Reporting 1042-S as a resident alien for tax purposes and should I be receiving this form?

[saulgoodman]

I received a 1042-S form despite being on an H-1B visa as a resident for tax purposes. This was from Fidelity where I have my Employer Stocks (ESPP) and 401k and the form has income codes 01 and 06, so I believe they are for interests and dividends respectively. Typically, I should have received a 1099 form with 1099-DIV and 1099-INT, I suppose. 

1.  Should I be receiving this form given that I've been a resident alien for tax purposes for almost 3 years now? I asked Fidelity and they said I might have to fill out W8 or W9 or something along those lines and they didn't seem fully sure about it. Is there any set of guidelines I can follow on this?
2. I sold a call contract and bought it back to close the transaction. I made a profit of around ~$17 and tax was deducted from it. Now given that I don't have any other tax forms on the website, is it a fair assumption that the transaction would have been accounted for in the form? I asked Fidelity tax support and they said it should be included. 
3. Am I right that I can file the 1042-S as Other Taxable Income and the tax deducted under Other Income Taxes on TurboTax or do I need to file it as a 1099-DIV and 1099-INT form for income codes 06 and 01 respectively? I think I was told last year that either way is fine, but I wanted to clarify that.

@MarilynG1, @DaveF1006, @AmyC 

[DaveF1006]

Regarding your questions:

1. Yes, you should be receiving a 1099 form whether it be a 1099B, 1099 DIV, or 1099 INT. According to this unofficial source a W9 form should be filled out and submitted to a company like Fidelity to o confirm the TIN of a person or business and to establish that they are a US taxpayer. Here is a copy of the W9 form to fill out and submit to Fidelity.
2. Looking at a 1042S form, I do not see where to enter a capital gain or loss on the form.  Most of the income type involves ordinary income but not capital gains/loss for the call contract.
3. Either reporting method is fine but i recommend reporting it as a 1099 DIV or INT because I  think it provides a cleaner report that provides more clarity than reporting it as miscellaneous income and other income taxes.

@saulgoodman 

[saulgoodman]

I just filled out the W9 form for Fidelity. Is there anything else I need to do with the IRS in this situation? Also, if I don't receive a 1099 form for the tax year 2022 despite filling out W9, does that mean I need to change how I report this income?

As you already mentioned, there's no place for capital gains for the call contract in 1042-S and I don't have any other form from them. I tried communicating with them and they're not fully sure either if this particular transaction has been included as part of my divided income. In this case, am I safe in assuming that I can file what I have as a 1099 DIV and 1099 INT and hope that Fidelity has included all my transactions in this 1042-S form?

@DaveF1006 

[DaveF1006 · Accepted solution]

I erred in my earlier statement. There is a place to enter capital gains on a 1099 DIV.  It is entered in Box 2A in the program when you enter your 1099 DIV information. In this case however, the program will not accept a negative number so leave this blank.

As far as changing how you report your income. Since you filed the W9, Fidelity should issue you a 1099 INT, DIV, or 1099B from now on. You won't change how you report the information. It will be reported to you on a different form.

[saulgoodman]

Fidelity said that they will issue me the 1099 forms for the previous tax year as well, but if there's a glitch/delay in that or if they can't redo their forms for a previous tax year, then would I be accurate to assume that they have done their job in reporting the transactions to IRS and I can just go ahead and file the 1042-S document in a 1099DIV and 1099INT form? It's all under one account and as of now, the only tax form available to me from Fidelity is the 1042-S. So logically speaking, any transaction with a tax implication should be included in that form, right? 

The issue with reporting capital gains that are not explicitly specified in 1042-S is that I might be doubly reporting that income and I don't want there to be a discrepancy in the total amount reflected in what Fidelity has reported to the IRS and what I will file with the IRS.

@DaveF1006 

[DaveF1006]

Yes, you are correct. It appears that the only taxable income to report are the interest and dividends in the account.  You do not need to report the capital gain since it isn't reported in the 1042S.

@saulgoodman 

[saulgoodman]

Thank you for that.

Also, is there any reason I might have to file an amendment due to this (for tax years 2021 and/or 2022)? Will that depend on me getting 1099 forms for the tax years?

@DaveF1006 

[DaveF1006]

You probably will not receive 1099's for 2021 or 2022 but you should now receive one for the 2023 tax year. The only reason why you would need to file an amendment if you didn't report your interest or dividends in 2021 and you received a 1042S for that year.

You wouldn't need to file an amendment this year unless you have already filed your return without reporting the interest and dividend amount on the 1042S.

@saulgoodman 

[saulgoodman]

In other words, not having the right form furnished to me by my broker isn't a reason to file an amendment as long as I have reported the income while filing taxes, right? 

Also, how has IRS not found a discrepancy here given that I've been filing taxes as a resident for the last two years but Fidelity would have reported this 1042-S amounts for dividend and interest income (and the tax deducted on it) which is only for foreign persons? Is that not how things work and they care only about the discrepancy in the income or tax filed by both parties?

@DaveF1006  

[DaveF1006]

Yes, you do not need to file an amended return if the information is reported on the wrong form. All they care about is that the income is reported, regardless of the form it is reported in.

@saulgoodman 

[saulgoodman]

Thank you for the clarification. I've received more (contradictory) news from Fidelity about reporting my options transaction. I have been told that I'll receive a grantor letter stating my transaction list for the tax year 2022 in the 2nd week of April (which is already pretty late). Then someone else from Fidelity told me that I will not receive that letter so I don't know whom to believe.  

The person who said that I will be receiving a grantor letter said that I can use my year-ending statement to file taxes if I don't want to wait for the letter. The other person who said I won't receive a grantor letter said that since I'm considered a foreign person, I don't need to pay taxes on stock transactions (which seems unbelievable). She didn't have an answer as to why the tax was withheld in this transaction and I need to talk to someone else about it.

The transaction in question is this: 

• Sold a call contract on 08/24 and received a premium of $22.31
• From this amount, a $5.35 tax was withheld (at a rate of 24% I believe). The rest of the amount was transferred to the cash part of my portfolio
• I bought back the contract on 08/26 for $4.03 and made a net profit of $18.28

This transaction isn't reflected on the 1042-S. 

My questions are these:

1. What is a grantor letter in this case and does it apply to me? If it does and I receive it, how do I use it to file taxes on TurboTax premium?
2. Can I use my statement for the month of August to file this stock transaction myself? I tried adding the transaction without a 1099-B on TurboTax with a cost basis of $4.03 and gross proceeds of $22.31. The sale date was 08/26 and the buy date was 08/24. I indicated it as a Short Term covered transaction (I hope Fidelity does report the transaction to IRS here) and suggested that $5.35 Federal Tax was withheld (even though my closed positions list doesn't show the tax withheld and only my August statement does). 
3. Also, if my way of reporting it is right, will I get an error later as the sale date is before the buy date? I haven't gotten one yet, but if I do, should I flip those dates?

I know this is a complex question and any help would be great. 

@DaveF1006