January 5, 2024

Twitch Taxes for Non-US Streamers: Guide to Form 1042-S

Contents

If you’ve monetized on Twitch and you’re not a United States resident or citizen, you might have received a tax document called Form 1042-S. This document reports the amount of payouts you received from Twitch and the U.S. taxes that were withheld, if any.

Unless you’re a tax pro, you’re probably wondering what Form 1042-S is and what your tax obligations are.

In this guide I’ll walk you through the Twitch Form 1042-S, explaining why you received it, what to do with it, why taxes may have been withheld, and how you can potentially lessen your tax exposure.

By the way – this guide is specific to U.S. non-residents. If you’re a U.S. resident or citizen, refer instead to my guide on the Twitch Form 1099.

What is the Twitch Form 1042-S?

Form 1042-S is an informational document that Twitch prepares annually for partners who aren’t United States residents or citizens. This document reports the gross amount of payouts you received from Twitch. It also reports the amount of U.S. taxes that Twitch withheld from your payouts, if any.

Twitch files this document with the U.S. tax authority–called the Internal Revenue Service (the “IRS”). You’ll also receive a copy on or before January 31st of the following year.

If you received Form 1042-S, your next steps depend on whether U.S. taxes were withheld. You’ll know by referring to Box 10 on the Form.

If no U.S. taxes were withheld, you generally don’t need to do anything with your Form 1042-S.

On the other hand, assuming taxes were withheld, you may be able to claim a refund of the withheld taxes if your country has an income tax treaty with the United States. If no such treaty is in place, you might be able to claim a credit or deduction for U.S. taxes paid in your home country.

Understanding your Twitch Form 1042-S

Before filing any other tax forms, you should review your Twitch 1042-S to confirm that it’s accurate. Should anything be incorrect, ask Twitch to file a corrected 1042-S with the IRS and provide you with an updated copy. 

The official Form 1042-S instructions provide a comprehensive and detailed description of each line, but the instructions have way more information than you need to know so here’s a summary of what you need to know as a Twitch streamer.

Example Form 1042-S

Box 1 - Income code

This box will generally report income code 12 (copyright royalties). 

However, there could be cases in which you earned multiple categories of income through Twitch. In these cases, Twitch would file a Form 1042-S for each income type. Each Form 1042-S will include a unique income code.

Box 2 - Gross income

Gross income is the amount Twitch sent you before taxes and fees were deducted from the payout. Reconcile this number with information in your Earnings report found in the Analytics screen.

Box 3a - Exemption code

This box will report exemption code 04 assuming your country of residence has an income tax treaty with the United States. If that’s the case then you might be eligible for a reduced tax withholding rate or no tax withholding.

Box 3b - Tax rate

If your country of residence has an income tax treaty with the United States and you see code 04 in box 3a, then the applicable tax rate will be in this box. 

Box 10 - Total withholding credit

The total withholding credit reported in this box should equal the amount of tax withheld. This amount would be $0 if your country of residence has an income tax treaty with the United States, as shown in boxes 3a and 3b.

Box 12f - Country code

This box will report a country code corresponding to your country of residence.

Why Twitch takes taxes out of your earnings

There are two possible reasons why Twitch withheld U.S. taxes if you’re a U.S. nonresident or not a U.S. citizen:

  1. No Income Tax Treaty - Taxes will be withheld if your country of residence doesn’t have an income tax treaty with the United States. You might be able to claim a credit for foreign taxes paid on your home country’s tax return.
  2. Incorrect W-8 BEN - You completed a tax form called the W-8BEN when completing the Twitch tax interview. If your country has a tax treaty with the United States and taxes were withheld, you may not have correctly completed the tax interview.

Why your Twitch income is subject to U.S. tax withholding

To answer the bigger question of why you–someone who doesn’t live or work in the United States–were subject to United States taxes we need to dive deeper into U.S. tax law.

As a U.S. company, Twitch must comply with IRC Sec. 1441. This law requires Twitch to withhold a 30% tax from income paid to ”nonresident aliens” (someone who is neither a U.S. resident or citizen). 

Your subscription revenues as a Twitch affiliate are considered royalty income for tax purposes. 

Another U.S. tax law, Treas. Reg. Section 1.861-5, stipulates that royalty income is sourceable to the location where the intangible property (i.e. your content) is used, not where the creator is located.

As a “withholding agent,” Twitch will determine the extent to which royalty income you earn through their platform is “U.S. source income.” Based on this determination, Twitch will then calculate and withhold taxes from your payouts in accordance with IRC Sec. 1441.

Fortunately, IRC Sec. 1441 also provides exceptions to the withholding requirements. You can claim an exemption from the 30% tax rate or a reduced rate if your country and the United States have an income tax treaty that covers royalty income from U.S. sources. If this is the case, and you’ve provided accurate tax information through the Amazon Tax Interview, then Twitch won’t withhold taxes from your payouts.

Filing taxes with the Twitch Form 1042-S

If you received a Form 1042-S from Twitch, your next steps depend on whether Twitch withheld U.S. tax from your earnings. Refer to Box 10 on Form 1042-S to confirm. 

You don’t need to take additional steps with respect to Form 1042-S if Twitch didn’t withhold any tax. You may, however, need to pay taxes on Twitch income to your home country’s tax authority.

On the other hand, if Twitch withheld taxes, here are the steps you should take.

File for a refund of U.S. taxes withheld

You may be eligible for a refund of U.S. taxes withheld by Twitch.

