File 1099 INT for a foreigner

[ArinaStan]

Hi there

How do I fill out the 1099 INT for a foreigner who received the interest during the year and paid the 10% tax on it during the year?

Let's say the total interest due in 2024 was $1,000 but, they paid $100 to IRS (so, the person received only $900). In 1099 INT (at Box 1 Interest Income) will be $900 or $1,000? 

Thank you

[pk]

@ArinaStan , 

Generic answer  For the form 1099-INT,

Box 1 Contains the total / gross amount of interest i.e. it is  the   gross/total interest earned by the Principal / Corpus invested , before  any withholding and/or other charges.

Box  4   contains the  Federal Taxes withheld

Box 17   contains  any State taxes withheld

Thus ,and absent any other charges , -- Box 1 amount should be  the final amount  received  PLUS amounts in Box 1 and Box 17

Are you the issuer of the 1099-INT or the recipient ?  What kind of interest i.e.  from lending monies or what?  Is the recipient a US person  (  NRA rates are different;  also treaty considerations may apply )

 Should we assume  " a foreigner" imply the person is not a US person or that the earnings are from a different country ?   Does this country have a Tax Treaty with the US ?   Is this a sanctioned country ?

Is there more I can do for you ?

[ArinaStan]

Thank you for your answer.

Yes, I am the issuer of 1099 INT. The recipient is a nonUS person but has an ITIN, that's why I had to pay 10% of the amount to IRS every time when I paid the recipient (owe them $100 from this: $10 I paid to IRS and $90 I paid to them)

[guywong]

I don't believe you report the interest paid to a foreigner on a 1099-INT.  Rather, you should report the payment and withholding on an IRS Form 1042 series   Take a look at this link below from the IRS.  In addition to Form 1042. there is a 1042-S and a 1042-T.  You may be required to file most of these forms electronically.  See the 1042 Instructions.

About Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons | Internal ...

Use Form 1042 to report the following:

• The tax withheld under chapter 3 on certain income of foreign persons, including nonresident aliens, foreign partnerships, foreign corporations, foreign estates, and foreign trusts.
• The tax withheld under chapter 4 on withholdable payments.
• The tax withheld pursuant to section 5000C on specified federal procurement payments.
• Payments that are reported on Form 1042-S under chapters 3 or 4.

[ArinaStan]

Thank you @guywong 

[pk]

@ArinaStan , under  many circumstances I would heartily agree with @guywong, that  you should issue  a 1042-S showing the earnings  and withholdings  ( acting as withholding agent ).  However, if the beneficiary / recipient is   in the US and  is on a dependent visa  then you  may have to issue 1099  ( depending on the  tax status of the primary visa holder).  Also note that the general rule for  NRAs, absent any tax treaty  assertions,  is 30% federal   withholding rate.

As an aside , should we assume that this earned interest is related a loan,  mortgaged asset  or what ?  I ask because  some these situations may require more delving into.

Is there  more I can do for yopu ?

[ArinaStan]

@pk thank you very much for your answer.

At this moment I am good.

[ArinaStan]

Thank you all of you who take time to give me an answer