If you have had US tax withheld in the US at the flat 30% non resident rate, there are many circumstances whereby you can claim back most if not all of this tax from the US by filing a 1040NR US tax return.
The US will either tax you at graduated income tax rates (like a local person) or at a flat 30% withholding rate, which in most cases, where a tax treaty exists with the US, you can reduce or eliminate the 30% tax withheld (to a reduced rate or remove it entirely).
If you have received US income, you will have received a tax withholding document. This document shows the gross income received and the federal (and possibly state) tax withheld on the amount paid to you. Don't lose this document! as you will need it when filing the 1040NR US tax return.
What types of US tax withholding documents are there?
The most common for a non resident is a 1042-S (Foreign Person's U.S. Source Income Subject to Withholding). This is issued for many types of US source income. Examples include:
- Gambling winnings from a casino
- wage income for services performed outside the US (independent personal services)
- earnings as an artist, athlete or performer
- royalty income for a book sale, copyright or music sales
- pension income
- and many other types of US income
You may have also received a 1099-DIV (if you received US dividends) or a 1099-INT (for interest income). Or just a simple 1099 if you sold shares in the US and had capital gains.
If you physically worked in the US, the payor may have issued you with a W-2 instead of a 1042-S.
I have regular dividend income from the US - can I stop the 30% or do I have to file every year?
You can complete a W-8BEN and submit this to the payor where a treaty with the US overrides the flat 30% withholding and reduces it down. An example is the US/UK tax treaty, where dividends are taxed at a flat 15% instead of 30%.
The W-8BEN is applicable to many US source income types, where a treaty overrride can reduce or eliminate the 30% flat tax withholding rate. The form is valid for 3 years and needs to be renewed to ensure the 30% is not applied (or is reduced).
How can I file a 1040NR to claim back tax from the USA?
Just Breve are UK based US tax accountants. We can assist in the preparation of the Form 1040NR for you. You will need to supply us with certain information including a copy of the tax withholding document, any days spent in the US and details of your residency so we can determine if a tax treaty overrides or eliminates the tax you have paid.
Once we have determined your status, we can assist in the filing of the 1040NR (with a treaty claim or even file based on local graduated tax rates, which are less than 30%) and where applicable, also assist you in applying for a US tax ID number (which is required to process the 1040NR and the refund). This number is called an Individual Tax Identification Number (also known as an ITIN). Just Breve is a certifying acceptance agent for ITIN purposes and we can certify your identity documents for the application and all follow up inquiries to ensure the ITIN is issued.
Once everything is prepared, you will have to wait anywhere from 3 to 6 months for the refund and if applying for an ITIN, you will need to add another 7 to 11 weeks (as the ITIN is processed before the tax return).
We can follow up on the progress of the tax return and refund. You will need to sign a Form 2848 power of attorney, which allows us to speak to the IRS on your behalf (as to the status of the refund). In some cases, you may receive a letter from the IRS. In all cases, we will deal with the letter, if the IRS has additional queries relating to the claim. This is including in our tax return fee.
I have questions, how can Just Breve assist?
Contact us today by phone or email and we will happily advise if you are eligible for refund of US tax. No charge for the initial call or emails. We only charge fixed fees for the actual work performed.
Tel: 0208 1444632
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