Claiming from the IRS in the US ?

Question

Hi, I'm in the UK and have a trading account with an online brokerage to trade in the US. I did a trade and the brokerage automatically deduced 30% of the value and passed it on to the IRS in the USA. I should'nt be taxed as I am not a US resident or citizen. I clarified this with the brokerage and passed on to them a W8 BEN form to register my status. They told me if I wanted to claim back the amount, they could'nt do it, and that I would have to claim it from the IRS instead. How do I claim from the IRS? Can someone tell me how to go about doing this? Any help will be deeply appreciated !!!

Answer 1

If the 30% withholding happened in 2006, the online brokerage firm should refund the 30% in 2006 and you should press them to do so. Call the firm and ask to speak to a supervisor or manager. If they do not refund the 30%, consider closing your account.

The alternative of filing a U.S. income tax return to obtain a refund is difficult and time consuming. You first need to obtain a ITIN (individual taxpayer identification number) by filing Form W-7. This requires notarization of the form and usually takes 6 weeks after being submitted to the IRS. Then you must wait until the end of January 2007 for a Form 1042 which the brokerage firm will send to you. It will have the amount of 30% withholding. Then you would file Form 1040NR-EZ (or Form 1040NR in 2007, paying particular attention to completing page 2, question J (or page 5, question M) and citing the US-UK income tax treaty Article 13 GAINS, paragraph 5 which indicates that only the UK can tax your gains.

Again, press the online brokerage firm to refund the withholding. If the withholding occured in 2006, they can do this because they do not report the witholding to the U.S. by individual until 2007.

Good luck.

Answer 2

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Answer 3

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Answer 4

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