U.S. Tax Guide - Stock and Dividend Investments for Non-U.S. Investors
Save 50% on Taxes! The Ultimate Guide to Lowering Your Taxes on U.S. Stock Investments
If you are a non-U.S. resident and opened a U.S. brokerage account, you’re going to pay some U.S. taxes.
That’s the cost of investing in the USA….
But, you need to make sure you aren’t paying too much in taxes, as the broker typically gets the withholding taxes wrong!
Or, it can even be your error by not completing the correct forms.
Let me tell you a story…
I recently helped a client recover over $100,000 in U.S. taxes that were INCORRECTLY taken out of their dividend distributions.
Why did that happen?
A U.S. broker generally must withhold taxes on dividend distributions paid to a nonresident account holder. And all too often, the broker withholds MORE tax than is legally required.
This wealthy non-U.S. investor was paid $800,000 in U.S. dividend distributions from various stock investments.
The U.S. broker withheld 30% in taxes and paid those taxes to the IRS. Over $240,000 in U.S. taxes!!
Was this the correct tax rate? No!
The non-U.S. investor is a Swiss citizen and resides in Geneva. As a Switzerland citizen and tax resident, the investor should have leveraged the U.S.-Switzerland tax treaty which provides a reduced withholding tax rate of 15%.
Not the 30% rate.
The non-U.S. investor approached the broker and asked for a refund of the taxes. The broker’s response “Sorry, you’re too late. We already sent the withholding taxes to the IRS”
Great, so now what?
Not all hope is lost. There are procedures to file a refund claim with the IRS, and to update your profile with the broker to make sure this doesn’t happen again in the future!
Here’s how I helped the investor:
Step 1 – Update the withholding certificates to claim the treaty benefits. No longer do we want the U.S. broker taking the 30% in taxes. Only 15%!
Step 2 – Get a federal tax return filed, claim the reduced treaty rate, and receive a refund for those extra taxes. After the returns were filed, the investor received a tax refund of $120,000.
Not too bad, right?
Let’s face it, U.S. taxes are complex. The U.S. tax code, regulations, revenue rulings, and tax case law amount to over 77,000 pages long!!
U.S. taxes are a complicated subject, so I designed this guide to try and simplify the procedures and rules to ultimately help you save or recover 50% in taxes.
TAKE NOTE: This guide is not for everyone. It is specifically designed for non-U.S. persons that open U.S. brokerage accounts and bank accounts.
If that does NOT apply to you, don’t worry: I will have more courses available which address tax savings techniques for U.S. tax residents.
Here is just some of what is covered in this guide:
- How U.S. taxes work for nonresidents of the U.S.
- How different types of income streams are subject to taxes in the U.S. (dividends, interest income, capital gains, royalties)
- How much tax does the broker need to take out of your dividend payments;
- What is the different treatment for dividend payments from RICs, REITs, and ETFs;
- How to file a refund claim with the IRS;
- How to apply for an ITIN or an EIN;
- How to complete a Form 1040-NR for a refund claim for an individual account holder (the guide INCLUDES a SAMPLE FORM 1040-NR;
- How to complete a Form 1120-F for a refund claim for a foreign corporation that owns a U.S. brokerage account (the guide INCLUDES a SAMPLE FORM 1120-F;
- How to analyze your potential tax treaty benefits;
- How to claim tax treaty benefits on your federal income tax return;
- What are the potential U.S. gift and estate taxes that apply to a nonresident;
- How to minimize your potential estate tax exposure.
And much, much more.
The goal here is to help you SAVE tax dollars going forward, and try to recover taxes that were previously taken out of your investment earnings.
Even if you work with a CPA or tax attorney on your annual taxes, this information can help you recognize potential excess withholding taxes, and help strategize your dividend investments to reduce the amount of taxes paid on a yearly basis.
The IRS is not going to contact you and let you know you overpaid in taxes.
Hell will freeze over before that happens.
Don’t give the IRS one more dollar than you are legally obliged to pay.