Reclaimable foreign taxes withheld

Discussion in 'Tax' started by Gary Goodman, Mar 21, 2011.

  1. Gary Goodman

    Gary Goodman Guest

    Section 1.901-2(e)(2)(i) states: “An amount is not tax paid to a
    foreign country to the extent that it is reasonably certain that the
    amount will be refunded, credited, rebated, abated, or forgiven.”

    That means you can't take the tax as a credit on your U.S. tax return.
    How does one get a refund though? The broker says it won't do it on
    behalf of the investor, a CRUT with over $3k of "reclaimable tax"
    listed in the statement of additional information that came with the
    1099.

    Personally, I think that if an investor trusts over $20 million with a
    broker, the broker should be responsible for it's actions.

    Gary

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    Gary Goodman, Mar 21, 2011
    #1
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  2. Gary Goodman <> wrote:

    > Section 1.901-2(e)(2)(i) states: “An amount is not tax paid to a
    > foreign country to the extent that it is reasonably certain that
    > the amount will be refunded, credited, rebated, abated, or
    > forgiven.”
    >
    > That means you can't take the tax as a credit on your U.S. tax
    > return. How does one get a refund though?


    I imagine you do the same thing you do in the US - find a local tax
    preparer, or prepare your own return, and claim the refund.

    > The broker says it won't do it on behalf of the investor, a CRUT
    > with over $3k of "reclaimable tax" listed in the statement of
    > additional information that came with the 1099.


    Why should the broker do that? It's the responsibility of the
    trustee. Unless, of course, the broker is the trustee.

    > Personally, I think that if an investor trusts over $20 million
    > with a broker, the broker should be responsible for it's
    > actions.


    Sure. But that isn't the broker's job, and it's not what the
    broker is being paid for.

    --
    Stu
    http://DownToEarthLawyer.com

    --
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    << nor can it used, for the purpose of avoiding penalties >>
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    Stuart A. Bronstein, Mar 21, 2011
    #2
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  3. Gary Goodman

    John Levine Guest

    In article <>,
    Gary Goodman <> wrote:
    >Section 1.901-2(e)(2)(i) states: "An amount is not tax paid to a
    >foreign country to the extent that it is reasonably certain that the
    >amount will be refunded, credited, rebated, abated, or forgiven."
    >
    >That means you can't take the tax as a credit on your U.S. tax return.
    >How does one get a refund though?


    A refund of foreign tax? You do whatever the foreign government
    requires, and they send you a check or make a transfer into your bank
    account. If there's no evident way to do it, I'd think that it is not
    reasonably certain that the amount will be refunded.

    I occasionally get book royalties from the UK, and the payor withholds
    UK tax. There is a process to tell them that you are not a UK
    resident so you can get the tax back, but the fixed cost is high
    enough that it's not worth it, so I take what I can on form 1116. My
    position is that since I haven't asked for the tax to be refunded,
    there's no likelihood at all that they will do so.


    >Personally, I think that if an investor trusts over $20 million with
    >a broker, the broker should be responsible for its actions.


    For an account of that size, you should be able to find a broker that
    offers satisfactory customer service. Perhaps you could point that
    out to your current broker.

    Regards,
    John Levine, , Primary Perpetrator of "The Internet for Dummies",
    Please consider the environment before reading this e-mail. http://jl.ly

    --
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    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
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    John Levine, Mar 21, 2011
    #3
  4. "John Levine" <> wrote in message
    news:im7th0$1976$...
    SNIPPED

    > I occasionally get book royalties from the UK, and the payor withholds
    > UK tax. There is a process to tell them that you are not a UK
    > resident so you can get the tax back, but the fixed cost is high
    > enough that it's not worth it, so I take what I can on form 1116. My
    > position is that since I haven't asked for the tax to be refunded,
    > there's no likelihood at all that they will do so.


    STOP THE BUS!

