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This article applies to:

  • Product: ONESOURCE Trust Tax

Reviewing Recipient Information

Since Form 1042-S can be used for many types of income recipients and many types of income, it is driven largely by codes. For example:
  • Status codes identify the type of recipient that received the income. Prior to FATCA reporting obligations, these status codes were referred to as recipient codes.
  • The country code identifies the country where the recipient claims residency for tax purposes.
  • The income code identifies the type of income reported on Form 1042-S.
  • The exemption code identifies the authority for exempting a type of income from U.S. withholding tax. Generally, the U.S. withholding tax rate is 30% but a lower tax rate or an exemption may apply under U.S. tax laws or a tax treaty in force between the U.S. and the recipient's country of residence.
When reviewing recipient information, it is important to ensure that the correct codes are applied and that the recipient's basic information (such as the recipient's name, address and TIN or GIIN) is correct. Otherwise, invalid treaty rates may be applied or your Forms 1042-S may be rejected from filing by the IRS.
In ONESOURCE Trust Tax, you can review and modify recipient information using the Recipient Detail page in the account binder or the
Beneficiaries with 1042-S Information
 register. The following show you how to review and modify recipient information from the account binder:
The
Beneficiaries with 1042-S Information
 register lists all active recipients that have a country entered in the
Country code for tax purposes
 field under the
Form 1042-S Recipient Information
 collapsible section on the Recipient Detail page. Most of the fields in this register can be modified without opening the account binder for each individual account.
note
To expand your review capabilities, create a custom register based on the
Beneficiaries with 1042-S Information
 register. On the Register Properties page, you can find the fields that apply to 1042-S reporting in the
Beneficiary 1042S Information
 category.

Reviewing Recipient Details

The Recipient Detail page in the account binder includes three collapsible sections for reviewing recipient details. The
Recipient Information
 collapsible section applies to basic recipient information, such as the recipient's name, date of birth, TIN and address. The
Distribution-Decimal/Dollar
 collapsible section applies to the recipient's distribution amounts or percentages. The
Form 1042-S Recipient Information
 collapsible section applies to specific 1042-S information.
To review recipient details:
  1. Open the account.
  2. Select the
    Recipients
     main topic. The
    Recipient Summary
     subtopic is selected by default and the Recipient Summary page displays.
  3. In the grid under the
    Recipient Listing
     collapsible section, select the
    Name
     link for the recipient you want to review. The Recipient Detail page displays.
  4. Review and, if necessary, modify the recipient's basic information under the
    Recipient Information
     collapsible section. This includes:
    • The
      Taxpayer ID
       field-This field cannot be empty. It must include an IRS-approved taxpayer ID, or APPLD FOR or FORM1042S. ONESOURCE Trust Tax does not validate taxpayer IDs. Additionally, the account cannot be processed when the
      Taxpayer ID
       field is empty. If you have yet to receive the recipient's taxpayer ID but you want to process the account, enter
      FORM1042S
       in the
      Taxpayer ID
       field.
    • The recipient's name, date of birth, mailing address and resident state-The IRS requires separate identification of the recipient's name, address, city, state and postal code.
    • For a recipient with a U.S. address, review the
      Name
      ,
      Address
      ,
      City
      ,
      Country
      ,
      U.S. State
      ,
      U.S. Zip
       and
      Resident State
       fields. The
      Country
       field can be populated with
      UNITED STATES OF AMERICA
       or
      NO COUNTRY SELECTED
      .
    • For a recipient with a Canadian address, review the
      Name
      ,
      Address
      ,
      City
      ,
      Country, Canadian Province
      ,
      Foreign Province
       and
      Foreign Postal Code
       fields. The
      Country
       field must display
      CANADA
       to enable the
      Canadian Province
       field. The
      Canadian Province
       field allows you to select the province code if it is not bridged. The province name displays in the
      Foreign Province
       field.
    • For a recipient with a foreign address other than a Canadian address, review the
      Name
      ,
      Address
      ,
      City
      ,
      Country
      ,
      Foreign Province
       and
      Foreign Postal Code
       fields.
  6. Under the
    Distribution-Decimal/Dollar
     collapsible section, review and, if necessary, modify the recipient's distribution amounts or percentages. Reviewing the distribution amounts or percentages is important because the amounts reported on Form 1042-s originate from the distribution allocated to each recipient. If the account includes domestic and NRA recipients, a 1099 is generated for the domestic recipients and a 1042-S is generated for the NRA recipients. To allocate the income correctly, enter the distribution decimal for the NRA recipient in the field for the required income decimal, and enter the 1099 distribution percentage for the domestic recipient in the
    1099 Distribution Percentage
     field.
  7. Under the
    Form 1042-S Recipient Information
     collapsible section, review and, if necessary, modify the recipient's specific 1042-S information.
  8. Be sure to pay particular attention to the following fields:
    • Documentation not available or invalid (30% withholding rate applies)
      -When selected, the 30% withholding rate is applied to non-exempt income regardless of whether a reduced rate of withholding is applicable under a tax treaty entered into between the U.S. and the recipient's country of residence for tax purposes.
    • No election made to receive treaty tax rates
      -When selected, portfolio interest and any income not subject to an exemption have a Chapter 3 tax rate of 30% applied.
    • Recipient eligible for special treaty dividend benefits
      -When selected, U.S. corporate dividends have a Chapter 3 exemption code of 04 (Exempt under tax treaty) rather than the reduced treaty rate that would have been used based upon the recipient country.
    • Country Code for Tax Purposes
      -The two-digit country code that signifies a nonresident alien (NRA) recipient should receive a Form 1042-S. If you select a country code for tax purposes but do not select the recipient's Chapter 3 or Chapter 4 status code then an error message will display when you save the recipient details.
    • Recipient's Chapter 3 Status Code
       and
      Recipient's Chapter 4 Status Code
      -If not selected:
      • The default chapter 3 status code is
        16-Individual
        .
      • The default is to leave the chapter 4 status code blank. An error message displays and the recipient information cannot be saved if the recipient's chapter 3 and/or Chapter 4 status code is set to
        Unknown Recipient
         and:
    • Recipient's U.S. TIN
       and
      Recipient's GIIN
      -Unless overridden, the recipient's U.S. TIN is the same as the
      Taxpayer ID
       field under the
      Recipient Information
       collapsible section. ONESOURCE Trust Tax allows overrides to the recipient's U.S. TIN to accommodate beneficial owner scenarios.
    • Recipient's Foreign TIN
      -This is the recipient's TIN as issued by the recipient's country of residence for tax purposes.
    • Primary Withholding Agent Name if different
       and
      Primary withholding Agent EIN if different
      -Use these fields if the withholding agent reports that the withheld amount was actually withheld by another withholding agent.
    • Recipient's account number
      -Unless overridden, this field is the same as the account number.
    • Payer's Name if different from Agent
      ,
      Payer's TIN if different from Agent
       and
      Payer's GIIN if different from Agent
      -Use these fields only if the payer is different from the withholding agent.
  10. Select
    Save
    .

