Foreign investors who earn dividends from U.S. stocks or ETFs often receive Form 1042-S from their broker. This form shows your U.S. income and the tax that was withheld. If you live outside the United States and earn this type of income, obtaining an ITIN with Form 1042-S is essential to manage your tax situation properly. To understand fundamental tax ID concepts, start with our guide on what is an ITIN.
What Is Form 1042-S?
Form 1042-S is issued to non-U.S. persons who receive U.S.-source income. It confirms:
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You are not a U.S. tax resident.
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You received income from the United States.
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Tax was withheld at the source.
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The income type (dividends, interest, royalties, etc.).
If you receive a 1042-S, you can apply for an ITIN with Form 1042-S using Exception 1 (Passive Income). This is the simplest category for investors. For global business owners, learn more about ITIN for international entrepreneurs.
Why Do Investors Need an ITIN?
Foreign investors usually apply for an ITIN for one or more of these reasons:
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To file a Form 1040-NR tax return.
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To claim a tax refund if the withholding was too high.
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To update the Form W-8BEN with a valid tax ID.
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To apply tax treaty benefits (if your country has one).
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To maintain compliance with your broker.
If you operate through a company structure rather than personal accounts, see our guides on how to form an LLC as a non-resident and whether you need an ITIN to form a U.S. LLC.
Example 1: With U.S. Tax Treaty
Abiezer is a Chilean investor. Chile has a tax treaty with the United States. He received Form 1042-S showing his U.S. dividend income.
He now needs an ITIN with Form 1042-S so he can:
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Update his Form W-8BEN: The W-8BEN tells the broker your tax residency; once he has an ITIN, the broker can apply treaty benefits correctly and may reduce future withholding.
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File a Form 1040-NR: To check for any eligible tax refund.
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Maintain compliance: Keep his setup ready for future investments.
Once his ITIN is issued, his broker can apply the treaty rate more accurately. Read more about treaty claims under Form W-7 Box a tax treaty benefits.
Example 2: Without U.S. Tax Treaty
A Philippine investor also receives Form 1042-S for U.S. dividends. But the Philippines does not have a tax treaty with the United States.
That means:
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Dividend withholding stays at 30 percent.
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Most cases do not result in a refund.
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Applying for an ITIN with Form 1042-S is still allowed under Exception 1.
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The withholding rate does not automatically reduce.
The ITIN still helps the investor file taxes or meet brokerage requirements.
Visual Diagram
┌────────────────────────┐
│ Foreign Investor │
│ Non-US Resident │
└──────────┬─────────────┘
│
▼
┌──────────────────────────────┐
│ Receives Form 1042-S │
│ • US dividend income │
│ • Tax withheld │
│ • Confirms non-US status │
└───────────┬──────────────────┘
│
▼
┌────────────────────────────────────────────┐
│ Use 1042-S for ITIN Exception 1 │
│ ✅ Accepted as evidence of US income │
│ ✅ No tax return required with W-7 │
│ ✅ Best route for foreign investors │
└───────────────────┬────────────────────────┘
│
▼
┌────────────────────────────────┐
│ Prepare ITIN Application │
│ Required documents: │
│ • Passport (certified by CAA) │
│ • Form W-7 │
│ • Exception 1 Letter │
│ • Form 1042-S │
└────────────┬───────────────────┘
│
▼
┌──────────────────────────────┐
│ CAA Assembles Full Packet │
│ • Certifies identity │
│ • Prepares W-7 │
│ • Reviews 1042-S │
└────────────┬─────────────────┘
│
▼
┌────────────────────────────┐
│ Submit to IRS Austin │
│ via Certified Acceptance │
│ Agent │
└────────────┬───────────────┘
│
▼
┌────────────────────────────┐
│ IRS Processing 6-13 weeks │
└────────────┬───────────────┘
│
▼
┌────────────────────────────────────┐
│ IRS Issues ITIN Letter │
│ • Sent to CAA │
│ • Sent to applicant address │
└────────────────────────────────────┘
To avoid errors during submission, review our checklist of 10 common errors filing Form W-7.
Treaty Countries vs. Non-Treaty Countries
| Country | Treaty Status | Dividend Withholding | ITIN Effect |
| Chile (Example: Abiezer) | ✅ Yes | Treaty may reduce withholding | Better rate after W-8BEN update |
| Philippines | ❌ No | Fixed at 30 percent | No reduction, but ITIN still valid |
For non-residents evaluating tax setups, explore our resource on LLC vs No LLC for non-US residents as well as our comparison on Form 1040 vs 1040-NR.
Final Thoughts
If you are a foreign investor and you receive Form 1042-S, you already have the ideal document for an ITIN application. You can apply under Exception 1 without sending a full tax return. Treaty or no treaty, obtaining an ITIN with Form 1042-S stays simple. The only difference is how much tax you save later. Applicants based in South Asia can also consult our ITIN Bangladesh application guide.
Explore our full range of ITIN services and company formation support. You can get started today, visit our about us page, contact us directly, or book a free consultation with our CAA team.