    Your position that you won't get it back simply because you won't ask for it
    back, simply because it costs too much, MAY NOT be sufficient to allow you
    to claim in your tax return. I cannot know for certain without doing the
    research, and I'm assuming you're not interested in retaining me to do that
    research, so I'd recommend you talk to your tax advisor.

    There is an old court case, Klithermes I think, where Mr. Klithermes claimed
    a deduction on his tax return for unreimbursed expenses. On audit the IRS
    determined that he was eligible for reimbursement from the company if had
    asked for it properly. He failed to ask, so he got nothing. The IRS, and
    the court, determined that he was NOT entitled to the deduction because he
    could have been reimbursed had he bothered to ask.

    Klithermes is about unreimbursed business expenses and your case is about
    foreign taxes. BUT the underlying similarity in both is that both you and
    Klithermes ARE entitled to get your money back if you'd just ask for it.
    Hence, it MAY BE that you are not entitled to the Form 1116 credit.

    Good luck,
    Gene E. Utterback, EA, RFC, ABA

    --
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    << nor can it used, for the purpose of avoiding penalties >>
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    Gene E. Utterback, EA, RFC, ABA, Mar 21, 2011
    #4
  5. Gary Goodman

    John Levine Guest

    >Your position that you won't get it back simply because you won't ask
    >for it back, simply because it costs too much, MAY NOT be sufficient
    >to allow you to claim in your tax return.


    More specifically, I could file some forms with the UK government,
    which they would consider and if they agree that I'm entitled not to
    have the tax deducted, then they might refund it. It's not unlikely,
    but I don't think it's "reasonably certain" that they'd approve my
    application.

    Anyway, the amount of tax is so small that it's not worth paying
    anyone to do anything special. I've been claiming it for years. If
    the IRS changes their mind and disallows it, so be it.

    Bonus confusing facts: there is a UK organization called the ALCS that
    collects statutory royalties on behalf of authors in the UK and other
    countries. If you're an ALCS member, as I am, they pay your royalties
    directly, less 20% tax and some administrative fees. If you're not an
    ALCS member and you live in the US, they forward the money to the
    Authors' Guild in New York, who convert it to dollars at a not very
    good rate, take out more fees, and send it out. (I did that until I
    realized I could join the ALCS and skip the middleman.) Tha Guild
    told me they distribute ALCS money to several thousand US authors, and
    I'd be surprised if a lot of them didn't claim the tax on Form 1116.
    So if I'm not eligible, at least I'm in good company.

    R's,
    John

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2011) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    John Levine, Mar 21, 2011
    #5
  6. Gary Goodman

    D. Stussy Guest

    "John Levine" <> wrote in message
    news:im7th0$1976$...
    > In article

    <>,
    > Gary Goodman <> wrote:
    > >Section 1.901-2(e)(2)(i) states: "An amount is not tax paid to a
    > >foreign country to the extent that it is reasonably certain that the
    > >amount will be refunded, credited, rebated, abated, or forgiven."
    > >
    > >That means you can't take the tax as a credit on your U.S. tax return.
    > >How does one get a refund though?

    >
    > A refund of foreign tax? You do whatever the foreign government
    > requires, and they send you a check or make a transfer into your bank
    > account. If there's no evident way to do it, I'd think that it is not
    > reasonably certain that the amount will be refunded.
    >
    > I occasionally get book royalties from the UK, and the payor withholds
    > UK tax. There is a process to tell them that you are not a UK
    > resident so you can get the tax back, but the fixed cost is high
    > enough that it's not worth it, so I take what I can on form 1116. My
    > position is that since I haven't asked for the tax to be refunded,
    > there's no likelihood at all that they will do so.


    Not asking for a tax to be refunded does not make it non-refundable.

    > >Personally, I think that if an investor trusts over $20 million with
    > >a broker, the broker should be responsible for its actions.

