbursement procedure. Under the reimbursement procedure, you repay the beneficial owner or payee the amount overwithheld. You use your own funds for this repayment and may reimburse yourself for an amount repaid by reducing the amount of any subsequent deposit of tax made during the calendar year or the subsequent calendar year. You must make the repayment by the earlier of:

The date you actually file Form 1042-S for the calendar year in which the amount was overwithheld; or
The due date for filing Form 1042-S for the calendar year (generally, March 15 of the year after the calendar year in which the amount is overwithheld).

The reimbursement amount may not be more than the amount you actually repaid. The amount of the reduced tax liability for amounts repaid to the beneficial owner or payee during the calendar year must be reflected on the line for the period you reduced your liability. The amount reported on line 59 for the calendar year for which you overwithheld tax must reflect the amount of the reduced tax liability for amounts you repaid the beneficial owner or payee in the subsequent calendar year, if applicable. Amounts reported on line 63c(1) should be limited to amounts repaid to the beneficial owner or payee in the subsequent calendar year (before the earlier of the filing of the associated Form 1042-S or the due date for such form). On line 71a, indicate that you are claiming a credit to be applied in the 2026 calendar year for amounts you repay the beneficial owner or payee in the subsequent calendar year (note that you may not claim a refund for such an amount).

For example, if you overwithhold tax in 2025, you must repay the beneficial owner by March 16, 2026 (or the date on which you filed the associated Form 1042-S with the IRS, if earlier). You must keep a receipt showing the date and amount of the repayment and provide a copy of the receipt to the beneficial owner if you repaid the beneficial owner. If you repaid the beneficial owner after year-end 2025, you must report the repayment on line 63c(1). You must reduce your federal tax liability on line 59 of your 2025 Form 1042 by the amount of the repayment and claim a credit on line 71a for the difference between your tax liability and your deposits with the IRS. You may reimburse yourself by reducing any subsequent deposits you make before the end of calendar year 2026 (the year after the calendar year in which the amount was overwithheld).

The due date for filing Form 1042-S for the calendar year (generally, March 15 of the year after the calendar year in which the amount is overwithheld).

The reductions that you applied pursuant to the set-off procedure during the calendar year must be reflected on the line for the period you reduced your liability. The amount reported on line 59 for the calendar year for which you overwithheld tax must reflect reductions that you applied pursuant to the set-off procedure during the subsequent calendar year, if applicable. Amounts reported on line 63c(1) should be limited to amounts repaid to the beneficial owner or payee (by reducing the withholding on a later payment) in the subsequent calendar year (before the earlier of the filing of the associated Form 1042-S or the due date for such form).

On line 71a, indicate that you are claiming a credit to be applied to the 2026 calendar year for amounts you set off in the subsequent calendar year (note that you may not claim a refund for such an amount).

For 2025, a withholding agent may rely on proposed regulations (83 FR 64757), which allow adjustments to overwithholding using the reimbursement or set-off procedure until the extended due date for filing Form 1042-S (unless a Form 1042-S has already been filed with the IRS or furnished to the recipient). A withholding agent may also use the extended due date for filing Form 1042 to claim a credit for any adjustments to overwithholding.

Overwithholding discovered at a later date. If you discover after March 15 of the following calendar year that you overwithheld tax for the prior year, do not adjust the amount of tax liability reported on Form 1042 or on any deposit or payment for that prior year. Do not repay the beneficial owner or payee the amount overwithheld unless you are a QI, WP, WT, PFFI, or reporting Model 1 FFI making a claim for a collective refund under your respective agreement with the IRS. See Regulations section 1.1471-1(b)(114) for the definition of a reporting Model 1 FFI.

In this situation, the recipient will have to file a U.S. income tax return (Form 1040-NR or Form 1120-F) or, if a tax return has already been filed, a claim for refund (Form 1040-X or amended Form 1120-F) to recover the amount overwithheld.

Adjustment for Underwithholding Under the procedures for adjusting underwithholding (see Regulations sections 1.1461-2(b) and 1.1474-2(b)), you may withhold from future payments made to a beneficial owner the tax that should have been withheld, or satisfy the tax from property or additional contributions of the beneficial owner that you hold in custody or otherwise control, before the date (without extensions) that the Form 1042 is required to be filed. You should report the liability related to such withholding on lines 1 through 60 for the period during the year in which you adjusted underwithholding by withholding additional tax. If you adjust underwithholding by withholding in the year following the calendar year of underwithholding, you should report the increased liability on line 59 for the year in which the underwithholding occurred. Amounts reported on line 63c(2) should be limited to amounts withheld in the year following the calendar year of

Set-off procedure. Under the set-off procedure, you repay the beneficial owner or payee the amount overwithheld by reducing the amount you would have been required to withhold on later payments you make to that person but only if made before the earlier of:

The date you actually file Form 1042-S for the calendar year in which the amount was overwithheld; or

Instructions for Form 1042 (2025) 11

underwithholding (before the date that the Form 1042 is required to be filed without extensions). You should report deposits of amounts withheld in the year following the calendar year of underwithholding pursuant to these procedures on line 65b. See Deposits made during subsequent year, earlier, for how to designate such deposits as attributable to the year of underwithholding.