IRS provides e-filing relief for Form 1042


The IRS released guidance on Feb. 27 (Notice 2024-26) providing relief from new e-filing requirements that will allow withholding agents to continue to file Form 1042 on paper for 2023 forms due on March 15, 2024, with additional relief extended to foreign withholdings agents for 2024 forms due next year.


Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, is required for reporting withholding under Chapter 3 or Chapter 4 on certain income of foreign persons, including nonresident aliens, foreign partnerships, foreign corporations, foreign estates and foreign trusts. Form 1042 must be filed by March 15 of the year following when the income was paid, but a six-month automatic extension of time to file is available by filing Form 7004.


The IRS published final regulations on electronic filing in 2023 that require any withholding agent filing Form 1042 to e-file the form if the total number of information returns of all form types filed by the agent for the year exceeds 10. The effect of the 10-form threshold is that virtually all withholding agents would be required to e-file Form 1042 beginning with the 2024 filing season (the e-file rule generally applies for all information returns; see our previous alert).


The notice indicates that the IRS has received feedback from withholding agents on the procedural challenges with filing Forms 1042 electronically. These challenges include a limited number of approved IRS Modified e-File business providers, difficulties accessing the schema and business rules for filing electronically, and time needed for withholding agents to upgrade their systems to comply with the IRS Modernized e-File platform.


The notice provides relief just two-and-a-half weeks ahead of the statutory due date. Under the relief, withholding agents are not required to electronically file Form 1042 in 2024, and foreign withholding agents (for example, qualified intermediaries and withholding foreign partnerships) are not required to electronically file in either 2024 or 2025. Withholding agents will instead be allowed to file Form 1042 on paper, and a timely filed paper return will not incur failure to file penalties for not satisfying e-filing requirements.   


Grant Thornton Insight

The notice is silent on an administrative exemption from e-filing Forms 1042-S, Foreign Person's U.S. Source Income Subject to Withholding, which are also due March 15 and are subject to a similar e-filing requirement threshold. Absent further guidance, it appears that nearly all withholding agents will be required to file Forms 1042-S electronically to the IRS, as referenced in our previous alert on information returns due in 2024. Withholding agents should ensure that Forms 1042-S are properly submitted through an approved IRS Modernized e-File system by a party with the proper e-File capabilities. The deadline for filing Forms 1042-S can be extended 30 days by filing Form 8809.


For more information, contact:

Cory Perry

Washington DC, Washington DC

  • Manufacturing, Transportation & Distribution
  • Technology, media & telecommunications
  • Private equity
Service Experience
  • Tax
Tax professional standards statement

This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “§,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.


More flash