We have a new foreign vendor who submitted a form W-8ECI. They are a corporation and provided a U.S. address, EIN, and foreign tax ID number. They are claiming a withholding exemption through an agreement with the IRS, but do we need to submit a 1042-S?

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Yes, even if you are not withholding due to the agreement, you must report the payment on a 1042-S.

(Note: As tax experts at Cokala have pointed out, a U.S. EIN is required on a W-8ECI, and not a foreign TIN, “because of the U.S. income tax return filing requirements for anyone claiming ECI.”)

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