What
is the purpose of the Form 1099?
Forms 1099 are a series of US Tax information returns which report
income earned such as interest, dividends, proceeds from securities
and commodities sale transactions, and other reportable payments posted
to your account during a calendar year. These reports, which are supplied
to the Internal Revenue Service (IRS), provide information which should
be used in preparing your tax return. Dividends and interest, for
example, are reported on IRS Form 1040, "U.S. Individual Income
Tax Return", Schedule B. In general, sales transactions are to
be reported on IRS Form 1040, "U.S. Individual Income Tax Return",
Schedule D. Information
on reporting gains and losses, including determining the cost basis
can be obtained by reading IRS Publications 544, "Sales and Other
Dispositions of Assets", and 551, "Basis of Assets".
We recommend you consult your tax professional with specific questions. All of the IRS forms and publications
referenced above are available on line at
www.IRS.gov/formspubs.
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What
Form 1099s will I receive?
If you are a U.S. citizens, green card holder, or legal resident,
you will receive one or more of the Form 1099s listed below depending
on the activity which has taken place within your account over the
calendar year: IB issues Consolidated Substitute Composite 1099 (1099)
forms by account; therefore, if you have both a securities and commodities
account you will receive two 1099s, one for each account. Each 1099
may contain information concerning interest earned, dividends received,
substitute payments, securities/futures transactions, and tax withheld,
if any.
Form
1099-INT: Interest Income reports interest income earned
in your securities account. Included in Box 1 is interest income,
exclusive of U.S. savings bond and U.S. Treasury obligations. Interest
from U. S. Savings Bonds and US Treasury obligations are reported
in Box 3. If the IRS has notified us that backup income tax must be
withheld on interest income, this amount will be reported in Box 4. Margin Interest
paid by you is not reported to the IRS. This amount appears on your
year end statement. Please consult your tax advisor to determine the
tax treatment of these payments.
Form
1099 – OID: "Original Issue Discount", reports
the amortization of bond interest on discounted bonds. The interest
is taxable annually. OID is the excess of an obligation’s stated
redemption price at maturity over its issue price.
Form
1099-DIV: Dividend Income, reports the total dividend payments
credited to your securities account for the calendar year as "Ordinary
Dividends" in Box 1a. Box 1b, "Qualified Dividends",
reports dividends, which are also included in Box 1a, that MAY be
eligible for reduced dividend tax rates. IB does not determine if
the payments included in Box 1b have met the requirements for the
lower tax rates to apply. PTI ProDirect only determines that they
are payments which may be eligible for the lower tax rates. Please
consult your tax advisor or IRS Publication 550 to determine the
appropriate status of these payments. Box 2a "Total Capital
Gain Distributions" reports long-term capital gain distributions
from mutual and exchange traded funds. Box 6, "Foreign Tax
Withheld," is foreign withholding tax that has been withheld
at the source related to dividends paid on American Depository Receipts
(ADR’s) or on foreign ordinary shares trading in the U.S.
The country to which the tax was paid is listed in Box 7. If the
IRS notified us that backup income tax must be withheld on dividends,
this amount will be reported in Box 4. Dividends that were
debited due to short positions are not reported to the IRS. These
amounts appear on your year end statement. Please consult your tax
advisor to determine the tax treatment of these payments.
Form
1099B: "Proceeds from Broker and Barter Exchange"
reports all proceeds received from SELL trades of securities (including
short sales). This includes sell trades resulting from the exercise
or assignment of stock options. The 1099B does not reflect capital
gains or profit and/or loss. It is the customer’s responsibility
to calculate gain or loss. Proceeds from option trading are reported
by IB on the Consolidated Substitute 1099 for Futures. Commissions
have been deducted from the trade proceeds reported on the 1099B.
If back-up withholding has occurred on your proceeds it has been
reported to you in Box 4. Proceeds from single stock futures
are not reported to the IRS. These amounts appear on your year end
statement. Please consult your tax advisor to determine the tax
treatment of these payments.
Form
1099 B – for Futures: (substitute form) reports profit
or (loss) from regulated futures contracts. This includes proceeds
from options (a regulated futures contract) trading. Only the aggregate
profit or (loss) is reported by IB. Single stock futures are
not considered to be regulated futures contracts therefore transactions
of these financial instruments are not included.
