IRS updates FAQ extending penalty relief, Forms 1042 and 1042-S
Penalty relief will apply with respect to dividend equivalent payments made with respect to a derivative referencing a partnership
Penalty relief will apply with respect to dividend equivalent payments
The IRS today updated a “frequently asked question” (FAQ), extending penalty relief for the 2022, 2023, and 2024 calendar years in situations when a withholding agent withholds and reports on Forms 1042 and 1042-S by September 15 of the applicable year.
According to the IRS transmittal release, the penalty relief will apply with respect to dividend equivalent payments made with respect to a derivative referencing a partnership.
Updated FAQ 23 (full text below) appears on the FATCA - FAQs General webpage, under the section, General Compliance.
Q23. For calendar years 2017 through 2024, will a withholding agent be subjected to interest, penalties, or additions to tax for failing to withhold and report by March 15 of the subsequent year, on a payment of a dividend equivalent made with respect to a derivative referencing a partnership?
For calendar years 2017 through 2024, a withholding agent will not be subject to interest, penalties, or additions to tax with respect to a dividend equivalent payment made with respect to a derivative referencing a partnership provided that the withholding agent withholds and reports on Form 1042 and Form 1042-S with respect to the payment by September 17, 2018 (for the 2017 calendar year), September 16, 2019 (for the 2018 calendar year), September 15, 2020 (for the 2019 calendar year), September 15, 2021 (for the 2020 calendar year), or September 15, 2022 (for the 2021 calendar year), September 15, 2023 (for 2022 calendar year), September 15, 2024 (for the 2023 calendar year), or September 15, 2025 (for 2024 calendar year). In a case in which a withholding agent withholds after March 15 of the subsequent year, the withholding agent should file a Form 1042 (if the dividend equivalent payments are the only payments reportable for the year) or an amended Form 1042 by September 17, 2018, September 16, 2019, September 15, 2020, September 15, 2021, September 15, 2022, September 15, 2023, September 15, 2024, or September 15, 2025 (as applicable), and write “Dividend Equivalent—Partnership” in the top center portion of the 2017, 2018, 2019, 2020, 2021, 2022, 2023, or 2024 Form 1042. The withholding agent should also file Form(s) 1042-S or amended Form(s) 1042-S by the applicable date noted above with respect to the dividend equivalent payment. Finally, when depositing the tax withheld for a dividend equivalent payment made in 2017, 2018, 2019, 2020, 2021, 2022, 2023 or 2024, the withholding agent must designate the payment as being made for the applicable calendar year in accordance with the instructions to Form 1042.
Updated: 08-24-2023
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