Reviewing Recipient Income

Amounts reported on Form 1042-S are either automatically calculated by ONESOURCE Trust Tax or are entered as additional income. Automatically calculated income is determined by matching transactions posted to specific ONESOURCE Trust Tax tax codes with 1042-S income codes.
Additional income items include:
  • Activity income from a business or farm.
  • Activity income (such as ordinary business income, net rental real estate or other net rental income) reported on Schedule K-1 for a partnership, S corporation, trust or estate.
  • Portfolio income coded as rental income and ordinary gains.
Additional income may also include capital gains, and active rental income and ordinary gains. This additional income depends on how the options for these income types are set on the Options and Overrides page.
Automatically calculated income can be reviewed and overridden using the
1042-S Income Overrides
 collapsible section. Additional income can be entered using the
1042-S Additional Income
 collapsible section.
Beginning in tax year 2022, ONESOURCE Trust Tax automatically includes the payer information for a PTP (from the partnership activity record) in boxes 16a through 16e of Form 1042-S. For each NRA recipient, you can override the payer information in the grids under the
1042-S Income Overrides
 and
1042-S Additional Income
 collapsible sections. Horizontally scroll the grids to access the payer columns.
To review recipient income:
  1. Open the account.
  2. Select the
    Recipients
     main topic. The
    Recipient Summary
     subtopic is selected by default and the Recipient Summary page displays.
  3. In the grid under the
    Recipient Listing
     collapsible section, select the
    Name
     link for the recipient you want to review. The Recipient Detail page displays.
  4. Navigate to then open the
    1042-S Income Overrides
     collapsible section. The income types that are automatically calculated by ONESOURCE Trust Tax are displayed.
  5. Review and, if necessary, override the automatically calculated income types. When overriding automatically calculated income types, enter or change only the information that needs to be changed. For example, if the tax rate is incorrect but the gross income amount is correct, change only the tax rate.
  6. When reviewing types of income:
    • There are three 01 income codes. Be sure the correct 01 income code is applied.
    • The
      1042-S Income Overrides
       collapsible section does not allow you to use the same income code twice. If a different exemption code applies to an income code, use the
      1042-S Income Overrides
       collapsible section for one income code and exemption code combination, then use the
      1042-S Additional Income
       collapsible section for the second income code and exemption code combination.
    • The
      Unique Identification Number (Override)
       field allows you to enter an override to the calculated value included in the IRS file. The override is included in the IRS file until the 1042-S return is in corrections mode.
    • The
      Force 1042-S with No Gross Income (Corrections Only)
       check box and the
      Amendment Number (Override)
       field are for the paper copy of the correction return only. Selecting the
      Force 1042-S with No Gross Income (Corrections Only)
       check box forces a Form 1042-S to be generated when the gross income amount is zero. Entering a value in the
      Amendment Number (Override)
       field overrides the calculated value for the amendment number.
  8. Select
    Save
    .
  9. Open the
    1042-S Additional Income
     collapsible section then enter income that is not automatically calculated by ONESOURCE Trust Tax. When entering additional income, enter the gross income paid and either the applicable tax rate or exemption code.
  10. Select
    Save
    .

Indicating NQI Information Is Required for an Account and Overriding NQI Information

ONESOURCE Trust Tax allows you to indicate that NQI information is required for an account. The NQI information is initially the same as the PAN-level NQI information, but you can override it. Changes to the account-level NQI information apply to all NRA recipients listed on the account, and are used for only the 1042-S forms generated for the account.
To indicate that NQI information is required for the account and to override NQI information:
  1. Open the account.
  2. Select the
    Recipients
     main topic then the
    Form 1042-S NQI and Filing Information
     subtopic.
  3. Open the
    NQI Information
     collapsible section. If NQI information was entered at the PAN level, it displays in the NQI fields.
  4. Select the
    Use NQI Information for all NRA beneficiaries on this account
     check box. This indicates that NQI information is required for the account.
  5. Enter the NQI information to use for the account in the remaining fields.
  6. Select
    Save
    .