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United States: IRS updates FATCA guidance extending penalty relief

Applies to dividend equivalent payments made with respect to derivatives referencing a partnership

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december 8, 2025

The IRS on December 5, 2025, updated a frequently asked question (FAQ 23) on the FATCA - FAQs General webpage under the General Compliance section, extending penalty relief for the 2025 and 2026 calendar years when withholding agents withhold and report on Forms 1042 and 1042-S by September 15 of the applicable year.

The relief specifically applies to dividend equivalent payments made with respect to derivatives referencing a partnership.

Full text of FAQ 23 is provided below.

Q23. For calendar years 2017 through 2026, 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? (updated Dec. 5, 2025)

For calendar years 2017 through 2026, 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), September 15, 2022 (for the 2021 calendar year), September 15, 2023 (for 2022 calendar year), September 15, 2024 (for the 2023 calendar year), September 15, 2025 (for 2024 calendar year), September 15, 2026 (for 2025 calendar year), or September 15, 2027 (for 2026 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, September 15, 2025, September 15, 2026, or September 15, 2027 (as applicable), and write “Dividend Equivalent—Partnership” in the top center portion of the 2017, 2018, 2019, 2020, 2021, 2022, 2023, 2024, 2025, or 2026 Form 1042 (as applicable). 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, 2024, 2025, or 2026, the withholding agent must designate the payment as being made for the applicable calendar year in accordance with the instructions to Form 1042.

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