Important 1042-S vs W2 Differences, Explained

The differences between 1042-s vs W2 might feel confusing. Employers use both forms to report wages – sometimes one of them, sometimes the other, and sometimes both. Your filing requirements depend on your employees’ statuses. Therefore, it’s a good idea to understand how both forms work before starting any tax and wage prep. This will make year-end taxes easier to complete, and you’ll ensure employees have what they need. Most importantly, an accounting software can significantly reduce any tax-induced headaches. This is where AMS can help.


The Benefits and Disadvantages of 1042-s vs W2

1042-S and W2s are different forms that accomplish the same task of reporting payments employers make to employees. Any foreign nationals, non-U.S. residents, and other foreign entities who received wages that were not subject to federal or state taxes will receive a 1042-S from their employer. Conversely, employees who are U.S. citizens receive a W2 from employers.

In terms of form simplicity, the W2 is more straightforward to complete than the 1042-S.  Since the W2 is for U.S. residents, the reporting requirements are less complex than those of non-residents. Employers withhold a set amount of wages for federal income tax, social security, and Medicare for U.S. resident employees. However, non-resident wage earners are not subject to these same withholdings. The 1042-S reflects this difference and requires more information on what income is subject to taxing.

Tax treaties add another level of complexity to the 1042-S. To avoid taxing the same employee twice for each country of residence, some nations form tax treaties with the United States. These treaties outline the covered types of income, but there are many ways non-residents can earn income that are often not covered. Because of these nuances, 1042-S forms require much more detail that a W2.



How Remote Work Impacts 1042-S vs W2

1042-S forms are becoming more common as U.S.-based businesses begin to hire more employees that live outside of the United States. The pandemic has introduced employers and employees to the work-from-home concept. This, in turn, has popularized remote roles. As employers take advantage of the ability to hire fully remote workers, international workers will need to account for non-resident employees with their tax reporting. While we explained the complexities of the forms, we have a solution to make completing 1042-S and W2 forms simple.


How AMS Products Can Help

Filing 1042-S vs W2 is not a complicated process with our W2 and 1042-S Filing Software tools. Our products have an easy-to-use, menu-driven format which makes for simple data entry. We understand that you may have several types of employees who require different forms. With our systems, you have the ability to have up to 99,999 employee files, which transfer into whichever form you are using. We want to make sure your system has what you need, so we offer a free, downloadable demo so that you can try it out before committing. If you have any specific questions, reach out to our Sales and Information team at (800) 536-1099.


Software Solutions from AMS

Our W-2 and 1099 Forms Filer is our only required platform. From there, users pick the services they need. Choose from the tools below to build out your customized accounting software.