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Form 1042-SQ: 1042 (Schedule Q)
IRS Form 1042 (Schedule Q) 20/25 is used to report the tax liability of a Qualified Derivatives Dealer (QDD). This schedule attaches to Form 1042, and it must be completed even if the QDD has zero tax liability.
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IRS Form 1042-SQ - 1042 (Schedule Q)
IRS Form 1042 (Schedule Q) 20/25 is used to report the tax liability of a Qualified Derivatives Dealer (QDD). This schedule attaches to Form 1042, and it must be completed even if the QDD has zero tax liability.
Risk Radar
Scan points- 1Failing to file Schedule Q even when tax liability is zero requires immediate correction.
- 2Failing to file a separate Schedule Q for each individual Qualified Derivatives Dealer (QDD).
- 3Not providing a separate Schedule Q for each portion of the fiscal year when filing annually.
- 4Omitting the required Name of QDD, which should follow the naming protocol used for applying.
- 5For partnerships, failing to complete Schedule(s) Q with partnership-specific adjustments from section 3.09 of the QIA.
Plain English
This form details how much tax a specific entity owes because it qualifies as a derivatives dealer. It allows the filer to break down that total tax obligation into different sources of income or agreements. The information is attached directly to Form 1042 for submission to the IRS.
Submission Date
- Filing date: 2025-12-01 11:10:09
- Preparation window: collect IDs, supporting records, and signatures in advance.
- Final review: verify names, dates, and required fields before submission.
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What this form is for
- Use this form when a taxpayer or one of its branches was a qualified derivatives dealer (QDD) during the tax year, as it must be filed for each QDD.
- Do not use this form if the taxpayer has no qualified derivatives dealers (QDDs), even if zero tax liability is present.
- Check Form 1042 instead when attaching Schedule Q to report the tax liability of a QDD.
Form selector
Use this form or another form?
Partnership is filing
The partnership must complete Schedule(s) Q accounting for partnership-specific adjustments detailed in section 3.09 of the QIA.
✓ Check Section 3.09 of the QIA
Fiscal year taxpayer
If a fiscal year is used, a separate Schedule Q must be provided for each portion of the fiscal year that falls within the calendar year.
✓ Verify dates against General Instructions.
QDD has zero liability
The form must still be completed and filed even if the QDD reports no tax liability.
✓ Confirm line 1 through 5 totals are zero.
Deadline or filing window
The filing trigger occurs during the specified tax year, which must be identified by beginning and ending dates. A separate Schedule Q is required for each portion of a fiscal year that falls within the calendar year. The form does not specify an external deadline date but must accompany Form 1042.
Checklist
What you need before filling it out
Taxpayer/QDD Identification
Name and EIN · Form 1042 (Schedule Q)
Reporting Period
Beginning and ending dates (Month, Day, Year) · Form 1042 (Schedule Q)
Line 5 Income Type Details
Gross Amount (a), Withholding Rate (b), Tax Liability (c) · Form 1042 (Schedule Q)
QDD Partnership Calculation
Weighted average applicable withholding tax rate of partners · Column (b) on Schedule Q
Line 2 Requirement
Gross Amount and Tax Rate only (for calendar years 2019–2026) · Form 1042 (Schedule Q)
General Filing Rule
Schedule must be completed and filed per QDD · General Instructions
Before you submit
- 1Verify that a separate Schedule Q is prepared for every QDD or branch being reported.
- 2Confirm the Name of taxpayer and Employer identification number are entered correctly on Form 1042 (Schedule Q).
- 3Ensure both beginning and ending dates for the tax year/period are accurately recorded.
- 4If a partnership, confirm Column (b) reflects the weighted average applicable withholding tax rate of its partners.
- 5For calendar years 2019–2026, check that Line 3 is not required to be filled in if it is zero.
- 6Check that for Line 5 entries, dividends included on Line 2 are excluded from the separate income type details (for 2019-2026).
- 7Ensure all required fields for the specific QDDs being reported have been completed before submission.
How to file this form
- 1Complete a separate Schedule Q for each Qualified Derivatives Dealer (QDD) that was active during the tax year.
- 2Enter the Taxpayer Name, EIN, and the beginning/ending dates of the relevant period on Form 1042 (Schedule Q).
- 3Populate lines 1 through 5 by entering the Gross Amount (a), Withholding Tax Rate (b), and Amount of Tax Liability (c) for each section.
- 4If applicable, ensure Line 5 details are broken down separately for every distinct income type, following specific rules for dividends.
- 5Attach all completed Schedule(s) Q to Form 1042 before mailing or electronically submitting the package.
- 6Keep a copy of the fully executed Form 1042 and attached Schedule Q for your records.
Known limitations
- 1A separate Schedule Q must be completed for each Qualified Derivatives Dealer (QDD).
- 2If a taxpayer has a fiscal year instead of a calendar year, a separate Schedule Q is required for each QDD for every portion of the fiscal year that falls within the calendar year.
- 3For calendar years 2019 through 2026, Line 3 (Total QDD tax liability pursuant to section 3.09(A) of the Qualified Intermediary Agreement) is not required.
- 4For calendar years 2019 through 2026, Line 4 (Total QDD tax liability pursuant to section 3.09(B) of the Qualified Intermediary Agreement) is not required.
Field map
Compact field-by-field guide
Personal Info
3 items
Enter your legal first and last name as shown on your Social Security card.
Your SSN must match IRS records exactly.
