We are trying to determine the most appropriate income code to apply on the 1042-S form.


Q. (cont.) We have several foreign vendors that are chapter 3-reportable. These vendors are corporations, and they performed either onsite training (not affiliated with any schools) or performed onsite services (such as running tests on our equipment). Would it be code 17, “Compensation for independent personal services,” or do you only use that for individuals and not corporations? Or should we use code 54, “Other income”?

A. Per the IRS Instructions for Form 1042-S, code 17 applies to “compensation for independent personal services.” In that same document, it states: A foreign person includes a nonresident alien individual, a foreign corporation, a foreign trust, a foreign estate, and any other person that is not a U.S. person. By this definition, the payments would be classified as code 17 because they were made to an entity the IRS considers a “person.”

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