At Just Breve we receive a lot of messages relating to assisting with tax reclaims from the United States. Sometimes these happen because the Form W-8BEN is expired and the sale occurred without this being in place.
Sometimes it happens because the withholding agent is being too cautious and tax was never due but they held it anyway.
Where capital gains or sales of US stocks occurred for a non resident, they are almost always fully refundable, especially if the company is listed on a US stock exchange. Even if there is no treaty with the country, by virtue of being non resident, you can claim this back.
I have been taxed at 30% on the sale of my US stock options in error after a merger occurred. How can I claim this back?
To claim back any tax withheld, the process is the same as anyone trying to obtain a refund of overheld US tax:
you file a 1040NR for the year of the sale
obtain a US tax number if you have no valid SSN or ITIN in place. For non residents this is always an ITIN if they are not eligible for an SSN.
Both must happen at the same time and all paperwork is paper filed with the IRS in this case.
Timings - how long does it take to claim a refund of tax from the IRS?
So, in all cases, you must wait for the tax withholding documents from the withholding agent (e.g. E*Trade or Morgan Stanley). The documents issued are normally issued between February and March the year following the sale and are either of the following or combination of multiple documents from the list:
Form 1042-S - this shows a variety of income types, including both dividends and gains.
1099-DIV - this shows dividends only
Form 1099-B - almost always, the big companies issue this form for capital gains.
Form K-1 or Form 8805 - if a partnership was involved, these forms would be issued showing income and tax held.
The documents above MUST be attached to any 1040NR to obtain the refund and the same documents are used to prepare the return and entries.
Once provided to the accountant, the return is prepared and the timings follow these approximate timescales (during busy times at the IRS):
ITIN (Individual Taxpayer Identification Number) - 2 to 4 months
Once issued the 1040NR is forwarded for processing and will take:
the above timings are where there are no further questions from the IRS. Sometimes the IRS issues letters asking more questions. Examples include:
All of the above cause further delays in processing the return and add to the timelines shown in normal processing.
From experience, these delays happen occasionally. Just Breve will ALAWAYS deal with and resolve any issues in processing and the resolution is included in the flat fee we charge for your tax filing.
How long the resolution takes, is out of our hands, but we aim to provide updates as and when they are provided to us by the IRS, and will clearly communicate these with the client.
We only assist clients we know are eligible for a refund.
How long do I have to claim back the tax from the IRS?
You have 3 years from date of filing plus extensions to file and claim the refund. As an example:
Tax year 2020 - this runs out on the 15th June 2024 - if not filed by this date, the tax is lost.
Contact Just Breve for more information:
Just Breve - is a US tax accounting firm, assisting non US persons with their US tax filing requirements, including obtaining a refund of overpaid US tax. This includes applying for a new ITIN or renewing an existing ITIN. We are a certifying acceptance agent (CAA) and have a contract with the IRS to help with Form W-7 ITIN applications.
T: 0208 1444632
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