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1042 S

Forum|Forum|2 years ago
February 26, 2024
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Hi, I got 1042 S and W2 from my company. I joined the company in January 2023, but the treaty for exemption (1042 S) only applied to September 2023 and after that I became an LPR. Now, the 1042 S form I received has only information about the September, though the exemption should be applied before that-- the amount in box 1 "Gross Income" of 1042 S should be much higher and the net taxable income should be lower in W2 form. I asked to my company about that and they told me I might not have signed the form before September, but I may be still claim for full treaty when I submit the tax return. Given this situation, how I can claim the full treaty and submit the tax return using Turbo? Thank you!

Best answer by ThomasM125

You need to report the treaty income on your tax return and then enter an adjustment to remove it. That way you can explain why the income isn't taxable.

First, enter any foreign income you haven't reported elsewhere on your return in the Foreign Earned Income and Exclusion section that you will find under Less Common Income in the Wages and Income section of TurboTax. On the screen that asks What Form(s) Was Foreign Income Reported on? answer A Statement from my foreign employer. You will be asked if you want to try to exclude the income, to which you should answer "no". You will be asked if you want to delete form 2555, to which you will answer "yes".

The income will appear on your form 1040, line 1(h) as other earned income.

You can make an adjusting entry to remove the treaty income in TurboTax as follows:

1. From the Federal menu in TurboTax find Wages and Income

2. Find Less Common Income

3. Choose Miscellaneous Income, 1099-A, 1099-C

4. Choose Other Reportable Income

5. Enter a description of the treaty and the adjustment as a negative number

You must complete Form 8833 Treaty-Based return position disclosure and include with your return. That form is not available in TurboTax, so you will need to complete that separately and attach it to your tax return that you would mail in. Here is a link to the form: Treaty income adjustment

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ThomasM125Answer

You need to report the treaty income on your tax return and then enter an adjustment to remove it. That way you can explain why the income isn't taxable.

First, enter any foreign income you haven't reported elsewhere on your return in the Foreign Earned Income and Exclusion section that you will find under Less Common Income in the Wages and Income section of TurboTax. On the screen that asks What Form(s) Was Foreign Income Reported on? answer A Statement from my foreign employer. You will be asked if you want to try to exclude the income, to which you should answer "no". You will be asked if you want to delete form 2555, to which you will answer "yes".

The income will appear on your form 1040, line 1(h) as other earned income.

You can make an adjusting entry to remove the treaty income in TurboTax as follows:

1. From the Federal menu in TurboTax find Wages and Income

2. Find Less Common Income

3. Choose Miscellaneous Income, 1099-A, 1099-C

4. Choose Other Reportable Income

5. Enter a description of the treaty and the adjustment as a negative number

You must complete Form 8833 Treaty-Based return position disclosure and include with your return. That form is not available in TurboTax, so you will need to complete that separately and attach it to your tax return that you would mail in. Here is a link to the form: Treaty income adjustment

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A

Al EmranAuthor

@ThomasM125 When I joined the company in January 2023, I was on F-1 OPT status in the USA, and then in September, I got a green card. I did not receive a foreign income nor my employer is a foreign company then why would I need A Statement from my foreign employer? And, I am talking about 1042 S, which is under Article 21(2) tax treaty. You mentioned form 1040, line 1(h), I don't have that.

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ThomasM125

I assumed you were trying to exclude income based on a tax treaty with a foreign country. If so, you first need to report all of your income, including the income that you are trying to exclude, then you enter a negative adjustment to remove the income exempt by treaty.

You mention income reported on a W-2 form and on a form 1042. You also mention a treaty. You also said that income is not allocated property between the W-2 and form 1042. Are you simply trying to change the reporting of income between the W-2 and Form 1042? If so, and if the W-2 income should be lower than reported, it would lower your social security and Medicare tax if that is listed on the W-2 in boxes 4 and 6. If that is the issue, there is no way to recover excess social security tax on your personal tax return form 1040 in this instance, you would have to get your employer to amend the W-2 form for that. If you are simply transferring the reporting of income between your W-2 and form 1042 entry, then it would not likely affect your income tax, as the total income would be the same either way.

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