Covid19 and working from home (WFH) has brought with it changes in how a home based business not only works but also how it has to deal with payments from clients it has in foreign countries.
You may have traveled to the US for business in the past but now are 100% remotely working from your home country.
The US is very strict and requires payors to identify whether US tax is required to be held from any payments to foreign recipients.
If you are a remote worker in the UK (or elsewhere) and are paid by a US company/payor, the income you earn is classed as foreign source and should not be subject to US tax.
My US payor is asking for an ITIN:
If your US customer is requesting an ITIN before payment, unfortunately you would not be eligible unless filing a US 1040NR tax return. If you are 100% remote, you would not meet the exception requirements for a non filer requesting an ITIN unless you had particular types of passive income, a US business or US mortgage.
Where you are 100% based remotely and perform the services from your home country, then any payment to you should be paid gross with no tax withheld.
My customer has withheld 30% tax - what do I do?
In this case you will have to file a 1040NR US tax return and attach the 1042-S issued to you to claim back the overpaid tax of 30% from the US. Some US payors have a low risk policy, so to save any headaches for them from the IRS, they hold the flat 30% and make you claim it back.
I need to claim back the 30% tax - can you help?
Yes Just Breve assists clients regularly to claim back an IRS Tax refund from the USA. We will need the 1042-S or other US tax document issued to you to both prepare the return and to ensure the refund is made. All tax withholding documents are attached to the tax return.
Why are you asking me to also apply for an ITIN?
All tax returns filed to the IRS require a US tax identification number. If you do not have an SSN, then you will need to simultaneously apply for an ITIN. This is issued to non residents of the US or to those not eligible for an SSN.
How long will my IRS tax refund take?
Due to Covid delays (as at March 2021), the IRS is exceptionally behind. You are looking at timescales of:
- up to 4 months for the ITIN to be issued, and then the tax return is forwarded for processing
- 6 months to over a year for the 1040NR tax return to be processed and the refund issued
- 4 to 6 weeks for the refund cheque to arrive to you. You normally have 6 months to cash this. As a first time filer, you are highly unlikely to get an electronic deposit to any US bank details you may have due to fraud risk.
Just Breve can assist with both the 1040NR claim for a US tax refund and any ITIN application (as certified acceptance agent). Get in touch today:
T: 0208 1444632
If you have any questions, there is no charge to just ask!
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