Form 1042-S vs. 1099: Key Differences and Filing Guide

When your business makes payments to non-employees or foreign payees, accurate tax reporting to the IRS is a critical obligation. Two of the most commonly required forms are Form 1042-S and Forms 1099 — but they are not interchangeable. 

The basic difference you need to understand is that Form 1099 is an essential tax form used to report payments made to U.S. people and businesses. Form 1042-S is used to report payments made to foreign persons (non-US people or companies). Both these forms have specific requirements and deadlines you need to comply with. Using the wrong forms can lead to significant penalties, lots of paperwork, IRS scrutiny, and unhappy payees.  

This guide covers what is a 1042-S, what is a 1042-S used for, how it compares to Forms 1099, the 1042-S filing requirements, the 1042-S due date, and the key concepts your finance team needs to understand. 

What is form 1042-S? 

Form 1042-S, titled “Foreign Person’s U.S. Source Income Subject to Withholding,” is used to report payments of US-source income subject to withholding paid to foreign persons. This includes non-resident aliens, foreign corporations, foreign partnerships, estates, and trusts. It is filed by withholding agents — such as financial institutions, corporations, universities, and global businesses.  

What is the form 1042-S used for? 

The form is used to document specific types of income such as: 

• Interest and dividends 
• Royalties 
• Scholarships and fellowship grants 
• Compensation for personal services performed in the US 
• Income subject to withholding from US-source payments 
• Rental income 
• Gambling winnings 

Recipients use the form 1042-S to file their own US tax returns or to claim treaty benefits.  

Form 1042 vs Form 1042-S — what is the difference? 

These are two separate IRS forms that work together. Form 1042 is an annual IRS tax return that summarizes U.S.-source income paid to foreign persons and the federal tax withheld. It is filed by a withholding agent and reports the total payments and total tax withheld for the tax year — providing a high-level reconciliation of withholding activity. Form 1042-S reports the income paid and tax withheld for each individual foreign recipient.  

In short: Form 1042 is the summary; Form 1042-S is the individual statement issued to each foreign payee. 

What is a 1099 tax form? 

Businesses use Form 1099 to report various types of payments made to U.S. persons who are non-employees. The most common forms are 1099-NEC for non-employee compensation and Form 1099-MISC for miscellaneous income. For example, use Form 1099 for U.S. payees who received independent contractor payments (Form 1099-NEC), rents, prizes, or awards (Form 1099-MISC), or interest and dividends (Form 1099-INT).  

To determine which filing form to use, the first step is collecting the right documentation: 

• W-9 form: Collected from US persons (confirms US tax status via SSN or EIN) → use Forms 1099 
• W-8BEN / W-8BEN-E form: Collected from foreign individuals and entities → use Form 1042-S 

1099 vs 1042-S: The key differences 

Factor	Form 1042-S	Form 1099
Who receives it	Foreign persons / foreign corporations	US persons / US businesses
What it reports	US-source income subject to withholding paid to foreign persons	Payments to US non-employees
Tax withheld	Yes – generally 30% (may be reduced by tax treaty)	Not usually, unless backup withholding applies
Person’s US source	Must be US-source income	US trade / business payments
Minimum threshold	None – file for any reportable amount	Generally $600 (NEC/MISC); $10 for royalties
Documentation required	W-8BEN or W-8BEN-E	W-9
1042-S due date / 1099 deadline	March 15	January 31 (to recipients)
Filed with IRS by	March 15	January 31 (NEC) / March 31 (electronic MISC)

1042-S filing requirements 

The 1042-S filing requirements apply to withholding agents — which the IRS defines as any person or entity that: 

• Controls or disposes of income subject to withholding that is US-source income paid to a foreign person 
• Is responsible for tax withholding on those payments 
• Is required to deposit tax withheld with the IRS 

Withholding agents filing Form 1042-S include: non-resident aliens, foreign corporations, foreign partnerships, estates, and trusts as recipients. The IRS is the sole recipient of Form 1042; foreign payees receive Form 1042-S.  

Who must file Form 1042-S? 

You are typically required to be filing forms 1042-S if your business: 

• Makes US-source income payments to foreign contractors, vendors, or foreign corporations 
• Pays royalties, interest, dividends, rents, or compensation to foreign persons 
• Has foreign students, researchers, or scholars receiving scholarships from US-source funds 
• Makes any payment that constitutes income subject to withholding under chapters 3 or 4 of the IRS Code 

There is no minimum threshold for Form 1042-S. Unlike Forms 1099, which generally require $600 in payments, you must file Form 1042-S for any amount of reportable US-source income paid to foreign persons.  

