1042-S income code 29, but is it exempt?

[Won-Chul-Lee]

My wife received 1042-S form for deposit interest (income code 29). I searched through here and found that I can put this amount as 1098INT. My question is that in 1042-S form, tax rate was "0" for both 3b and 4b. In the exemption codes, we have 02 (exempt under IRC (other than portfolio interest)) for 3a and 15 (Payee not subject to chapter 4 withholding) for 4a. Does this mean that this income is exempt from tax? If so, can you please let me know how to put this into the form to offset the amount of money we put into 1098INT?

[Anonymous]

Per IRS, code 29 on a Form 1042-S is for reporting interest from your bank accounts.  You would treat it as if you receive a Form 1099-INT.  If you have already filed your taxes, you have two options:

If your return got rejected for any reasons, you can return to the program/account to edit the info along with other changes.  

If your return has been accepted, you would need to do an amendment

[Won-Chul-Lee]

Thanks for your answer. I am about to amend the return and will treat it as if I received a form 1099-INT. My question is if this income is exempt or not for tax because I could see exemption codes 02 and 15 in 3a and 4a respectively in the form. If they are exempt, how can I put this into the form?

[Sharon2017]

I believe the Exemption Code in Box 3a just means "exemption from withholding", not necessarily means the payment is a tax-exempt interest. The bank put the code there so they don't have to withhold tax for you, but you need to figure out if that interest is taxable. You can find more information in IRS Publication 515 under the "Withholding exemption" section.