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Important Reminder for Property Management Companies – Form 1042-S required to report rental income for foreign owners of US rental property

Important Reminder for Property Management Companies - Form 1042-S required to report rental income for foreign owners of US rental property

It is the time of year for income reporting for your homeowners. Here is a friendly reminder of the requirements:

Form 1042 (“Annual Withholding Tax Return for U.S. Source Income of Foreign Persons”) serves a number of important reporting purposes. 

  • Report the tax withheld under chapter 3 of the Internal Revenue Code (“IRC”) on certain income of foreign persons (such as nonresident aliens, foreign partnerships, foreign corporations, foreign estates, and foreign trusts)
  • Report the tax withheld under chapter 4 of the IRC on payments subject to tax withholding
  • Report tax withheld pursuant to IRC Section 5000C (“Imposition of tax on certain foreign procurement”), and reportable payments from Form 1042-S under chapters 3 or 4.

Property managers who receive rental income on behalf of foreign persons are required to file Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons (Form 1099 is supplied to those who have a US Social Security number or EIN)

Form 1042 is prepared on a calendar-year basis (regardless of the taxpayer’s year end). 

Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, and Form 1042-T, Annual Summary and Transmittal of Forms 1042-S. Forms 1042-S and 1042-T are also due by March 15. If additional time is required to file the form, an extension may be filed to extend the filing date but not the payment of the tax. 

Important to note that Non US residents must have an ITIN (Individual Taxpayer Identification Number) on file with your firm to avoid penalties from the IRS.

Our firm has several CAAs, (Certified Acceptance Agents) who can streamline the process of the ITIN application and submission to the IRS.

Contact us here at Harding Bell International to answer any questions you may have. We are available to prepare these forms for you and your clients.

Links

1042-S – https://hbitax.com/resource/form-1042-s/?_sft_resource-category=w-8-forms-w-9-1042-s-1099

1099 – https://hbitax.com/resource/form-1099/?_sft_resource-category=w-8-forms-w-9-1042-s-1099 

ITIN – https://hbitax.com/resource/how-do-i-obtain-my-individual-taxpayer-identification-number-itin/?_sft_resource-category=itin-w-7-ein-ss-4-forms 

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