How to handle foreign income: Filing with both W-2 and 1042-S for 2025 taxes

This is actually a common situation for people who work internationally. The 1042-S form is used to report income paid to non-US persons from US sources, so it makes sense you received this for your time working from Canada. The 30% withholding you mentioned is the standard rate for foreign persons receiving US-source income. However, depending on the tax treaty between the US and Canada, you might be eligible for a reduced rate or even a refund of some of those withheld taxes. When filing your US return, you'll need to report both the W-2 income and the 1042-S income. The tax software question is a good one - while TurboTax can handle this situation, you'll need their Premier or higher version that supports foreign income reporting. You'll enter the 1042-S information in the Foreign Income section, not the W-2 section. One important thing to note: you'll likely need to file a Canadian tax return as well to report this income there, but you can generally claim a foreign tax credit for taxes paid to the US to avoid double taxation.

I went through literally this exact situation last year and was pulling my hair out until I found this AI tool specifically designed for tax document analysis. I uploaded my W-2 and 1042-S to https://taxr.ai and it immediately flagged that my employer had actually double-counted some income on both forms. It explained exactly how to handle the foreign income portion and saved me from overpaying by almost $3,200. The tool automatically identified the relevant tax treaty provisions between US and my work country and explained how the withholding on my 1042-S would impact my final tax bill. It was seriously a lifesaver for this exact situation - regular tax software just kept giving me errors.

Just wanted to follow up - I decided to try the https://taxr.ai site that was mentioned earlier for my W-2 and 1042-S situation and it was legitimately helpful. I was about to pay an international tax specialist $600 for a consultation, but the AI tool identified that my company had actually messed up the withholding calculation on my 1042-S. It explained exactly how the US-Japan tax treaty applied to my specific income type and provided step-by-step guidance on how to report everything properly. The document analysis caught that my employer had used the wrong exemption code on my 1042-S, which would have caused issues during filing. Saved me both money and a potential audit headache!

If you're still having trouble after trying to figure out the W-2/1042-S situation on your own, you might need to call the IRS directly. I tried calling them about my similar international tax situation last year and kept getting the "due to high call volume" message for WEEKS. I eventually used https://claimyr.com which got me through to an actual IRS agent in under 20 minutes when I'd been trying for days on my own. You can see how it works in their demo video: https://youtu.be/_kiP6q8DX5c The agent I spoke with was able to explain exactly how to report my foreign income and confirmed that I was eligible for reduced withholding under the tax treaty. They also sent me specific publications that addressed my situation. Definitely worth it when you're dealing with complicated international tax issues that most software doesn't handle well.

I need to eat my words from my earlier comment. After struggling for another week trying to get through to the IRS about my foreign income questions, I broke down and tried the Claimyr service. I was connected to an IRS agent in about 22 minutes when I had spent literally days trying on my own. The agent was able to confirm exactly how to report my 1042-S income and explained that I was actually eligible for a reduced withholding rate based on the tax treaty with my country. She also helped me understand which forms I needed beyond just the 1040. For anyone dealing with complicated international tax situations like the W-2/1042-S issue, being able to actually talk to the IRS directly makes a huge difference. Saved me from making a costly mistake on my return.

Does anyone know if income reported on a 1042-S counts towards your Social Security earnings? I'm in a similar situation with both W-2 and 1042-S forms, but I'm concerned that the foreign portion won't count towards my future Social Security benefits since they withheld NRA tax instead of FICA.

Has anyone successfully e-filed with this W-2/1042-S combination? I tried using H&R Block's software and it kept giving me errors when I entered the 1042-S information. Wonder if TurboTax or TaxAct handle it better or if I just need to file a paper return.

I'm dealing with this exact same situation right now! Working in the US for half the year then remotely from Germany. One thing I learned that might help others - make sure to check if your employer properly applied the tax treaty withholding rate on your 1042-S. The standard 30% withholding can often be reduced under tax treaties. For example, the US-Germany treaty allows for reduced rates on certain types of employment income. If your employer didn't apply the treaty rate, you can still claim the benefit when filing your return, but it means waiting longer for your refund. Also, keep really good records of which days you worked where. The IRS can be picky about the physical presence test for treaty benefits, especially if you're claiming reduced withholding rates. I created a simple spreadsheet tracking my location each workday just to be safe. Has anyone had luck getting their employer to retroactively apply the correct treaty withholding rate, or do you pretty much have to wait until tax filing to get the difference back?