Tax

Have a tax question? Ask a tax Expert

Ask an Expert,
Get an Answer ASAP!

This answer was rated:

What tax form is filed to report dividends paid by US Corp?

You will report this on the Form 1042. In addition, the Form 1042-S has to be filed as well. See below:

Including a wide variety of income, FDAP income is defined under Sec. 871(a)(1)(A) as “interest, dividends, rents, salaries, wages, premiums, annuities, compensations, remunerations, or emoluments. FDAP income is not subject to the 30% gross basis withholding tax if it is derived from the conduct of a U.S. trade or business. In that event, the income is subject to tax as ECI taxable at graduated rates after the deduction of relevant expenses.

Form 1042: U.S. withholding agents must generally file tax and information returns with the IRS to report FDAP income paid to foreign payees along with any tax withheld on Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons.

Form 1042-S: In addition to Form 1042, a withholding agent must file Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, with the IRS for every foreign payee with respect to which it paid FDAP income. On each Form 1042-S, the withholding agent must indicate the amount of each category of income paid to the foreign payee (e.g., dividends, interest, etc.) and the amount of tax withheld. A separate Form 1042-S must be filed for each payee and each type of income. Note that if the withholding agent did not withhold tax on FDAP income because it was exempt from withholding tax under a relevant income tax treaty, the withholding agent still must file Form 1042-S. A copy of Form 1042-S should be sent to the foreign payee and attached to any U.S. income tax return that the payee files.

Reference Source

https://www.thetaxadviser.com/issues/2013/apr/clinic-story-05.html

Read full interaction below »
Ask Your Own Tax Question

Resolved Question:

What tax form is filed to report dividends paid by a US Corp which is owned by a Canadian Corp? I think it might be 1042S. I want to know the rate of WH.

Submitted: 7 months ago.
Answered in 2 hours by:
9/19/2017
Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
Satisfied Customers: 4,575
Experience: 3+ decades of varied tax industry exp. Tax Biz owner
Verified

Q: what tax form is filed to report dividends paid by a US Corp which is owned by a Canadian Corp?

A: You are correct. You will report this on the Form 1042. In addition, the Form 1042-S has to be filed as well. See below:

Including a wide variety of income, FDAP income is defined under Sec. 871(a)(1)(A) as “interest, dividends, rents, salaries, wages, premiums, annuities, compensations, remunerations, or emoluments. FDAP income is not subject to the 30% gross basis withholding tax if it is derived from the conduct of a U.S. trade or business. In that event, the income is subject to tax as ECI taxable at graduated rates after the deduction of relevant expenses.

Form 1042:U.S. withholding agents must generally file tax and information returns with the IRS to report FDAP income paid to foreign payees along with any tax withheld on Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons.

Form 1042-S: In addition to Form 1042, a withholding agent must file Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, with the IRS for every foreign payee with respect to which it paid FDAP income. On each Form 1042-S, the withholding agent must indicate the amount of each category of income paid to the foreign payee (e.g., dividends, interest, etc.) and the amount of tax withheld. A separate Form 1042-S must be filed for each payee and each type of income. Note that if the withholding agent did not withhold tax on FDAP income because it was exempt from withholding tax under a relevant income tax treaty, the withholding agent still must file Form 1042-S. A copy of Form 1042-S should be sent to the foreign payee and attached to any U.S. income tax return that the payee files.

Reference source:

https://www.thetaxadviser.com/issues/2013/apr/clinic-story-05.html

The W/H rate is 30%. See below:

FDAP & ECI. ECI and FDAP are subject to two different tax regimes. FDAP is taxed on a gross basis (gross income without deductions) at 30 percent whereas ECI is taxed on a net basis (gross income less allowable deductions) at graduated rates. The 30 percent tax rate on FDAP may be reduced (or eliminated) pursuant to an income tax treaty or under domestic law. Although not the focus of this concept unit, it is important to note that the 30% tax on FDAP income is collected by withholding at the source. Accordingly, the payer of the FDAP income is required to withhold and remit this tax to the IRS. The person who withholds and pays the tax is often referred to as the withholding agent.

Reference source:

https://www.irs.gov/pub/int_practice_units/RPWCUP_081_02.pdf

Page 3

Ask Your Own Tax Question
Customer reply replied 7 months ago

US Corp is 100% earned by Canada Corp. US Corp has built up earnings over many years which are considered ECI & wants to pay Canada Corp $500,000. What is the lowest rate of US WH?