Form
1099-MISC: "Miscellaneous Income", reports gross
fee income paid to advisors and gross commissions paid to introducing
brokers in Box 7. Box 8 reports substitute payments in lieu of dividends
and interest. If backup withholding occurred tax withheld is reported
in Box 4.
Form
1099-R: "Distributions from Pensions, Annuities, Retirement
or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.", this
form used to report distributions made to you from your retirement
accounts, including an IRA, Roth IRA, IRA Simple, or Keogh Plan. These
1099’s are issued to you directly by Principal Trust Company,
the administrative manager of all IBG retirement related plans.
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When will I receive
my 1099 Forms?
By January 31, your Substitute Consolidated 1099 Forms will be available
for the immediately preceding year.
How
do I access my 1099 Forms?
All 1099 forms, with the exception of the 1099-R,
are available in electronic format accessible after you Login from
PTI ProDirect and view your Account Management/Report Management.
Your 1099-R, if applicable, will be sent to you directly from Principal
Trust Company, the retirement account trustee, via mail. We recommend
that you also print your year – end statement for reference
and detail of items which are not reported to the IRS, but which may
be necessary to prepare your tax return.
How do I get my 1099
if I am unable to log into my Account Management Menu?
Contact our Customer Service Department, and
advise the service agent that you are not able to log into the Account
Management Menu.
1. If you have
your username, we will ask a series of security questions for identity
verification, once the information has been verified; our customer
service department will establish a temporary password in order for
you to gain access.
2. If you
do not have your username, we will require you to send additional
information to our new accounts department in order to verify your
identity. Please be advised that this process may require additional
processing time to complete the verification process.
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What
must I do if my 1099 form is not included in the Statements and Downloads
section of my Account Management menu?
First, you must determine from which account you are missing your
1099 form. A separate Consolidated Substitute 1099 is issued for Securities
and Commodities accounts. Retirement account 1099’s are sent
to you by mail. If you are missing the securities Form 1099, the futures
Form 1099, or both, verify that you sold shares of stock during the
previous tax year for equities and/or verify that you bought or sold
futures contracts during that same period or that you received an
interest (including interest on free cash) or dividend payment in
an account. Once you have reviewed your account activity from the
previous tax year, and you have determined that you should have received
a 1099 for an account, please contact our customer service department
with specific details of transactions, including the name of the security,
number of shares/contracts, and the trade date. We will research the
issue and will advise you once we have concluded our investigation.
How
do the gross proceeds as reported on Form 1099B - Securities relate
to gains or losses?
Gross proceeds, alone, are not indicative of whether an overall gain
or loss was realized from a securities transaction. Gross proceeds
report only the sale of a capital asset, which is reportable to the
IRS. The gain or loss for any given transaction is a function of the
sales proceeds, the purchase price and allowable transaction costs.
Please refer to IRS Publication 550 (on line at www. IRS.gov/formspubs)
for further guidance. Information relating to each of these items,
on an individual transaction basis, is available from the both the
monthly and annual confirmation statements located in the Statements
and Downloads section of your Account Management Menu. We have formatted
the monthly confirmation statements in MS Money and Quicken, or you
can use an Excel Spreadsheet to help with your calculations. If you
have trouble with downloading your statements, please contact
the Technical Assistance Center at 1.877.442.2757, and press 4.
IB cannot provide any assistance in determining transaction gains
or losses due to the numerous and often taxpayer specific considerations
involved. Please consult with your tax advisor for guidance in this
area.
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What
is the Realized Profit and Loss on the 1099 for commodities transactions?
It is the actual aggregate profit or loss recognized over the course
of the year from transactions in commodity futures and regulated futures
contracts which have been closed, reached final settlement or, in
the case of options, expired.
Does the gross proceeds
balance in the 1099-B for my securities account include commissions?
The gross proceeds balance is net of commissions.
Does
the gross proceeds balance in the 1099-B for my securities account
include equity and index option transactions?
No. The proceeds (premium) received from the sale of put and call
options are not required to be reported. However, proceeds associated
with option exercises and assignments will be reflected in gross proceeds
on the 1099-B. Please consult your tax professional for more information.
Does
the gross proceeds balance in the 1099-B for my securities account
include short sales?
