The IRS has issued 2014 draft instructions to Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding, which include a transitional rule for payments subject to the Foreign Account Tax Compliance Act (FATCA) applicable after July 1, 2014.
Payments made to a foreign person subject to the FATCA rules both before July 1 and after July 1 may require two separate 1042-S filings. In addition, all forms must be submitted electronically, eliminating the previous allowance of a paper filing in cases where fewer than 250 forms were filed. Taxpayers contemplating payments for foreign persons in 2014 may review the draft instructions.
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