Under most of its treaties, the United States may not tax the business profits of a treaty country resident generated in the United States, unless such business is carried on through a permanent establishment (“PE”) located in the United States. If a PE exists, the business profits may be taxed only to the extent they are attributable to the US PE.

Reference source:

https://www2.deloitte.com/content/dam/Deloitte/us/Documents/Tax/us-tax-introduction-to-taxation-of-foreign-investment-071515.pdf

(Bottom Page 9)

Corporate taxable income varies from 15% to 35%.

Ask Your Own Tax Question
Customer reply replied 7 months ago

In the following chart it appears the WH rate for dvds pd to Canadian parent should be 15% (column 1) or 5% (column 2) see http://taxsummaries.pwc.com/ID/United-States-Corporate-Withholding-taxes Top of Page 4 of the following under "subsidiary" it also mentions the 5% rate. http://www.andersentax.com/uploads/file_attachments/Foreign_Owned_US_Operations_Guide.pdf Obviously we are interested in paying the lowest rate but I want to be correct. You mentioned 30% but there seem to be many legitimate exceptions. The US subsidiary has paid the corp tax rates you mentioned 15% to 35% but these accumulated earnings are going to be sent to the Canadian parent as a dividend.

The tax treaty between the U.S. and Canada states the following regarding dividends.

2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State; but if a resident of the other Contracting State is the beneficial owner of such dividends, the tax so charged shall not exceed: (a) 10 per cent of the gross amount of the dividends if the beneficial owner is a company which owns at least 10 per cent of the voting stock of the company paying the dividends; (b) 15 per cent of the gross amount of the dividends in all other cases. This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.

Reference source:

https://www.irs.gov/pub/irs-trty/canada.pdf

Article X

Based on this information, I would say 10% is the lowest tax rate.

Ask Your Own Tax Question
Customer reply replied 7 months ago

So if a $500,000 dividend is paid and 10% is WH and sent to IRS what is the timing for 1. remittance of the 50,000 WH 2. filing of forms 1042

When to file form 1042 AND 1042-S:

No later than March 18, 2018

Deposit Requirements You are required to use the Electronic Federal Tax Payment System (EFTPS), discussed later, to deposit the tax withheld and required to be shown on Form 1042 (regardless of whether withholding was applied under chapter 3 or 4 or with respect to a specified federal procurement payment).

1. If at the end of any quarter-monthly period the total amount of undeposited taxes is $2,000 or more, you must deposit the taxes within 3 business days after the end of the quarter-monthly period. (A quarter-monthly period ends on the 7th, 15th, 22nd, and last day of the month.) A business day is any day other than a Saturday, Sunday, or legal holiday in the District of Columbia. 2. If at the end of any month the total amount of undeposited taxes is at least $200 but less than $2,000, you must deposit the taxes within 15 days after the end of the month. If you make a deposit of $2,000 or more during any month except December under rule 1, earlier, carry over any end-of-the-month balance of less than $2,000 to the next month. If you make a deposit of $2,000 or more during December, any end-of-December balance of less than $2,000 should be remitted with your Form 1042 by March 15, 2017. 3. If at the end of a calendar year the total amount of undeposited taxes is less than $200, you may either pay the taxes with your Form 1042 or deposit the entire amount by March 15, 2017.

Reference sourcde:

https://www.irs.gov/pub/irs-pdf/i1042.pdf

Page 3

Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
Satisfied Customers: 4,575
Experience: 3+ decades of varied tax industry exp. Tax Biz owner
Verified
Tax.appeal.168 and 87 other Tax Specialists are ready to help you
Ask your own question now
Was this answer helpful?
Ask Tax.appeal.168 Your Own Question
Tax.appeal.168
Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
Satisfied Customers: 4,575
4,575 Satisfied Customers
Experience: 3+ decades of varied tax industry exp. Tax Biz owner

Tax.appeal.168 is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,338 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,451 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

PhillipsEsq.

PhillipsEsq.

Attorney-at-Law

56 satisfied customers

B.A., M.B.A, J.D.

Robin D.

Robin D.

