Exemption Granted from Electronic Filing for Form 1042

1042-s forms close up at horizontal compositionThe IRS granted a temporary electronic filing exemption for Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons. The exemption is automatic, so withholding agents do not need to file an electronic filing waiver request to use the exemption.

Under the exemption:

  • Withholding agents (both U.S. and foreign persons) are not required to file Forms 1042 electronically during calendar year 2024; and
  • Withholding agents that are foreign persons are not required to file Forms 1042 electronically during calendar year 2025.

Challenges to Withholding Agents

Since the final regulations were published, the IRS received feedback from withholding agents noting challenges in transitioning to the procedures needed for filing Forms 1042 electronically. Withholding agents expressed concerns about the limited number of Approved IRS Modernized e-File Business Providers for Form 1042, and difficulties accessing the schema and business rules for filing Form 1042 electronically. Withholding agents that do not rely on modernized e-file business providers said that they needed more time to upgrade their systems for filing on the IRS’s Modernized e-File platform. Agents also noted challenges specific to foreign persons filing Forms 1042 regarding the authentication requirements necessary for accessing the platform.

In response to these concerns, the IRS used its power under the regulations to provide the exemption from the electronic filing requirement for Form 1042, in the interest of effective and efficient tax administration.

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