If you’re looking for a 1099 form to use for a nonresident alien, there isn’t one. Payments of U.S. source income to a nonresident alien are reported on Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, not on any form in the 1099 series. The recipient then uses that 1042-S to file Form 1040-NR. Payers who issue a 1099 to a nonresident are using the wrong form and can face penalties for it.
The three form numbers get mixed up constantly. The 1099 series (1099-NEC, 1099-MISC, 1099-INT) reports payments to U.S. persons. Form 1042-S reports payments to foreign persons. Form 1040-NR is the income tax return the nonresident alien files after receiving a 1042-S. Different forms, different systems, no overlap.
Confirm the Payee Is Actually a Nonresident Alien
Before you swap out a 1099 for a 1042-S, verify status. The IRS uses two tests, and passing either one makes the person a resident alien, which puts them back inside regular 1099 reporting.
The green card test is simple: a lawful permanent resident is a resident alien from the first day of physical presence in the U.S. as a permanent resident.
The substantial presence test counts days. A person is a resident alien if they were physically in the U.S. for at least 31 days in the current year and at least 183 days across a three-year weighted period. Current-year days count fully, prior-year days count as one-third, and days two years back count as one-sixth.1Internal Revenue Service. Substantial Presence Test Someone in the U.S. 120 days a year for three years comes out at 180, just under the line, and remains a nonresident.
Fail both tests, and the payee is a nonresident alien. U.S. source income you pay them belongs on Form 1042-S.
What Goes on Form 1042-S Instead of a 1099
Form 1042-S covers U.S. source income that is fixed, determinable, annual, or periodical, abbreviated FDAP. The common categories:
- Compensation for independent personal services performed in the U.S., regardless of where the check is mailed or where the contract was signed.2Internal Revenue Service. Source of Income – Personal Service Income
- Rents from U.S. real property.
- Royalties for U.S. use of patents, copyrights, or other intellectual property.
- Dividends from U.S. corporations and certain taxable interest.
- Pensions and annuities from U.S. sources.
- Scholarship and fellowship grants that exceed qualified education expenses.
One trap for payers used to the 1099 rules: Form 1042-S has no $600 threshold for most income types. Nonemployee compensation paid to a nonresident is reportable for any amount, including small payments, and it must be reported even when the full amount is exempt under a tax treaty.3Internal Revenue Service. Federal Income Tax Withholding and Reporting on Other Kinds of U.S. Source Income Paid to Nonresident Aliens
Services performed entirely outside the U.S. are foreign source income, even when a U.S. company pays for them. Foreign source income doesn’t go on Form 1042-S, because sourcing follows where the work happens, not who’s writing the check.4Internal Revenue Service. Pay for Personal Services Performed
The 30% Withholding Rate and How to Reduce It
Most U.S. source FDAP income paid to a nonresident alien is subject to a flat 30% withholding tax on the gross payment, with no deductions.5Internal Revenue Service. NRA Withholding The payer withholds before remitting, and for many recipients that withholding is their complete U.S. tax on the income.
The 30% is a default. A tax treaty between the U.S. and the recipient’s country of residence may cut it, sometimes to zero. Rates vary by treaty and by income type: royalties to one country might be taxed at 10%, the same royalty to another country might be exempt.
To claim the lower rate, the nonresident gives the payer a completed Form W-8BEN before payment. The form certifies foreign status and cites the specific treaty article supporting the reduced rate.6Internal Revenue Service. Form W-8BEN – Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals) For foreign entities, the equivalent is Form W-8BEN-E.7Internal Revenue Service. Instructions for Form W-8BEN-E Without a valid W-8BEN on file at the time of payment, you withhold the full 30%, and the IRS holds the payer liable for the difference if a reduced rate was applied without proper documentation.
