What’s New — Instruction 1042 — Instructions for Form

Claim for credit or refund of amounts withheld on certain borrow fees. On October 23, 2025, Notice 2025-63, 2025-46 I.R.B. 709, available at IRS.gov/IRB/ 2025-46_IRB#NOT-2025-63 , was released announcing that the Department of the Treasury and the IRS intend to issue proposed regulations providing that certain borrow fees, as defined in the notice, are sourced based on the residence of the recipient. Notice 2025-63 provides that taxpayers can rely on the sourcing rule described in the notice with respect to securities lending transactions and sale-repurchase transactions entered into before the forthcoming proposed regulations are published. A withholding agent relying on Notice 2025-63 to claim a collective refund permitted under an applicable agreement with the IRS for amounts that it withheld on borrow fees (for example, a QI claiming a collective refund under its QI agreement) must attach copies of the Form(s) 1042-S received to support such claim, and attach a statement indicating reliance on Notice 2025-63 as the reason for the claim and include the amount of income that was subject to withholding for each payment of a borrow fee associated with a securities lending transaction or sale-repurchase transaction. For claims for credit or refund by the beneficial owner of an applicable borrow fee, see the Instructions for Form 1040-NR and the Instructions for Form 1120-F.

Direct deposit and electronic payments. If you have access to U.S. banking services or electronic payment systems, you should use direct deposit for any refunds. The IRS added another option for withholding agents to make federal tax deposits and make balance due payments using IRS Direct Pay. Go to IRS.gov/Payments to see all your payment options.

New direct deposit lines. You can have your 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. Line 71 has been expanded by adding lines 71b, 71c, and 71d for direct deposit information.

Credit forward framework. After December 31, 2024, withholding agents (including a QSL) may no longer use the credit forward framework set forth in Notice 2010-46, 2010-24 I.R.B. 757, for substitute dividends paid in a

series of security loans or stock repurchase agreements. See FAQ 26 under the General compliance section of FATCA - FAQs general, available at IRS.gov/ FATCAFAQsGeneral .