Glossary
Form 1042-S
Form 1042-S is the IRS information return a withholding agent files for each foreign person it paid US-source income during the year, reporting the amount, any tax withheld and any exemption claimed, due to the IRS and the recipient by March 15.
Also called: 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, foreign contractor tax form
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Definition
Form 1042-S is the foreign-person counterpart to the 1099 family. Its full name is Foreign Person’s U.S. Source Income Subject to Withholding, and the IRS instructions say "Every withholding agent" must file one to report amounts paid during the preceding calendar year that fall within its reporting rules.
A withholding agent is broader than it sounds. The IRS defines it as any person, US or foreign, that has control, receipt or custody of an amount subject to withholding and can pay it out, and adds that "A person may be a withholding agent even if there is no requirement to withhold from a payment." A US company paying a foreign contractor for work done in the United States is the textbook case.
The form is about US-source income, so where the work happens decides whether it applies. IRS Publication 515 says that for personal services, "The place where the services are performed determines the source of the income, regardless of where the contract was made, the place of payment, or the residence of the payer." A designer in Lisbon who never sets foot in the United States earns foreign-source income from your US company. A consultant who flies in for two weeks of on-site work earns US-source income for those two weeks.
Key points
- +Form 1042-S reports US-source income paid to a foreign person, the tax withheld on it and any exemption claimed.
- +Pay for services is US-source only for work performed in the United States. Work split across borders is usually allocated by days.
- +You file it even when a tax treaty exempts the payment and you withheld nothing.
- +Forms 1042-S are due to the IRS and to each recipient by March 15. For 2026 payments, that is Monday, March 15, 2027.
- +Filing any Form 1042-S also means filing Form 1042, the annual withholding tax return, by the same March 15 date.
- +Stripe’s US tax reporting for Connect platforms covers 1099-NEC, 1099-MISC and 1099-K for US-based or US-taxpayer accounts. Form 1042-S is not in that list.
When a payment to a foreign contractor creates a 1042-S
Start with where the work was done. Publication 515 treats pay for personal services performed in the United States as US-source, and pay for services performed outside it as foreign-source. Payments for work done entirely abroad generally fall outside Form 1042-S.
Work done in both places gets split. The publication says that for services performed partly in and partly outside the United States, "you must make an accurate allocation" based on the facts, and "In most cases, you make this allocation on a time basis": total pay multiplied by days worked in the United States over total days worked. A contractor paid $20,000 for a project of 100 working days, 10 of them on-site in Austin, has $2,000 of US-source income.
Pay to an independent contractor is reported under income code 17, compensation for independent personal services. Publication 515 says to withhold at the statutory 30% rate on that pay unless an exemption or reduced rate applies. A contractor claiming a treaty exemption on it gives you Form 8233, not a W-8BEN.
Treaty-exempt payments still get a form
This is the rule that catches US companies used to 1099 thresholds. The Form 1042-S instructions say: "You must file a Form 1042-S even if you did not withhold tax under chapter 3 because the income was exempt from tax under a U.S. tax treaty or the Internal Revenue Code."
So a treaty that brings the tax to zero does not bring the paperwork to zero. The form records the payment and the exemption code instead of an amount withheld.
There is no $2,000 floor either. The 1099-NEC threshold that rose to $2,000 for tax years beginning after 2025 is a Form 1099 rule. The Form 1042-S instructions contain no comparable dollar threshold, so don’t assume a small payment for US-performed work drops out.
Form 1042 and the March 15 deadline
Forms 1042-S, on paper or electronic, must be filed with the IRS and furnished to the recipient by March 15 of the following year, moving to the next business day when the 15th falls on a weekend or holiday. March 15, 2027 is a Monday, so it is the deadline for 2026 payments.
The forms do not travel alone. The instructions say "If you file Form 1042-S, you must also file Form 1042," the Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, and the Form 1042 instructions set the same March 15 date.
Two filing rules matter for platforms. A filer required to file 10 or more information returns during the year must e-file Forms 1042-S, and 2026 forms must be e-filed through the IRS IRIS portal because the older FIRE system retires. A 30-day extension to file is automatic with Form 8809, while an extension to furnish recipient copies needs a separate request on Form 15397.
1042-S, 1099-NEC and backup withholding compared
Form 1099-NEC is for US persons. Stripe’s Connect documentation requires a connected account to be "Based in the US or a US taxpayer" before a 1099-NEC applies, alongside $2,000 or more in payments. A foreign contractor who gives you a Form W-8BEN is outside it.
Backup withholding is a 1099-side mechanism. It applies at 24% to US payees who fail to provide a correct taxpayer ID, and it is reported on the 1099. Withholding on foreign persons runs under chapter 3 at 30% unless reduced or exempted, and it is reported on Form 1042-S.
The form a contractor gives you decides which track they are on. A Form W-9 puts them on the 1099 track. A Form W-8BEN or W-8BEN-E puts them on the foreign-person track, where Form 1042-S applies only to their US-source income.
What a synced QuickBooks file holds for foreign contractor pay
Acodei syncs Stripe Connect transfers into QuickBooks through Balance Transaction Mapping. You create a product for Stripe Connect, usually linked to an expense or cost of goods sold account, and map Transfer (Stripe Connect) to it. Acodei then processes Connect activity on the daily balance summary or upon payout, depending on your settings.
Acodei sends aggregated transfer information, so QuickBooks shows the total transferred rather than which contractor received each transfer. That total includes US and foreign contractors alike. For Form 1042-S you need per-payee amounts, the contractor’s W-8 status and the days worked in the United States, and none of that lives in the synced ledger. Keep it with your contractor records, and use the QuickBooks total to check that every dollar of contractor spend lands on a 1099-NEC, a 1042-S, or a documented reason for neither.
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Frequently asked questions
Do I file Form 1042-S for a foreign contractor who works only outside the US?
Generally not. Form 1042-S reports US-source income, and IRS Publication 515 says pay for personal services is sourced where the services are performed. Work done entirely outside the United States is foreign-source income. If the contractor does some work in the United States, the US-performed share, usually allocated by days, is in scope.
Do I still file a 1042-S if a tax treaty exempts the payment?
Yes. The IRS instructions say you must file Form 1042-S even if you did not withhold because the income was exempt under a US tax treaty or the Internal Revenue Code. The form reports the payment along with the exemption, instead of an amount withheld.
When is Form 1042-S due for 2026 payments?
March 15, 2027, a Monday. Forms 1042-S are due to the IRS and to each recipient by March 15 of the year after payment, and Form 1042, the annual withholding tax return, is due the same day. Form 8809 gives an automatic 30-day extension to file with the IRS.
Does Stripe file Form 1042-S for Connect platforms?
Stripe’s US tax reporting documentation for Connect covers Forms 1099-NEC, 1099-MISC and 1099-K, each for connected accounts based in the US or that are US taxpayers. Form 1042-S is not among them. A platform paying foreign contractors for US-performed work should plan its 1042-S filing separately, with its tax advisor.
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Related reading
- Foreign contractors on Stripe Connect: W-8BEN and 1042-S
- Form 1099-NEC
- Backup Withholding
- Stripe Connected Account
- Stripe Connect 1099-NEC forms and your QuickBooks books
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