Yes. Proceeds relating to the securities short sales are included
regardless of whether the securities have been subsequently purchased.
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Does
the gross proceeds balance in the 1099-B include sale transactions
which have taken place in December, but which will not settle until
January?
Yes. As proceeds are reported on a trade date basis a sale is reportable
in the year it is executed not settled. In the case of bond sales
which take place in December but which do not settle until the following
year, the sale proceeds will be reported in the year of the trade,
and accrued interest, if any, will be reported included in the following
year’s 1099-INT, when the funds are received in your account.
What
happens if I receive Form 1099-DIV that includes income that needs
to be reported by other taxpayers?
If you receive Form 1099-DIV that includes income attributable to
other taxpayers under other Taxpayer Identification Numbers, you will
need to follow the IRS instructions for "Nominees." Please
refer to the instructions for Form 1040, "U.S. Individual Income
Tax Return", Schedule B, "Interest and Ordinary Dividends"
or to IRS Publication 550 , "Investment Income and Expenses",
for more information. IRS forms, instructions and publications can
be obtained free of charge on line at www.IRS.gov/formspubs or by
calling the IRS at 800.829.3676 (800/TAX FORM).
What
IRS form(s) do I use to report Form 1099-DIV tax information?
Generally, individual investors will need to report Form 1099-DIV
information on IRS Form 1040, "U.S. Individual Income Tax Return".
Depending on the type of information reported on your Form 1099-DIV,
you may need to include with Form 1040 additional forms such as Schedule
B, "Interest and Ordinary Dividends" and/or Schedule D,
"Capital Gains and Losses" , Form 1116, "Foreign Tax
Credit". All IRS forms are available free of charge on line at
www.IRS.gov/formspubs or by calling the IRS at 800.829.3676 (800/TAX
FORM).
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Does
IB send the IRS a copy of my 1099?
Yes, IB sends an electronic file to the IRS with same information
that was provided to you by IB on Form 1099.
Where can I find more
descriptive information regarding your 1099’s?
You may find more information on our website by clicking on Tax Instructions.
If
I completed a W-8 form and I am not a legal resident of the United
States will I receive a 1099?
If you are not a U.S. citizen, or legal resident, you will not receive
a 1099 form. However, you may receive Form 1042S. Form 1042S reports
interest payments, dividends, and payment in lieu income received
from U.S. Securities to foreign investors. Please see information
for U.S. non-citizens and non-residents below.
The
Form 1099 that I received is incorrect. How can I get this corrected?
Send an email to PTI ProDirect at Help@PTIProDirect.com.
Please include your full name, and account number, and a description
of the discrepancy. In addition, please include what you feel is the
correct amount and specific details as to the calculations used to
derive that amount. We will research the issue and will advise you
once we have concluded our investigation.
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Why
did I receive a Form 1099 for the amount that I received from a deceased/divorced
person's account?
The IRS requires us to report all assets received by an individual
from an account due to death or divorce. Please consult your tax advisor
concerning these amounts.
Why
did I receive a Form 1099-R for a distribution from my employer's
retirement plan that was rolled directly into an IRA?
This is called a direct rollover. Your employer is required to report
assets leaving the employer’s plan on Form 1099R. Box 7 indicated
the type of distribution occurred. Common distribution codes are:
1 Early Distribution, no known
exception
2 Early Distribution, exception applies
3 Disability
4 Death
7 Normal Distribution
G Direct rollover
Q Qualified distribution from a Roth IRA
T Roth IRA distribution, exception applies
The successor trustee (receiver
of assets in a rollover) is required to report the contribution (receipt)
of the same assets to the IRS on Form 5498.
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Why
did I receive a Form 1099-R for my rollover from one IRA to another
IRA?
A rollover occurs when money is distributed from one tax-deferred
account and deposited within 60 days to another tax deferred account.
There are two types of IRA rollovers: 1) a direct rollover, which
occurs when fund are transferred directly from one account to another
account by the account custodians/trustees. 2) A distribution is made
directly to you and within 60 days you deposit the full amount (including
any taxes withheld) into a new IRA or other tax deferred account.
The custodian/trustee distributing the funds will issue you a 1099R
reporting the payment/transfer of funds. The code in Box 7 (listed
above) indicates what type of payment was made. The custodian/ trustee
receiving the IRA funds will issue a Form 5498 in May reporting the
contribution to the receiving IRA account which reports to the IRS
that you deposited the money into another IRA.