Current mailing address including street, city, state, and ZIP code.
Filing Status
1 items
Select: Single, Married Filing Jointly, Married Filing Separately, Head of Household, or Qualifying Surviving Spouse.
Income
1 items
Sum of all income sources — wages, interest, dividends, business income, capital gains, unemployment, retirement, and other income.
Adjustments
1 items
Total income minus above-the-line deductions such as IRA contributions, student loan interest, and HSA contributions.
Deductions
1 items
Choose the higher of the standard deduction for your filing status or total itemized deductions from Schedule A.
Tax
1 items
AGI minus deductions. This determines your tax bracket and the amount of tax owed.
Payments
1 items
Sum of federal tax withheld, estimated tax payments, and refundable credits like the Child Tax Credit.
Signatures
1 items
You must sign and date the return. Unsigned returns are invalid.
Almost done reviewing the fields?
Fillable formOpen in Editor->The current edition is 20/25, created on 6/5/25. The form directs users to www.irs.gov/Form1042 for the latest information.
What changed or needs a fresh check
- Edition date — confirm the revision reads 20/25.
- Tax Year range — ensure the form covers the correct year(s) being reported.
- QIA reference — verify that section 6 of Rev. Proc. 2022-43, 2022-52 I.R.B. 570 is applicable to your situation.
- Filing requirement — confirm Schedule Q must be filed for each individual QDD (or branch).
- Fiscal year reporting — if applicable, verify the number of schedules matches the portion split within the calendar year.
Quick Facts
Downloads
After you file
- 1Keep a copy of the completed Schedule Q as an attachment to Form 1042.
- 2If filing for a partnership, ensure Column (c) reflects the total tax liability of all partners.
- 3For calendar years 2018 through 2026, if using a fiscal year that begins in 2026 and ends in 2027, provide information for any amounts paid or accrued on or after January 1, 2027.
- 4If the taxpayer has multiple branches that are QDDs, file a separate Schedule Q for each one.
Sources
- SRCForm 1042 (Schedule Q) is used to report the tax liability of a Qualified Derivatives Dealer (QDD) and attaches to Form 1042. (Instructions p.1)
- SRCThe taxpayer must file Schedule Q as an attachment to Form 1042 even if the QDD has zero tax liability. (Instructions p.1)
- SRCA separate Schedule Q is required for each QDD. (General Instructions, Instructions p.1)
- SRCIf a partnership is a QDD or has a branch that is a QDD, it must complete Schedule(s) Q. (QDD Partnerships, Instructions p.1)
- SRCFor calendar years 2019 through 2026, only the gross amount and tax rate are required on Line 2. (Line 2, Instructions p.1)
- SRCColumn (c) is determined by multiplying column (a) by column (b), unless noted otherwise; it is not reduced by any withholding that has occurred. (Column (c), Instructions p.1)
Common confusion points
Who must complete this form?
The taxpayer or any branch of the taxpayer that was a qualified derivatives dealer (QDD) during the tax year must complete and file Schedule Q.
Do I need to file it even if my liability is zero?
Yes, the taxpayer must file Schedule Q as an attachment to Form 1042 even if the QDD has zero tax liability.
How do I calculate Column (c) for a partnership?
Column (c) should reflect the total tax liability of the partners, and it is determined by multiplying column (a) by column (b).
What does 'QDD' mean?
A QDD is a home office or branch that qualifies and has been approved for QDD status under the qualified intermediary agreement (QIA).
When do I report dividends on Line 5?
For calendar years 2019 through 2026, only enter dividends on Line 5 if they are not already included on Line 2.
What is Column (b) for a QDD Partnership?
It reflects the weighted average applicable withholding tax rate of the partners.
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Questions about IRS Form 1042-SQ
What is IRS Form 1042-SQ used for?
This form details how much tax a specific entity owes because it qualifies as a derivatives dealer. It allows the filer to break down that total tax obligation into different sources of income or agreements. The information is attached directly to Form 1042 for submission to the IRS.
Who must file IRS Form 1042-SQ?
Schedule Q must be completed and filed by the taxpayer if the taxpayer or any branch of the taxpayer was a qualified derivatives dealer (QDD) during the tax year.
What information does IRS Form 1042-SQ require?
The form collects identifying information such as the Name of taxpayer and their Employer identification number. The schedule details various liabilities, including totals for section 871(m), dividends received, and amounts pursuant to sections 3.09(A), (B), and (C) of the Qualified Intermediary Agreement.
When is IRS Form 1042-SQ due?
The tax year must be indicated by entering beginning and ending dates in month/day/year format on Form 1042 Schedule Q.
Where do I file IRS Form 1042-SQ?
This schedule is attached to Form 1042, which directs taxpayers to www.irs.gov/Form1042 for the latest information regarding filing location rules.
How do I complete IRS Form 1042-SQ?
A separate Schedule Q is required for each QDD, and a partnership must complete schedules taking into account partnership-specific adjustments. The filer enters the Gross Amount (column (a)), Withholding Tax Rate (column (b)), and Amount of Tax Liability (column (c)) for each item.
What happens if IRS Form 1042-SQ is filed incorrectly?
The form must be completed and filed for each qualifying derivatives dealer (QDD), even if that QDD has zero tax liability.
Who must complete this form?
The taxpayer or any branch of the taxpayer that was a qualified derivatives dealer (QDD) during the tax year must complete and file Schedule Q.
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