To confirm your eligibility, your first step should be to check the list of United States income tax treaties. Find your home country and review the tax treaty to confirm that royalties are exempt from income tax withholding.

As an alternative, here is a table of withholding rates for various countries that you can reference. The applicable tax rate based on your country of residence may be on the table.

Once you’ve confirmed that a treaty exempts your Twitch earnings from the U.S. withholding tax, you can file a nonresident tax return to claim a refund of the withheld taxes.  

The nonresident tax return is called Form 1040-NR. You have up to three years after April 15th of the year following the year on your 1042-S to file Form 1040-NR. For example, if your 1042-S is for 2024, you have until April 15th, 2028 to file Form 1040-NR.

You should also update your tax information in Twitch by retaking the Tax Interview to avoid tax withholdings on future payouts.

You don’t need to file Form 1040-NR, or any other U.S. form, if your 1042-S shows $0 in Box 10. This means no tax was withheld and there would be nothing to refund. 

File taxes in your country of residence

You may need to report Twitch income on your home country’s income tax return. 

Assuming you’re ineligible to receive a refund of U.S. taxes withheld, because your home country doesn’t have an income tax treaty with the U.S., you may be able to claim tax benefits on your tax return in the form of a credit or deduction.

To avoid double taxation, some tax authorities will allow you to take a credit for taxes paid to another country. The foreign tax credit will offset the taxes you‘ll owe to the tax authority of your home country.

Instead of a tax credit, you could potentially claim the U.S. taxes paid as a business deduction. A deduction doesn’t provide the same benefits as a tax credit would but it will decrease your taxable income, allowing you to pay less tax overall than you otherwise would.

In either case consult with a tax advisor knowledgeable of the tax laws in your country of residence.

Avoiding the withholding tax on Twitch income

You can potentially reduce your exposure to the nonresident withholding tax by using the strategies below.

Providing an accurate Form W-8 BEN

You should first confirm that the tax information you’ve provided to Twitch is correct. You would have provided this information in the online tax interview when onboarding. Twitch withholds taxes based on your responses to the tax interview.

For example, if, when taking the tax interview, you selected a country that doesn’t have an income tax treaty with the United States as your resident country, you’d be subject to the 30% withholding tax on U.S. sourced subscription revenues.

In this case, assuming you selected the incorrect country, you’d want to retake the tax interview and select the country where you live.

Avoiding double taxation on royalty income

Your home country might require you to pay taxes on your Twitch earnings. If you’ve already paid the U.S. nonresident withholding tax, you could avoid being taxed twice on the income by:

  1. Applying for a refund of U.S. nonresident withholding tax; or
  2. Taking a credit for foreign taxes paid on your home country’s tax return.

You’re eligible for a refund of the U.S. nonresident withholding tax only if the tax shouldn’t have been withheld but was because you previously provided incorrect tax information. 

This would be true if you live in a country that has an income tax treaty with the United States that qualifies you for a reduced rate of withholding or no withholding at all but indicated otherwise in the tax interview.

Assuming you live in a country that doesn’t exempt you from the U.S. withholding tax, you can avoid paying additional tax on Twitch income in your home country by claiming a credit for foreign taxes paid. Not all countries provide for this credit so you should confirm before filing your tax return.

Taking business deductions to offset royalty income

Your home country might allow you to take deductions to offset your Twitch income. Deductions are similar to a foreign tax credits, but rather than offsetting your tax liability, a deduction offsets your business income, generally yielding a lower tax benefit.

The U.S. withholding tax might be an allowable deduction. You’d need to review your home country’s tax laws or speak with a tax professional in your home country.

Generally, if you were able to take tax credit for the U.S. taxes, then you wouldn’t also be eligible to deduct the taxes. You can’t receive a double benefit for a single expense item.

Other allowable business deductions might include:

  • Video production equipment & supplies
  • Administrative software
  • Marketing costs
  • Tax preparation fees
  • Payment processing fees

Allowable deductions depend on local tax law. These categories are provided as examples and aren’t an exhaustive list.

Seek advice from a tax professional when in doubt

If you need help filing a Form 1040 NR to claim a refund of U.S. taxes, completing the Twitch W-tax interview, or have other questions, please get in touch through the contact form below.

Frequently Asked Questions (FAQs)

Does having an ITIN exempt me from the withholding tax on Twitch income?

No, providing an ITIN doesn’t exempt you from the U.S. nonresident withholding tax. 

However, if you’re eligible for a refund of taxes withheld, you’ll need to provide either an ITIN from the IRS or a FTIN. FTIN is a general term that refers to the tax identification number that was issued by your home country’s tax authority. In Canada, for example, this is called the Social Insurance Number.

If your home country doesn’t issue FTINs, but you’re otherwise exempt from the U.S. nonresident withholding tax or eligible for a reduced rate of withholding, then you’ll need to apply for an ITIN from the IRS.

Where can I find the Twitch Form 1042-S?

You can find your Twitch Form 1042-S by logging in to Amazon Tax Central and clicking Find Forms. Alternatively, if you’ve provided Amazon Tax Central with access to your Twitch account, you can find the Form by logging in to Twitch and going to the Channel Analytics screen. 

Still can’t find it? Here’s a step-by-step guide for finding your Twitch tax forms.

This content is for informational purposes only and does not constitute legal, business, or tax advice. You should consult your own attorney, business advisor, or tax advisor regarding matters mentioned in this post. We take no responsibility for actions taken based on the information provided.

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