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13-03-2015
www.bdo.lu
U.S. QUALIFIED INTERMEDIARY:
NEW RULES ON 1042-S AND 1042
REPORTING
Intermediaries with a Qualified Intermediary (“QI”) status must annually
provide to the U.S. Tax Authorities (“IRS”) a 1042-S reporting and a 1042
reporting containing information on (i) U.S. source income paid to their clients
(ii) the amount of withholding tax due, as well as the amount effectively
levied by the QI or on its behalf.
Changes to the information to be provided
Reporting was adapted as additional information has to be provided, notably
information relating to FATCA. In case of withholding, the QI has to indicate if
the withholding tax is levied under Chapter 4 (FATCA) or under Chapter 3 (QI/NRA
withholding tax). For payments not subject to Chapter 4 withholding, a FATCA
exemption code has to be provided. QI may also have to mention its GIIN (on top
of its QI-EIN).
Contact
Gerdy Roose
Partner
When the QI does not assume the primary NRA withholding responsibility, the QI
should provide the name of the primary withholding agent. However, this year,
this is optional.
Regarding the 1042 reporting, information relating to substitute payments and
any other reportable amount has to be split.
Deadlines
As in the past, the deadline for both reportings is March 16. Nevertheless, QI can
request extensions.
On request, a one month extension is granted automatically for the 1042-S
reporting. However, no extension is granted automatically for any nominative
reporting 1042-S to be provided to a client (e.g. another QI). It needs to be
justified.
+352 45 123 371
gerdy.roose@bdo.lu
Sylvie Maestri
Director
With respect to the 1042 reporting, a six-month extension is granted
automatically on request.
Electronic Reporting
Since this year, the 1042-S reporting to the IRS must be submitted electronically
by the QI by using the “FIRE” system. Paper form reporting is not allowed
anymore even when the QI produces less than 250 forms.
Electronic reporting will allow the IRS to identify more easily any error and to
reconcile a QI’s 1042-S reporting with the one made by its upstream withholding
agents (e.g. custodians or registrars).
The 1042 reporting is still on paper. In order to obtain a credit for withholding
taxes levied by an upstream withholding agent, QI has to join to the 1042
reporting all the 1042-S forms it received.
+352 45 123 589
sylvie.maestri@bdo.lu
Required Format for electronic reporting
The IRS 1187 publication (“Specifications for Electronic Filing of Form 1042-S,
Foreign Person's U.S. Source Income Subject to Withholding For Tax Year 2014”)
gives details regarding the required format for the 1042-S reporting.
How BDO can help YOU?
BDO provides technical advises on the 1042-S reporting and the 1042 reporting.
BDO also assists QIs answering questions received from the IRS after submitting
the reporting.
In partnership with OPES, a Canadian company which develops softwares for the
financial industry, BDO has developed a solution which facilitate the electronic
filing of the 1042-S forms. The solution automatically converts in the required
format information provided by the QI in a excel file especially created for this
purpose. With the OPES solution, the QI does not need to request a TCC.
Link to the electronic filing solution: http://www.opessoftware.com/1042-s/
We stay at your disposal if you would like to discuss any aspect of the 1042-S and
1042 reportings, the OPES solution, or more generally the new Q.I. regime
requirements in more detail.
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific
situations and you should not act, or refrain from acting, upon the information contained herein without obtaining specific professional advice. Please contact the appropriate BDO Member
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