Why
has "Taxable amount not determined" been checked in Form
1099-R, Box 2b despite a balance being reported in Box 2a as a "Taxable
amount"?
The IRS requires that we report the full amount of your IRA distribution
in Box 1 (Gross distribution) In Box 2a (Taxable amount), we also
report the full amount distributed unless you have directly rolled
(transferred account to account) your funds to another IRA custodian/trustee.
If funds are distributed directly to you we can not determine the
taxable amount, since we do not know whether you have made any non-deductible
(after-tax) contributions to this IRA account. Box 2b is checked to
indicate that we have not determined the taxable amount Please consult
your tax advisor to determine if you have made non-deductible (after-tax)
contribution to your IRA account, which may lower your taxable amount.
Why
have taxes been withheld from my IRA distribution, I deposited the
funds within 60 days into a new IRA/retirement account?
If you are under 59 1/2 years of age the IRS requires us to withhold
taxes from your IRA distribution, unless your IRA rollover is sent
directly account to account. Box 4 of the 1099R reports any withheld
taxes. Please note that for any account rollover on which taxes have
been withheld the full amount must be redeposited into a tax-deferred
account within 60 days. This includes the amount withheld for tax
purposes for the transaction to be tax free.
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What
is Form 5498?
Form 5498,"IRA, and Coverdell ESA Contribution Information",
is an information form used to report contributions and rollovers
to Traditional IRAs, Roth IRAs, SEP IRAs, and SIMPLE IRAs for which
Principal Trust Company is custodian. As contributions to these types
of tax deferred accounts for the prior year may be made up to the
tax filing deadline of April 15, the IRS has established May 31 as
the deadline for providing Form 5498.
I
already filed my taxes and did not include information reported on
Form 1099. What do I do now?
You should file an amended tax return that includes the applicable
information as reported on Form 1099. The IRS verifies the information
on your tax returns with the 1099 information received from banks,
brokers and other sources. You may receive a notice from the IRS indicating
that your return was filed without the omitted information. Consult
your tax or legal advisor for further information.
How
do I contact the Internal Revenue Service (IRS)?
www.IRS.gov is the IRS website. The site has information about all
types of U.S. tax filings. The site also has links to tax forms, instructions
and publications, which can downloaded for free. You may also call
the IRS with questions. The IRS contact number for:
Individuals: 800.829.1040
Business: 800.829.4933
Trusts: 800.829.4933
Estates (and gift tax) 800.829.4933
Forms and Publications: 800.829.3676
Refunds: 800.829.1954
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What is interest income?
Interest is income earned on cash balances, bonds and some preferred
securities. Some distributions called dividends are actually interest
and should be reported as such. Earnings on money market funds are
dividends, not interest.
Is U.S.
Government Interest Taxable?
Interest from U.S. Obligations, such as interest on U.S. Treasury bills,
notes, and bonds issued by any agency or instrumentality of the United
States is subject to federal income tax. Interest from U.S. Obligations
is not subject to state or local income tax. Interest on U.S. Treasury Bills
is the difference between the discounted price you paid for the purchase
of the bill and the value you received at sale or maturity. Generally,
all other U.S. Government obligations pay interest semi annually.
Why is U.S. Government
interest reported separately on my 1099 INT?
US Government interest is reported separately for state reporting purposes.
What is Original Issue
Discount (OID)?
OID is the excess of an obligation’s stated redemption price at
maturity over its issue price. OID is amortized over the life of the
security, recognizing a portion of the discount annually as taxable
interest.
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What
are ordinary dividends?
Dividends are paid by corporations, mutual funds and other entities
such as Real Estate Investment Trusts (REIT).Ordinary dividends include
payments from foreign securities such as ADR’s and net short term
gains from mutual funds. Dividends that have been reinvested are also
included in this amount. Dividends payable
by a Regulated Investment Company (RIC) or a REIT declared in October,
November, or December, but not paid until January of the following year
are, for U.S. tax purposes, treated as if they were paid on December
31 of the year and are included in the amount reported to you on Form
1099DIV. Please consult your tax professional for more information concerning
this type of dividend.
What
are Qualified Dividends?
