Does the turbotax free version support 1042S forms with income code 20?

[tyk]

My tax residency changed to RA in 2023. I still received 1042S forms with income code 20. Does the free version support these 1042S forms?  If it supports, how could I add 1042S forms to my tax returns? Thank you very much.

[DaveF1006]

This is a correction to my earlier answer. The free version does not support the filing of Form 1042-S and will require you to upgrade. To report the income.

1. Log into your account
2. Select Wages and income
3. Less Common income
4. Miscellaneous Income, 1099-A, 1099>start
5. Scroll to the bottom of the page to Other Reportable Income
6. Other taxable income, answer yes
7. Then give a brief description of the income and the amount listed. Here, list this as 1042-S income and the amount.

[Edited 03/28/24|2:10 pm PST]

@tyk 

[tyk]

@DaveF1006 Thank you so much for your response. I tried your listed procedure. But the the program asked me to upgrade to the deluxe version. If I choose "I'll upgrade later", it says that "TurboTax Free Edition doesn’t cover your situation". May I know how I should avoid this issue to use the free version? Appreciate your help.

[DaveF1006]

Yes, unfortunately, there is no way to keep this out of the free version and the instruction that I gave you to report is the only manner in which to report this income. 

@tyk 

[tyk]

@DaveF1006 Thank you! Got it. I have used the deluxe version. But I have questions about how to report my 1042S form. Because my 1042S with income code 20 is based on the U.S-China tax treaty (Article 20 (c)), its income is untaxable with the tax rate is 0.  I checked the IRS Publication 519, section 9 (Tax Treaty Benefits). So, in definition , is my 1042S still a taxable income but with the tax rate 0, which I need to report in my 1040? Or, should it be directly considered as the income exempt from U.S. tax under a treaty, which I don't need to report in my 1040? 

[DaveF1006]

To clarify, are you a student or a scholar. Did you have a student visa? What was it?

@tyk

[tyk]

@DaveF1006 Yes, I am an international student with F1 visa. My tax residency status changed to a resident alien in 2023 (Start Date: 1/1/2023).  

More details: My 1042S form with income code 20 (box 1) for 2023 tax year;

box 3: 3

box 3a: 04

box 3b: 0

box 4a: 16

box 4b: 0

[DaveF1006]

You may exclude the taxable amount of your 1042S up to $5000, which is the maximum amount eligible for the exclusion.  to exclude. 

1. Log into your account
2. Select Wages and income
3. Less Common income
4. Miscellaneous Income, 1099-A, 1099>start
5. Scroll to the bottom of the page to Other Reportable Income
6. Other taxable income, answer yes
7. Now you be at a summary screen where your first entry was reported. Here select add more income.
8. Now describe this event as US/China treaty income Exemption. Enter the amount of the 1042S (up to $5000) with a minus sign in front of it. Make sure you enter an amount that is either equal or less than and amount shown on the 1042S. Remember $5000 is the limit.

@tyk 

[tyk]

@DaveF1006 Appreciate your advice. Yes, the amount of my 1042S is just $5000.  I tried the procedure but met a problem. Because the amount of my 1042S is not included in my W2, if I put a negative value (-$5000) in the other income (1040, Line 15, and Schedule 1, Line 8z), the total taxable income (1040, Line 15) will be wrong (smaller than the real one). 

I find some answers say that a positve $5000 can be added to "Other Reportable Income" and subsequently a negative -$5000 can be added to "Other Reportable Income". In these methods, the total taxable income (1040, Line 15) will be correct. However, the final values of other income (1040, Line 15) probably will be $0 becasue there is only one line for that, which cannot reflect either the 1042S income or the tax treaty in1040 finally. 

Thus, my question is whether Schedule 1, Line 8z will list these two other incomes separately and gives $0 as the amount if I put both "-$5000" and "$5000" into the "Other Reportable Income"? Are these methods correct? If not, are there other ways to report this weird situation?

Thank you!

[DaveF1006 · Accepted solution]

Yes, you can report the $5000 as taxable income and then negate it. 

1. Open your return in TurboTax 
2. Click on Wages & Income 
3. Scroll down to All Income
4. Scroll down to Less Common Income 
5. Scroll down to Miscellaneous Income, 1099-A, 1099-C 
6. Click start 
7. Scroll down to Other reportable income 
8. Answer yes and record this as 1042S income and then the amount.

Now to exclude it:

1. Repeat steps 1-7.
2. Record this as a US/China Treaty Exemption
3. Now enter the amount with the minus sign in front of the income.

You have now reported to 1042 S and exempted it in accordance with the US China Treaty Exemption.

@tyk 

[tyk]

@DaveF1006 Appreciate your detailed answer. When I claim the tax treaty in my tax returns, should I file Form 8833? Or, is it the exception listed in Publication 519 (page 70), "2.You claim that a treaty reduces or modifies the taxation of income from dependent personal services, pensions, annuities, social security and other public pensions, or income of artists, athletes, students, trainees, or teachers. This includes taxable scholarship and fellowship grants"? Does it mean that I don't need to file Form 8833 because I am a student?

Additionally, can I e-file my tax returns including my 1042S? Or, I have to do it manually and mail the forms?

Thank you very much.

[DaveF1006]

No, you do not need to file a 8833 according to the IRS.  According to the IRS, you do not need to file if you can claim a treaty exemption  that reduces or modifies the taxation of income from dependent personal services, pensions, annuities, social security and other public pensions, or income of artists, athletes, students, trainees, or teachers. This includes taxable scholarship and fellowship grants. Just like you mentioned.

You may also efile with a 1042 S reported in the return.

Claiming Tax Treaty Benefits

@tyk 

[tyk]

@DaveF1006 I see. Thank you very much for your response. It's very helpful.