    >
    > For an account of that size, you should be able to find a broker that
    > offers satisfactory customer service. Perhaps you could point that
    > out to your current broker.


    Make certain you have another broker in mind first....

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2011) - All rights reserved. >>
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    D. Stussy, Mar 21, 2011
    #6
  7. Gary Goodman

    Guest

    On Mar 21, 4:51 pm, John Levine <> wrote:

    > >Your position that you won't get it back simply because you won't ask
    > >for it back, simply because it costs too much, MAY NOT be sufficient
    > >to allow you to claim in your tax return.

    >
    > More specifically, I could file some forms with the UK government,
    > which they would consider and if they agree that I'm entitled not to
    > have the tax deducted, then they might refund it.  It's not unlikely,
    > but I don't think it's "reasonably certain" that they'd approve my
    > application.
    >
    > Anyway, the amount of tax is so small that it's not worth paying
    > anyone to do anything special.  I've been claiming it for years.  If
    > the IRS changes their mind and disallows it, so be it.


    But by claiming the FTC I think you're violating the language of the
    statute. You have to fill out that application. If you get audited
    you might be in trouble.

    Of course, the ideal approach is to have the US government deal with
    getting the money from the UK government.

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2011) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    , Mar 22, 2011
    #7
  8. "Gene E. Utterback, EA, RFC, ABA" <> wrote:
    > "John Levine" <> wrote
    >
    >> I occasionally get book royalties from the UK, and the payor
    >> withholds UK tax. There is a process to tell them that you are
    >> not a UK resident so you can get the tax back, but the fixed
    >> cost is high enough that it's not worth it, so I take what I
    >> can on form 1116. My position is that since I haven't asked
    >> for the tax to be refunded, there's no likelihood at all that
    >> they will do so.

    >
    > STOP THE BUS!
    >
    > Your position that you won't get it back simply because you
    > won't ask for it back, simply because it costs too much, MAY NOT
    > be sufficient to allow you to claim in your tax return. I
    > cannot know for certain without doing the research, and I'm
    > assuming you're not interested in retaining me to do that
    > research, so I'd recommend you talk to your tax advisor.


    I haven't done the research either. However my guess is that if it
    is unreasonably expensive to get the refund, it may not be necessary
    to do so. Exactly where to draw the line will be the problem. But
    if he makes a reasonable business decision (rather than a personal
    decision based on non-financial issues), I'd think it would be ok.

    --
    Stu
    http://DownToEarthLawyer.com

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2011) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    Stuart A. Bronstein, Mar 22, 2011
    #8
  9. Gary Goodman

    Seth Guest

    In article <im8ebc$pma$>,
    D. Stussy <6lvw.ampr.org> wrote:
    >"John Levine" <> wrote in message
    >news:im7th0$1976$...
    >> In article

    ><>,
    >> Gary Goodman <> wrote:
    >> >Section 1.901-2(e)(2)(i) states: "An amount is not tax paid to a
    >> >foreign country to the extent that it is reasonably certain that the
    >> >amount will be refunded, credited, rebated, abated, or forgiven."

    .. . .
    >> I occasionally get book royalties from the UK, and the payor withholds
    >> UK tax. There is a process to tell them that you are not a UK
    >> resident so you can get the tax back, but the fixed cost is high
    >> enough that it's not worth it, so I take what I can on form 1116. My
    >> position is that since I haven't asked for the tax to be refunded,
    >> there's no likelihood at all that they will do so.

    >
    >Not asking for a tax to be refunded does not make it non-refundable.


    The law doesn't say anything about "non-refundable". It says, as
    quoted above, "reasonably certain that the amount will be refunded
    .. . .". Do you believe it is reasonably certain that John's UK taxes
    will be refunded? Will you bet even money that they will be? If you
    won't even make a bet at even money that an event will occur, you
    certainly shouldn't claim that the event is reasonably certain.

    Seth

    --
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    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
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    Seth, Mar 23, 2011
    #9
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