Form 1042 and 1042-S Questions on Need to Amend Return

Form 1042 and 1042-S Questions on Need to Amend Return

Question:

At our 2010 tennis tournament, a player (athlete) was paid on the spot, but the 30% Federal Tax was not withheld.  The 2010 1042-S provided to the player (athlete) was coded as: Box 1 – 20, Box 2 – 5,000, Box 5 – 0%, Box 6 – 00, and Box 7 - $0.00, with all the other boxes correctly filled in.  At the end of January, 2011 we discovered that the 30% Federal Tax was not withheld so we electronically transferred the monies to: 09455 – Tax 945: Withheld Federal Income Tax: Federal Tax Deposit - For Calendar Year Ending 2010 to cover the Federal Tax not w/h. 

So it appears that we have three errors that need to be dealt with.  First, there was no w/h (and possible miss-coded boxes), secondly, the 30% electronically transferred to cover the Federal Tax was transferred to the wrong account (should had been to: 1042 Federal Deposit), and lastly, correcting the 1042.

We know we have to correct the 1042-S as well as the Form 1042 to reflect the actual amounts paid and withheld.  We have read, and re-read Pub 1042 and Pub 1042-S, but are still unsure how to correct each.

First question:  Since the Federal Tax monies were not initially deducted from the gross amount the player (athlete) received (and we covered the Federal Tax portion), do we have to amend the 2010 1042-S or does it stand correct?  Do any of the boxes need to be re-coded?

Second question:  Can we contact (call) the IRS to have them transfer the monies to the appropriate account?  Is a letter necessary instead?

Third question:  Since we did not correct the Federal Tax Withholding issue until 2011, is this included on the 2011 Form 1042 or do we need to correct the 2010 Form 1042?  Do we include the 30% electronically transferred on line 64 if we need to correct the 2010 Form 1042?

Answer:
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Any tax advice in this written or electronic communication was not intended or written to be used, and it cannot be used by the taxpayer, for the purpose of avoiding any penalties that may be imposed on the taxpayer by any governmental taxing authority or agency. This written or electronic communications does not represent legal advice. Persons in need of a legal opinion should seek competent counsel.
Steven Mercatante, Esq. specializes in tax topics. Steven is a nationally recognized leader in tax reporting education and consulting on specialized compliance issues. He received his Juris Doctor from the Michigan State University College of Law, graduating with a Certificate of International Law. He is an active member of the State Bar of Michigan.