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Form 1042-S is a US tax slip. A US payer issues it for US-source income paid to you and any US tax withheld, often 30%. As a Canadian resident you still report that income to the CRA, and you may claim a foreign tax credit for the US tax. (We read 1042 s Canada as this slip.)
What is a 1042-S and why did I get one?
The IRS describes it as the form that reports US-source amounts paid to foreign persons, whether or not any tax was held back. The payer, called the withholding agent, files it with the IRS and gives you a copy by March 15 of the following year. To a US payer, you count as a foreign person.
The boxes you’ll look at first are these.
| Box | What it shows |
|---|---|
| 1 | Income code, the type of payment |
| 2 | Gross income |
| 3a, 3b | Exemption code (3a) and the tax rate (3b), such as 30.00 for 30% |
| 7a | US federal tax withheld |
Why was 30% taken out?
The IRS instructions treat 30% as the default rate when no treaty or exemption applies. To get below it, the IRS says the payer needs your taxpayer identification number on the form. A tax treaty can lower the rate for Canadians, but the right rate depends on the type of income, and I haven’t verified the treaty figures for each type, so check the IRS treaty tables and ask the payer which rate they used and why.
Not sure the rate was right? Talk to the payer first. Getting part of it back from the IRS depends on the case, and the steps aren’t something this page can promise.
How do you report a 1042-S in Canada?
Report the income on your Canadian return, in Canadian dollars. The CRA says to convert with the Bank of Canada rate from the day the amount arose, or the annual average for recurring payments such as pensions. Use box 2 as your gross figure, not the amount you received after withholding.
Then claim the federal foreign tax credit. The CRA’s page on the federal foreign tax credit says you qualify if you were resident in Canada, reported income from outside Canada and paid tax on it there. You use Form T2209. The provincial side is a separate form, the T2036.
How much of the US tax do you get back?
Not always all of it. For each country the credit is the lesser of the foreign tax you paid and the Canadian tax on that income. Here’s a small example. You’re in Ontario, earn $80,000 of employment income, and have $2,000 (Canadian dollar equivalent) of extra US income.
The income tax calculator shows total tax rising from $14,127.85 to $14,720.85. That’s $593 more, of which $410 is federal and $183 is Ontario. If 30% were withheld, $600 would have gone to the US. The credit can’t top the Canadian tax on that income, so the extra $7 has no home in this simple case. Read the CRA page for the details of the limits.
The tax credits tool is federal only and doesn’t include the foreign tax credit. The marginal tax rate calculator tells you what Canada takes from your next dollar of income, which is the number to compare with the US rate.
What should you do when the slip arrives?
Work through it in this order and the paperwork stays manageable.
- Check your name, address and the amounts in boxes 2 and 7a. If something looks wrong, ask the payer for a corrected slip.
- File the slip somewhere safe, along with any other proof of US tax paid.
- Convert the box 2 amount to Canadian dollars using the Bank of Canada rate, as described above.
- Report the income on your Canadian return, then fill in Form T2209 for the federal credit and Form T2036 for the provincial one.
The payer owes you the slip by March 15, so you have a few weeks to sort out errors before tax time. Waiting until the last evening of April is how a wrong box gets filed without anyone noticing.
Mistakes to avoid with a 1042-S
People report the net amount instead of the gross. Some forget to convert to Canadian dollars. Others toss the slip. It’s your proof of US tax withheld, so keep it with your T2209 papers. We didn’t find CRA wording that names the 1042-S, so we can’t promise it is the exact receipt the CRA wants. What the CRA does ask for is official receipts of the foreign tax paid.
Capital gains from US shares follow other rules. See the capital gains tax calculator. The US side of your tax isn’t something this site can work out.
Our sources
The form’s purpose, deadline and boxes come from the IRS page and the instructions for Form 1042-S. The credit rules come from the Canada Revenue Agency‘s line 40500 page. Example tax figures are our engine’s 2026 estimates for Ontario. This site isn’t affiliated with the CRA or the IRS. The CRA line 40500 page, dated August 14, 2026 in its page details, and the IRS Form 1042-S instructions for 2026 were read in November 2026. All official pages were checked in November 2026.
Frequently asked questions
What is Form 1042-S?
The IRS uses it to report US-source amounts paid to foreign persons, whether or not any tax was withheld. The payer, called the withholding agent, files it with the IRS and gives you a copy by March 15 of the following year. To a US payer, a Canadian resident is a foreign person.
Why was 30% withheld from my US income?
The IRS instructions treat 30% as the default rate when no treaty or exemption applies. A tax treaty can lower it for Canadians, depending on the type of income, and the payer needs your taxpayer identification number. Ask the payer which rate it used and why.
How do I report a 1042-S on my Canadian return?
Report the gross amount from box 2, not the net you received, in Canadian dollars. The CRA says to convert using the Bank of Canada rate from the day the amount arose, or an annual average for recurring payments. Then claim the federal foreign tax credit on Form T2209.
How much of the US tax withheld can I claim back in Canada?
Not always all of it. For each country the federal foreign tax credit is the lesser of the foreign tax you paid and the Canadian tax on that income. In our Ontario example, $600 withheld exceeded the $593 of extra Canadian tax, so the credit stops at the Canadian tax.
What should I do when the slip arrives?
Check your name, address and boxes 2 and 7a, and ask the payer for a corrected slip if something looks wrong. Keep the slip with your proof of US tax paid, convert box 2 to Canadian dollars, and fill in Form T2209 for the federal credit and T2036 for the provincial one (not for Quebec residents).
- How Canadian income tax works: brackets and credits
How federal and provincial Canadian income tax stack up, what marginal and average rates mean, and how credits and deductions change your bill