Income effectively connected with a U.S. trade or business (ECI) is a separate system. ECI is taxed at graduated rates with allowable business deductions, and the recipient gives the payer Form W-8ECI to avoid the 30% withholding.8Internal Revenue Service. Instructions for Form W-8ECI Personal services performed in the U.S. are generally ECI.4Internal Revenue Service. Pay for Personal Services Performed
The Bank Interest Exception
The most common place a 1099 gets issued to a nonresident by mistake is a bank account. Interest paid to a nonresident alien by a U.S. bank, savings and loan, credit union, or insurance company is generally not taxable and not subject to withholding.9Internal Revenue Service. Nontaxable Types of Interest Income for Nonresident Aliens The nonresident should file a Form W-8BEN with the bank, not a W-9, so the bank knows not to issue a 1099-INT.
If a bank does issue a 1099 on this exempt interest, the income still isn’t included in the nonresident’s gross income, as long as they file a proper return to correct the record.
The Payer’s Filing Obligations
A payer (called a withholding agent) has three obligations for payments subject to NRA withholding.
File Form 1042-S for each recipient. The form uses a two-digit income code to identify the type of payment, Code 17 for independent personal services, Code 16 for scholarship grants, and so on.10Internal Revenue Service. Instructions for Form 1042-S (2026) The IRS copy and the recipient copy are both due by March 15 of the following year. If March 15 falls on a weekend or holiday, the deadline shifts to the next business day.
File Form 1042, the annual withholding tax return, which reports the total tax withheld under Chapter 3 (NRA withholding) and Chapter 4 (FATCA) and summarizes all the 1042-S forms issued for the year.11Internal Revenue Service. About Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons
Deposit the withheld tax on schedule. Deposit frequency depends on the amount withheld, and larger withholding agents deposit more often. Missing a deposit or under-withholding makes the payer personally liable for the tax, plus penalties and interest.
Penalties for Issuing the Wrong Form
If you file a 1099 when you should have filed a 1042-S, or file nothing at all, the IRS charges per-return penalties that climb with delay. For returns due in 2026:
- Filed within 30 days late: $60 per return.
- Filed 31 days late through August 1: $130 per return.
- Filed after August 1 or not filed at all: $340 per return.
- Intentional disregard: $680 per return, with no maximum cap.
Annual maximums vary by business size. Large businesses (average gross receipts over $5 million) face a cap of $4,098,500 for returns filed after August 1; small businesses have a cap of $1,366,000.12Internal Revenue Service. Information Return Penalties The intentional disregard penalty is the greater of $680 or 10% of the amount that should have been reported correctly.13Office of the Law Revision Counsel. 26 U.S. Code 6721 – Failure to File Correct Information Returns On a $50,000 payment, that’s $5,000 rather than $680. The same structure applies to failure to furnish the correct statement to the payee.
What the Nonresident Does With the 1042-S
The nonresident alien files Form 1040-NR using the information from the 1042-S. FDAP income not effectively connected with a U.S. business goes on Schedule NEC (Form 1040-NR), taxed at 30% or the lower treaty rate. Tax already withheld and shown on the 1042-S is claimed as a credit against the total liability.14Internal Revenue Service. Instructions for Form 1040-NR (2025)
When the payer withheld 30% but a treaty allowed a lower rate, the 1040-NR is how the nonresident recovers the difference as a refund. The IRS provides a simplified procedure for nonresidents whose only U.S. tax obligation was fully satisfied by withholding: complete Schedule NEC, Schedule OI, and the signature page, and leave most of page 1 blank.
Every nonresident who files a U.S. return needs a taxpayer identification number. Those who don’t qualify for a Social Security number apply for an ITIN using Form W-7, submitted with the tax return and original identity documents (or certified copies from the issuing agency).15Internal Revenue Service. Instructions for Form W-7 Many use an IRS-authorized Certifying Acceptance Agent to authenticate documents in person rather than mailing original passports.16Internal Revenue Service. ITIN Acceptance Agent Program Without a valid ITIN or SSN, the IRS won’t process the return or issue a refund, so a nonresident owed money from overwithholding should start the ITIN process early.