Have you received a 1042-S or 1099 from the US for income received or capital gains on the sale of US stocks? If yes, you may be entitled to a USA tax refund.
If you live outside the US and there is a tax treaty with your country of residence you will be able to obtain a refund if too much was withheld. The amount held will be visible on the tax document you have received.
Normally a flat 30% is withheld for a foreign person (non resident) of the US. This normally happens where a W-8BEN has not been completed correctly or has expired (this happens after 3 years). It may also occur if the payor has a policy of holding the flat 30% for any payments to a non resident alien of the USA.
Can I claim back the tax?
In most cases, yes you can claim back overheld US taxes. It depends on the type of income and if a treaty article with your country of residence overrides the US tax position.
Examples of claims for US tax refunds include:
- 30% tax held on dividends - if you live in the UK for instance, the treaty rate is 15%. Where excess tax has been withheld, you can reclaim the excess 15% by filing a 1040NR US tax return
- 30% tax held on capital gains of US listed stocks - again if you live in a treaty country, you can reclaim 100% of the tax held as the gains are classed as not effectively connected income (ECI) and by virtue of you being a non US person.
- Inherited IRA or retirement account - where 30% tax has been held and depending on if you took a lump sum or annuity, you will be able to claim some or all of the tax back. Where a lump sum has been taken, a lot of tax treaties state the tax is paid to the US and then tax free in the country of residence (e.g. United Kingdom). In this case you would pay graduated rates of US tax (starting at 10% up to 37%). Any difference is refundable.
- Casino winnings - if you happen to have won money at a US casino - you may be able to reclaim in full the tax held on your winnings.
How is the tax refunded?
Any US tax for a first time filer is normally refunded by USD cheque. This is mainly for fraud prevention. If filing multiple years, we also advise you add any US bank details, as the later years are likely to be paid by bank transfer. The IRS does not accept non US accounts.
How long does it take to get a refund of tax?
Currently, due to Covid related delays, it is taking 6 months plus for any paper tax filings to be processed. In 99% of cases, where there is no US tax number (ITIN or SSN), you will have to apply for the number at the same time as filing the US tax return. The ITIN will take 4 months as at December 2021. Again, due to Covid related processing delays.
So a total of 10 months plus as a minimum. Unfortunately, this has been the case since March 2020.
How can Just Breve assist with me claiming back overheld tax?
If you need to claim back a US tax refund, we can help. We have assisted many people with varying types of US tax refund claims and ITIN applications. Whether it is due to a sale of US shares or dividends received or if you were the beneficiary of an IRA or ROTH retirement account or if you won some money at a Louisiana or Las Vegas casino, we can assist in any tax reclaim.
Get in touch today:
T: 0208 1444632