Qualified Dividends are distributions which meet the criteria to be
subject to a beneficial federal tax rate. In general, qualified dividends
are distributions received from U.S. Domestic corporations or qualified
foreign corporations where you have owned the investment for more than
61 days before or after the ex dividend date. IRS publication 550 "Investment
Income and Expenses" available free on line at www.IRS.gov/formspubs
and/or your tax professional can assist in determining if your dividends
are eligible for the beneficial rate.
How
are short-term capital gains distributions from a mutual or exchange
traded fund (ETF) reported?
Distributions of net short-term capital gains are included in the Ordinary
Dividend amount on your Composite Form 1099 and are taxable at ordinary
income tax rates.
Where
are long –term capital gains distributions from a mutual or exchange
traded fund reported?
Long –term capital gains distributions are reported in box 2a
of Form 1099-Div.
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Where
are my dividends/payments in lieu reported?
Substitute payments, such as dividends on securities that you have loaned
to others are reported in box 8 on Form 1099 Misc.
What
is a Return of Capital?
A distribution paid to fund shareholders in excess of a fund's current
and accumulated earnings and profits is a return of capital (ROC) distribution.
A ROC distribution is generally nontaxable and reduces a shareholder's
cost basis in the investment If a ROC distribution exceeds a shareholder's
cost basis, then any additional amount is treated as a capital gain. For example:
A shareholder buys 1 share of Fund A for $10. In 2003, Fund A pays a
$1 per share ROC distribution. The shareholder's cost basis in Fund
A after the ROC distribution is $9 per share ($10 initial investment
less $1 ROC distribution).
How
do I know if my account had a Return of Capital (ROC)?
A fund will report ROC distributions to shareholders as nontaxable distributions
in Form 1099-DIV, Dividends and Distributions. Please note that this
information is often not available until after the 1099 Composite forms
are made available to you. Once the information is available IB will
make updated 1099s available.
Why
were foreign taxes withheld from my dividends?
Foreign taxes are withheld on foreign stocks even though the shares
are traded and were purchased on a U.S. stock exchange. They are withheld
at the source (company) level and remitted to the foreign government,
much like U.S. withholding taxes. U.S. taxpayers may receive a tax credit
for these foreign taxes on their U.S. Tax returns. IRS Publication 514
"Foreign Tax Credit for Individuals" available at www.IRS.com/formspubs
can provide more information on this topic.
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Should
I take the foreign tax paid as a foreign tax credit or as a deduction
on my tax return?
Treatment of foreign tax withheld as a foreign tax credit or as a deduction
depends upon the tax situation of each shareholder. IRS Publication
514, "Foreign Tax Credit for Individuals", the instructions
for Schedule A "Itemized deductions" and Form 1116 "Foreign
Tax Credit" provide more specific guidance. Please consult your
tax professional for any additional information and determination of
the appropriate treatment for your tax situation.
What
is a capital gain or loss?
Assets held for investment purposes such as stocks, options and bonds
are classified by the IRS as capital assets. When such assets are sold
a capital gain or loss is realized on the sale. If the capital asset
is sold for a price greater than its purchase price, then a capital
gain has been realized; if less, then a capital loss has been realized.
In determining whether a capital gain or loss has been realized, adjustments
to the purchase and sales price may be allowed to recognize certain
transaction costs such as commissions. Proper determination
and recognition of capital gain and loss is important as capital gains
may be subject to tax rates lower than that for other forms of income.
Net capital losses are subject to annual limits. The taxation of capital
gains and losses are also distinguished by the length of time the asset
was held prior to sale. IRS Publication
550 "Investment Income and Expenses" is a good source of information
on this topic. It is available free on line at www.IRS.gov/formspubs.
We also recommend you consult your tax professional.
What
are short-term capital gains?
Short-term capital gains are capital gains earned on the sale of securities
held for less than 1 year. The date a security is acquired is the trade
date +1 and the date of sale is the trade date.
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What
are long-term capital gains?
Long-term capital gains are capital gains earned on the sale of securities
held for more than 1 year. The date a security is acquired is the trade
date +1 and the date of sale is the trade date. Net long-term capital
gains are eligible to be taxed at favorable tax rates.
What
is a wash sale?
