I asked the IRS help desk and received the following answer concerning 1042-S forms:
According to your inquiry, you are a resident of Austria who earns U.S. royalties from two U.S. companies. You have submitted the Form W-8BEN to both without an ITIN on either. One company has sent you the Form 1042-S reporting income and withholding tax. The other company has not reported the Form 1042-S. You wish to know if 1.) you must apply for an ITIN and 2) do you need to file additional forms with the IRS regarding your U.S. source income.
The answers to your inquiry are as follows:
1.) According to Publication 901 “U.S. Tax Treaties,” residents of Austria are subject to 0% tax on copyright or patent royalties. If these are the type of royalties you receive, then the exemption is appropriate. You were correct to give the U.S. payers the Form W-8BEN “Certificate of Foreign Status of Beneficial Owner.” However, the U.S. payers cannot honor the tax treaty exemption without your Individual Taxpayer Identification Number (ITIN) on your Form W-8BEN “Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding.” This is why 30% tax was withheld from your income and reported on your Form 1042-S “Foreign Person’s U.S. Source Income Subject to Withholding.” The other company may be waiting for you to present the ITIN before they will honor the treaty exemption and send you their Form 1042-S. You should contact the other company regarding your Form 1042-S. According to Publication 515 “Withholding of Tax on Nonresident Aliens and Foreign Entities,” they must report the exemption on the Form 1042-S with your ITIN present. They must present the ITIN to comply with reporting requirements to the IRS. The company that did report the Form 1042-S and withheld 30% tax did so also in compliance with IRS reporting rules when an ITIN is not received on the Form W-8BEN.
If you are still to receive royalties from these U.S. companies, you must file for, receive, and report your ITIN to both companies on the Form W-8BEN.
You must file Form W-7, Application for Individual Taxpayer Identification Number, to apply for an ITIN, and show that you have a federal tax purpose for seeking the ITIN. Please review the “Exception 1d” in the Exceptions table in Publication 1915 “Understanding Your IRS Individual Taxpayer Identification Number(ITIN) or the For W-7 instructions. You must request for your payers to send you their letters according to the requirements in Exception 1d. The letters must be attached to your completed Form W-7 ITIN application. You must also submit identity documents to demonstrate the purpose for which you need the ITIN.
The identity documents are needed to verify both your identity and your foreign status; one must include a recent photograph. If you submit an original valid passport (or a notarized or certified copy of a valid passport) you do not need to submit any other documents. If you do not submit a passport document, you must provide a combination of documents (at least two or more) that are current and that (1) verify your identity (that is, contain your name and a photograph), and (2) support your
claim of foreign status. Please refer to Publication or the Form W-7 instructions for the list of acceptable documentation. If we receive your original documents to the ITIN department, the ITIN department, after reviewing your application, will return your documents to you. If your original documents have not been returned within 60 days, you may call us at the number below to find out about the status of your documents. We strongly suggest that you send properly notarized copies of your documentation, as we cannot be responsible for documents lost in the mail.
If sending copies of your original documents, you must have a notary public copy and notarize your documents. You may use the issuing agent of your documents whom must clearly identify their status as the issuing agent on the notary. You might also use the U.S. embassy. However, you must contact the embassy closest to you to verify if the location will notarize your documents. You may use a local notary; however, the notary must attach the Apostille document to indicate Austria is part of the Hague Convention. The IRS also partners with acceptance agents in different countries. The acceptance agents, for a fee, will authorize your documents and forward your application. Some will only authorize your documents
When sending your application package by mail, you may use either the mail stop address or if sending by express or private delivery, our street address for the ITIN department located in Austin, TX. The addresses are shown in the Form W-7 instructions and in Publication 1915. If sending your application prior to April 30th, the application process takes 8-10 weeks. If sending after April 30th, please allow 6-8 weeks for processing.
2.) If the royalties are your only income, then you are not required to file a U.S. tax return to report your income. This is because the income is Non-Effectively Connected with a U.S. Trade or Business (NECI) and normally subject to tax at source. Since the income is subject to treaty exemption, your filing requirement is satisfied when you file the Forms W-8BEN correctly to the U.S. companies with your ITIN. Once your ITIN is received, please send a revised Form W-8BEN to each company. The forms are good from the date of signature, to the end of the year and until you no longer do business with the U.S. company you have reported the form to. The U.S. companies must report copies of the Form 1042-S indicating your royalty income and the treaty exemption code to you and to the IRS.
However, since your tax was withheld in error, you may want to file the Form 1040NR “U.S. Nonresident Alien Income Tax Return” with the copies of your Form 1042-S to claim a refund of the 30% withholding tax. You should want to wait until after you have received the other Form 1042-S. If the other company withheld incorrect tax, you will need the other Form 1042-S as part of your U.S. tax return to prove the withholding tax. Taxpayers have up to 3 years from the due date of the U.S. tax return to file their claim. However, your U.S. tax return must have your ITIN number.