1042-S due date and filing deadline 

Both Form 1042 and Form 1042-S are generally due by March 15 following the calendar tax year. The 1042-S filing deadline applies to both furnishing the form to recipients and filing form 1042-S with the IRS.  

1042-S deadline in 2026: For the 2025 tax year, March 15 falls on a Sunday. In accordance with IRS rules, when a deadline falls on a weekend or federal holiday, the due date shifts to the next business day. The 1042-S due date for the 2025 tax year was therefore Monday, March 16, 2026. 

Can I request an extension for the 1042-S filing deadline? 

Extensions are available. Filing Form 8809 gives you an additional 30 days beyond the 1042-S due date. Note that extensions for furnishing recipient copies and for IRS filing may differ — consult IRS instructions or a tax professional for the current rules.  

Income codes and types of income on Form 1042-S 

Each Form 1042-S includes an income code that identifies the specific type of payment or type of income being reported. These income codes are assigned by the IRS and tell the recipient (and the IRS) exactly what type of income is being reported and what withholding rate applies. 

Common types of income reported on Form 1042-S to foreign persons include: interest, dividends, royalties, scholarships and fellowship grants, compensation, and gambling winnings.  

Common income codes include: 

• 01: Interest 
• 06: Dividends 
• 12: Royalties 
• 15: Scholarships and fellowship grants 
• 16: Compensation for independent personal services 
• 17: Compensation for dependent personal services 

The correct income code is important for ensuring accurate tax withholding and for recipients who may be claiming tax treaty benefits. 

Tax treaty benefits and reduced withholding 

The standard tax withholding rate on payments paid to foreign persons under Form 1042-S is generally 30%. However, the US has tax treaty agreements with many countries that may reduce or eliminate the tax withheld on specific types of income. 

The 1042-S withholding rate is generally 30%. But this can be reduced or waived through tax treaties. To claim tax treaty benefits, recipients typically need to submit Form W-8BEN (for individuals) or W-8BEN-E (for entities), along with their taxpayer identification numbers.  

It is the withholding agent’s responsibility to apply the correct tax treaty rate and maintain appropriate documentation. Always verify treaty eligibility through the IRS or a qualified tax professional. 

Taxpayer identification numbers and documentation 

Accurate taxpayer identification numbers (TINs) are required on both Form 1042-S and Forms 1099. Incorrect or missing TINs are one of the most common reasons forms are flagged or penalized. 

Common 1042-S filing mistakes include incorrect withholding rates, missing or invalid taxpayer identification numbers, failure to apply tax treaty benefits properly, and late deposits of tax withheld.  

For Form 1042-S: foreign payees provide Form W-8BEN (individuals) or W-8BEN-E (entities) to confirm their foreign tax status and taxpayer identification numbers. 

For Forms 1099: US payees provide Form W-9, which includes their SSN or EIN (their taxpayer identification numbers) and confirms their US tax status. 

What happens if you use the wrong form? 

Using the wrong forms can lead to significant penalties, additional paperwork, IRS scrutiny, and issues for payees. If you file a form 1042-S for a US person or a Form 1099 for a foreign person, you may face penalties and be required to correct the filing.  

The IRS tax penalties for late, missing, or incorrect filings can range from $60 to $330 per form depending on how late you file. File corrections as soon as you discover an error — late filing carries lower penalties than not filing at all. 

How Payoneer helps with tax form management 

For businesses making large numbers of payments to contractors, vendors, or global payees — managing 1042-S filing requirements, collecting W-8 and W-9 forms, and generating the correct filing form for each payee can be a significant operational challenge. 

Payoneer’s tax form management capabilities — available as part of the Mass Payouts product — are designed to help payers streamline this process.  

These tools support: 

• W-form collection: Collect and validate W-8BEN, W-8BEN-E, and W-9 forms from payees to determine whether to issue Form 1042-S (foreign payees) or Form 1099 (US payees) 
• Tax reporting automation: Generate Form 1042-S and 1099 forms based on payee data and type of payment, reducing manual effort for your team.
• IRS reporting: Submit 1099 and Form 1042 forms to the IRS via the Payoneer Admin platform, as part of your end-of-year tax year obligations 
• Payee data management: Track taxpayer identification numbers, payee status, and form submission across all payees in one place 

Payoneer’s tools support tax form generation and submission workflows. The accuracy of all submitted forms and the determination of appropriate tax withholding rates remain the responsibility of the payer/withholding agent. This is not a tax advisory service. Always consult a qualified tax professional for guidance specific to your situation.