Waiver from the electronic filing requirement for Form 1042

Electronic filing is now the rule, not the exception, for many IRS returns. That includes Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons. For tax year 2025, filed in 2026, most withholding agents must file electronically or risk penalties.

E-filing for Form 1042 isn’t new; it has applied since tax year 2023, but the IRS is now spotlighting tax year 2025 waiver procedures and the fact that determination letters will not be issued.

But what happens when e-filing truly isn’t feasible? The answer is a hardship waiver request. Here’s what tax professionals need to know for 2025.

Who must e-file Form 1042 for 2025?

For tax year 2025, withholding agents that are required to file Form 1042 must file electronically through modernized e-file (MeF), unless they obtain a hardship waiver by written request. This requirement applies to both U.S. and foreign withholding agents. 

Not sure if you’re required to file Form 1042?  See “Who Must File” in the Form 1042 instructions.

If a withholding agent cannot file electronically, the only path to filing on paper is an approved hardship waiver. The withholding agent must submit a written request labeled “Form 1042 e-file Waiver Request” that explains the hardship and the steps taken to try to comply.

If a waiver is granted, the withholding agent may file Form 1042 on paper for that year. If the waiver is not granted, the return must be filed electronically.

When a waiver is appropriate

A waiver from the electronic filing requirement is not granted automatically. Withholding agents must demonstrate undue hardship. The IRS defines undue hardship to include factors such as technology constraints or a significant financial burden associated with electronic filing.

For example, a small organization in a remote area with unreliable internet access may qualify for a waiver. A withholding agent facing substantial costs to upgrade systems solely to meet the e-filing requirement may also have a case. Convenience alone, though, is not enough.

To request a waiver for Form 1042, submit a written request labeled “Form 1042 e-file Waiver Request” that explains the hardship and includes the required details, including incremental cost computations and a plan to file electronically in future years. Submit the waiver request by March 16, 2026, or at least 45 days before the return due date if you file under an extension.

For tax year 2025, Form 1042 is due March 16, 2026, because the typical March 15 due date falls on a Sunday.  If you file under an extension, the waiver request must still be submitted at least 45 days before the extended due date.

One procedural change for 2025 is worth noting. The IRS will not issue formal determination letters for these waiver requests. Practitioners should plan accordingly and monitor internal processes to confirm whether the request has been granted.

Do not paper-file prematurely

If a waiver request is submitted, do not file a paper Form 1042 until approval is received. Filing a paper return before the waiver is granted can create duplicate filings and processing issues.

If the waiver is denied, the withholding agent must file electronically. Failure to do so may trigger penalties for failing to comply with the electronic filing requirement. Those penalties can add up quickly, especially for repeat noncompliance.

Practical steps for tax professionals

For tax year 2025, start by confirming whether the client is required to file Form 1042. If so, plan to file electronically through modernized e-file (MeF). If e-filing is not feasible, address the waiver early. The waiver request for Form 1042 is a written “Form 1042 e-file Waiver Request,” and it must include a detailed hardship explanation, incremental cost computations and steps the withholding agent will take to file electronically in future years.