Senior Tax Advisor 4

15,124 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,655 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

< Previous | Next >

Related Tax Questions
Just discovered $1000 dividend income. Will IRS be confused
Just discovered $1000 dividend income. Will IRS be confused if I send 1040X today when I just filed my 1040 yesterday? Should I wait a couple of weeks? … read more
Carter McBride
Carter McBride
LLM
967 satisfied customers
I'm on Federal Disability, on my Federal Tax forms there are
I'm on Federal Disability, on my Federal Tax forms there are special provisions for this income. How do I handle it on my California State Income tax filling Married Joint? … read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
VA income tax return form 760, Line 16, “ Taxable Income -
VA income tax return form 760, Line 16 , “Virginia Taxable Income - Subtract Line 15 from Line 9” what are the two bubbles “DTD” and “LTD” ? Should I fill in one ?… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
Looking for estimated tax rate for 500,000 income in 2017.
looking for estimated tax rate for 500,000 income in 2017 … read more
Richard
Richard
Tax Attorney
Doctoral Degree
4,451 satisfied customers
If I have aid taxes on interest and dividends every year for
If I have aid taxes on interest and dividends every year for money i a trust, do I need to pay taxes on the money in my trust cash account again when I withdraw the money? … read more
Cole Parker
Cole Parker
Principal/CPA
Bachelor\u0027s Degree
87 satisfied customers
Self employed. after deductions, my taxable income is $4000.
self employed . after deductions, my taxable income is $4000. will i have to pay tax on that amount? thank you … read more
Cole Parker
Cole Parker
Principal/CPA
Bachelor\u0027s Degree
87 satisfied customers
On line 17, Form 1120 ,C Corp Federal Tax return are state
On line 17, Form 1120 ,C Corp Federal Tax return are state corporate income taxes deductible.If I am doing my Federal C Corp returns for 2017 are the state corporate income taxes due but not paid yet … read more
Barbara
Barbara
Enrolled Agent, Paralegal
4,948 satisfied customers
I filed my state and federal taxes electronically and then
I filed my state and federal taxes electronically and then realized that I accidentally omitted something that significantly changes my refund from the federal and my payment to the state. I need to f… read more
Barbara
Barbara
Enrolled Agent, Paralegal
4,948 satisfied customers
Do i pay income tax,on dividends on stocks,if they are
do i pay income tax,on dividends on stocks,if they are rolled over into more stocks. Or when i withdrawl, from my stocks… read more
Tax.appeal.168
Tax.appeal.168
Tax Accountant
4,575 satisfied customers
I have a question about tax exempt dividends in a mutual
I have a question about tax exempt dividends in a mutual fund that are from a state other than Oregon. Are they taxable in Oregon? This refers to tax schedule OR-ASC … read more
Carter McBride
Carter McBride
LLM
967 satisfied customers
If Non Resident Alien (NRA) for Tax Purposes has Dividends
If Non Resident Alien (NRA) for Tax Purposes has Dividends from Nuveen Tax Free Municipal security such as Symbol NVG, 1. Is the broker required to withhold 30% and/or 2. Does the NRA get the tax with… read more
Dr. Fiona Chen
Dr. Fiona Chen
President
Ph.D.
938 satisfied customers
Are royalties, interest and dividends reported in boxes 5,6a
are royalties, interest and dividends reported in boxes 5,6a and 7 of schedule K-1 required to be reported if held if stock is held in an IRA … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I have a client that received Interest, dividend, short-term
I have a client that received Interest, dividend, short-term loss and Long-term gain income from a CMCF Common trust Fund which is a grantor trust. The trust income is taxable to my client. And, the o… read more
Carter McBride
Carter McBride
LLM
967 satisfied customers
I entered the federal tax withholding as my state tax
I entered the federal tax withholding as my state tax withholding. I discovered my error after I received my refund check. I actually owe $178. How do I send back the refund money? … read more
Barbara
Barbara
Enrolled Agent, Paralegal
4,948 satisfied customers
Can I submit the federal taxes with an itemize deduction and
Can I submit the federal taxes with an itemize deduction and the state with a standard deduction form? … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
15,124 satisfied customers
Years ago I received a federal tax id number. but never used
years ago I received a federal tax id number. but never used it. would it still be active … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I plan to declare some foreign interest and dividends
I plan to declare some foreign interest and dividends totaling about 3000 pounds in each of the last 3 years, on some of which i suffered withholding tax at source. I have not been submitting an annua… read more
taxmanrog
taxmanrog
Master\u0027s Degree
905 satisfied customers
Same question on the taxation of interest and dividends (on
Same question on the taxation of interest and dividends (on mutual funds) earned inside a disclaimed portion trust ... disclaimer trust . The original owner of a trust passed and the spouse declined a… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x