A wash sale occurs when you sell stock or securities and, within 30
days before or after the sale, you buy acquire in a taxable exchange
or acquire a contract or option to buy substantially identical stock.
Commodity futures contracts are not stock or securities and are not
covered by the wash sale rule, however any position of a straddle acquired
after June 23, 1981 is included in these rules. See IRS Publication
550, "Investment Income and Expenses", available free on line
at www.IRS.gov/formspubs and/or consult your tax professional. For purposes
of the wash sale rule, a short sale is considered complete on the date
the short sale is entered into if on that date: 1. You own (or,
on or before the date of the short sale, you entered into a contract
or option to acquire) securities identical to those sold short (in any
account you may own regardless of where it is located) and
2. You deliver such stock or securities to close the short sale.
What
are the tax consequences of a wash sale?
Losses from wash sales are not deductible when they occur. Any unallowed
loss should be added to the cost basis of the newly acquired security.
The unallowed loss will be reflected in the calculation of gain or loss
when these shares are sold. If you think you may have entered into a
wash sale, please consult your tax professional for more information.
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What
is a Regulated Futures Contract?
A regulated futures contract is defined under Section 1256 of the Internal
Revenue Code. A Section 1256 contract is any: Regulated futures
contract,
Foreign currency contract,
Nonequity option,
Dealer equity option,
Dealer securities futures contract. Please refer
to IRS Publication 550, "Investment Income and Expenses" and
Section 1256(g) of the Internal Revenue Code, available on line at www.irs.gov
for specific definitions of these securities. We also recommend that
you consult your tax professional.
When
will I receive My K-1 from a Publicly Traded Partnership (PTP), Royalty
Trust?
K-1s are prepared and distributed by the individual partnership or trust.
IB does not have access to these documents. Most PTPs and Royalty Trusts
have investor contact phone lines though which you can obtain this information.
Why
does IB withhold U. S. taxes from my dividends and substitute payments?
US Tax law requires that U.S. Tax be withheld from dividends paid by
US Corporations to foreign persons at 30%. The withholding is less if
the U.S. has entered into a tax treaty with your country. In most cases
the treaty withholding rate on dividends is 15%, however the amount
does differ, refer to IRS Publication 901, "U.S. Tax Treaties"
specific information about U.S. tax treaties. IRS publications are available
free on line at www.IRS.gov/formspubs. This law applies to all ordinary
dividends, payments in lieu, short-term capital gain distributions paid
to foreign persons. Investment interest
income is not subject to US withholding.
Where
is the tax sent?
IB remits the tax withheld to the U.S. Treasury.
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What
is Form 1042-S?
Form 1042-S, "Foreign Person's U.S. Source Income Subject to Withholding",
is the federal information form which reports the amount of interest,
dividends, payments in lieu paid to and for account managers, fees earned
to the Internal Revenue Service (IRS), annually. IB may issue you one
or more 1042 S forms. Each type of income is reported on a separate
form using a code in Box 1. Common codes are:
01) Interest
paid by U.S. obligors including the U.S. Treasury
29) Deposit Interest
30) Original issue discount (OID)
06) Dividends paid by U.S. Corporations
34) Substitute payment – Dividends
35) Substitute- payment – Other
50) Other Income
Box 2 indicates
the amount of income credited to your account of this type, Box 5 rate
at which tax was withheld and Box 7, the amount of U.S. Tax withheld. If the income
is exempt from withholding tax a code appears in Box 6.
When
will I receive my 1042 –S forms?
The form will be made available to you by March 15th and is located
in the Statements and Download section of your Account Management Menu
after you Login.
Can
I receive a refund of tax withheld?
In general, amounts withheld for U.S. taxes are non-refundable. However,
under certain circumstances, such as an incorrect rate being applied
to withhold tax, a refund can be obtained. If you are an individual
and file either Form 1040NR, "U.S. Nonresident Alien Income Tax
Return" or 1040NR-EZ "U.S. Income Tax Return for Certain Nonresident
Aliens with No Dependents to obtain a refund. There are similar U. S.
forms for trusts and corporations. IRS Publication 515 "Withholding
of Tax on Non –Resident Aliens and Foreign Entities" and
IRS Publication 519 "U.S. Tax Guide for Aliens" available
free at www.IRS.gov/formspubs provides more information on this subject.
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