Returns Required You must file Forms 1042 and 1042-S to report tax withheld onfixed or determinable annual or periodic income. Do not use theseforms to report tax withheld on the following: Wages or salaries subject to graduated income taxwithholding (see Pay Subject to Graduated Withholding,earlier, under Pay for Personal Services Performed), Effectively connected income allocable to foreign partners(see Partnership Withholding on Effectively Connected Income,later), Dispositions of U.S. real property interests by foreignpersons (see U.S. Real Property Interest, later), Pensions, annuities, and certain other deferred incomereported on Form 945, and Income, social security, and Medicare taxes withheld onwages paid to a household employee reported on Schedule H (Form1040). Form 1042.Every U.S. withholding agent who has the control, receipt, custody,disposal, or payment of fixed or determinable annual or periodicincome (as previously defined) and each Canadian withholding agentdescribed earlier under Withholding Agent, must file anannual return on Form 1042 by March 15 of the year following the endof a calendar year. (If March 15 falls on a Saturday, Sunday, or legalholiday, the due date is the next business day.) You must file Form1042 even though you did not withhold or deduct any income tax becauseof a specific exemption under Chapter 3 or under an income tax treatybetween the United States and a foreign country. You must file Form 1042 with the Internal Revenue Service Center,Philadelphia, PA 19255. Form 1042-S.Every U.S. withholding agent must transmit with the annual Form1042 the information called for on Form 1042-S. Form1042-S must be filed by the due date for filing Form 1042. Thisinformation is furnished magnetically, electronically, or on anoriginal paper Form 1042-S. A separate Form 1042-S (ortape record) is required for each payee (recipient) of income to whomyou made payments during the preceding calendar year regardless ofwhether you withheld or were required to withhold tax. You may use aseparate Form 1042-S for each type of income that you paid tothe same payee; or you may report more than one specific type ofincome on the same Form 1042-S for the same payee. You must furnish a Form 1042-S for each recipient even thoughyou did not withhold tax because you released the tax withheld to therecipient or because the income payment was exempt from tax undercertain provisions of the Internal Revenue Code, under a regulation,ruling, or procedure issued by the IRS, or under a U.S. income taxtreaty. When you have adjusted the amount of the tax withheld duringthe calendar year for overwithheld amounts, show the net amount of taxwithheld on the Form 1042-S. Magnetic media reporting.If Form 1042-S is filed on paper, it must accompany Form1042. However, withholding agents or their agents generally must usemagnetic or electronic media to file 250 or more Forms 1042-Swith the IRS. You are encouraged to file electronically ormagnetically even if you are not required to. A completed Form 4419, Application for Filing InformationReturns Magnetically/ Electronically, should be filed with theMartinsburg Computing Center at least 30 days before the due date ofthe return. Returns may not be filed magnetically or electronicallyuntil the application has been approved by the IRS. ERROR MSGFor information and instructions on filing Forms 1042-S onmagnetic media, get Publication 1187, Specifications for FilingForm 1042-S, Foreign Person's U.S. Source Income Subject toWithholding Magnetically/ Electronically. Interest payments to a nonresident alien individual whoresides in Canada and is not a U.S. citizen.If you pay interest to a nonresident alien individual who residesin Canada and is not a U.S. citizen, you may have to report it on Form1042-S. This reporting requirement generally applies to interestthat a) is on a deposit maintained at a bank's office in the UnitedStates and b) is not effectively connected with a trade or businesswithin the United States. However, this reporting requirement does notapply to interest paid on certain bearer certificates of deposit, asdescribed in section 1.6049-8(b) of the Treasury Regulations ifyou pay that interest outside the United States. How to report.Although you only have to report the interest paid to residents ofCanada who are not U.S. citizens, you can comply by reporting paymentsto all foreign persons receiving bank deposit interest, if that way iseasier for you. This interest is not subject to backup withholding. When to report.This information reporting is being phased in over a three-yearperiod that began in 1997. You must report on Form 1042-S thebank deposit interest paid after you receive the Form W-8. Determining residency.You determine whether a payee is a Canadian resident based on theaddress in the country of permanent residence required to be providedon the Form W-8. If you have actual knowledge that the payee isa U.S. person, you must report the payment on Form 1099-INT. Statements to payees.You must furnish a statement to each payee for whom you are filinga Form 1042-S (or magnetic media report) with the IRS by the duedate for filing Forms 1042 and 1042-S. You may use a copy of theofficial Form 1042-S for this purpose. Or, you may providepayees with the information together with or on other (commercial)statements or notices. These statements must clearly identify the typeof income (as described on the official form), the amount of taxwithheld, the withholding rate (including 0% if exempt), and thecountry involved. You must get prior annual approval to use a substitute Form1042-S unless it meets the requirements listed in Publication 1167, Substitute Printed, Computer-Prepared andComputer-Generated Tax Forms and Schedules. ERROR MSGGet Publication 1167for more information. Extension of time to file.You may request an extension of time to file Form 1042 by filingForm 2758, Application for Extension of Time to File CertainExcise, Income, Information, and Other Returns. You may requestan extension of time to file Form 1042-S by filing Form 8809,Croatia HotelesRequest for Extension of Time to File Information Returns.You should send Forms 2758 and 8809 far enough in advance of the duedate of Forms 1042 and 1042-S to allow the IRS time to consideryour application and to reply before the due date of the return. Penalties.The penalty for not filing Form 1042 when due (includingextensions) is usually 5% of the unpaid tax for each month or part ofa month the return is late, but not more than 25% of the unpaid tax. cheap hotel in KarpunA penalty may be imposed for failure to file Form 1042-S whendue (including extensions), or for failure to provide complete andcorrect information. The amount of the penalty depends on when youfile a correct Form 1042-S. The penalty for each Form1042-S is: $15 if you file a correct form within 30 days, with amaximum penalty of $75,000 per year ($25,000 for a smallbusiness). $30 if you file after 30 days but before August 2, with amaximum penalty of $150,000 ($50,000 for a small business). $50 if you file after August 1 or do not file a correctform, with a maximum penalty of $250,000 per year ($100,000 for asmall business). A small business is a business that has average annual grossreceipts of not more than $5 million for the most recent 3 tax years(or for the period of its existence, if shorter) ending before thecalendar year in which the Forms 1042-S are due. If you fail to provide a complete and correct statement to eachpayee, a penalty of $50 for each failure may be imposed. The maximumpenalty is $100,000 per year. If you intentionally disregard the requirement to report correctinformation, the penalty for each Form 1042-S (or payeestatement) is the greater of $100 or 10% of the total amount of theitems that must be reported, with no maximum penalty. Failure to file on magnetic media.Kastrup hotelsIf you are required to file on magnetic media but you fail to doso, and you do not have an approved waiver, you may be subject to apenalty of $50 per return for failure to file Form 1042-S onmagnetic media unless you show reasonable cause. The penalty appliesseparately to original and corrected returns.