At a glance ✓ Assign a custom tax rate and exemption codes to any payment in the Payment Entry Module (PEM). ✓ Record payments for vendors, not only for individual users. ✓ Review all 1042-S reportable income on the new 1042-S Summary page when the PEM is enabled. ✓ Record state tax withheld on payments, one at a time or by CSV import. |
These changes apply to administrators who have access to register payments in PEM.
1. Custom tax rates
PEM calculates the tax owed on each payment that you add. Before this release, PEM always applied the tax rate from the Final Summary, which is based entirely on the individual’s user record.
You can now assign a custom tax rate and custom exemption codes to a payment instead of using the system-calculated rate. A custom tax rate can be any rate that is valid for Form 1042-S, and a custom exemption code can be any code listed in the Instructions for Form 1042-S.
Caution A custom tax rate is independent of the system’s tax determination, so you are responsible for its accuracy. |
1.1 Choose a tax rate for a payment
When you register a payment, choose one of the following options:
- System Tax Rate: PEM applies the system-calculated tax rate from the Final Summary and assigns the exemption codes automatically. This option is available only for income types that Sprintax Calculus supports, so some income types don’t offer it.
- Custom Tax Rate: you choose a different rate from the list of available rates, and you assign the exemption codes yourself. The tax treatment of the payment depends entirely on the information that you provide, and any rate below 30% must be explained by the relevant exemption codes.
1.2 New fields in the Add Payment drawer
The Add Payment drawer includes three new required fields:
- Tax Rate: select the tax rate for the payment from the list.
- Authority for Exemption under Chapter 3: if you choose System Tax Rate, this field is completed automatically. If you choose a custom rate, select the applicable Chapter 3 exemption code.
- Ch.4 Exemption Code: if you choose System Tax Rate, this field is completed automatically. If you choose a custom rate, select the applicable Chapter 4 exemption code.
1.3 Example: keep the tax withheld on an earlier payment
An individual qualifies for a tax treaty exemption on scholarship payments and submits a completed and signed Form W-8BEN. However, the first payment of the tax year was taxed at 14% when it was paid.
In general, the exemption can apply to every payment made from 1 January 2026 onwards. If you don’t want to adjust the tax already withheld from that first payment, you can keep it taxed at 14%:
- Open the payment in PEM.
- In Tax Rate, change System Tax Rate to a custom rate of 14%.
- Select the applicable exemption codes, and then click Save.
Note If you tax payments under the same income code at more than one rate, you may need to issue more than one Form 1042-S to the same recipient for that income code. |
2. Vendor payments in PEM
Before this release, PEM processed payments only for individuals added through the Users list. You can now also record payments for vendors added through the vendor lists (Vendor – Entities and Vendor – Individuals).
To add a payment for a vendor manually, follow these steps:
- On the Add Payments page, search for the vendor.
- Click anywhere on the vendor’s row.
- Click Add Payment.
- Complete the required fields for the payment.
- Click Add Payment to save the entry.
3. 1042-S Summary page
The 1042-S Summary is a new page in the foreign national questionnaire. It summarizes all 1042-S reportable income and is visible in accounts that have PEM enabled.
The 1042-S Summary lists 1042-S reportable income from PEM entries only. Like the Final Summary, it groups income by income code, and it includes entries that have a custom tax rate.
Each combination of income code, tax rate and exemption code appears as a separate row, and each row corresponds to one Form 1042-S. For example, if a scholarship payment is partly exempt under a tax treaty and partly taxed at 14%, the two portions appear in separate rows.
Important The income code sections of the Final Summary show only PEM payments taxed at the system-determined rate, as before. Payments taxed at a custom rate don’t appear in the Final Summary. For this reason, track accumulated 1042-S reportable income on the 1042-S Summary, unless your institution uses only the system-determined tax rate for all registered payments. |
4. State tax withheld
You can now record state tax withheld on a payment in PEM. Before you save the payment, complete the following fields in the payment details drawer:
- State tax withheld: the amount withheld for state tax.
- State: the state that the tax was withheld for.
4.1 Where state tax withheld appears
The values that you enter appear in new columns in PEM and in PEM reports:
- The Add Payments list shows a State tax withheld column.
- The individual’s payments page shows the State tax withheld and Name of state columns.
- Payment Reports show the State tax withheld and Name of state columns.
State tax columns in Payment Reports.
4.2 Import state tax withheld by CSV
You can also bulk add state tax withheld through a CSV file. The payment import CSV layout includes two new columns: State_tax_withheld for the amount, and Name_of_state for the state abbreviation (for example, NC).
4.3 State tax number in Account Data
Account Data includes a State tax number field for your institution’s state tax number. To open Account Data, use the Account menu.
5. Coming in future releases
The following related features are in development:
- Bulk import of vendor payments to PEM by CSV upload.
- Support for custom tax rates and exemption codes in the payment bulk import.
- Vendor Forms 1042-S generated from PEM entries.
- API capabilities for Vendor PEM entries.