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Claim for repayment of US tax suffered on inheritance - Individual Retirement Account

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A UK resident relative of one of my clients has inherited a surprise USD 15,000 share of an Individual Retirement Account in the US.  He has suffered a 30% US tax deduction.  I have established that the 30% deduction is correct but I have read that in certain circumstances it is possible to reclaim all or part of the tax suffered.  Does anyone know what these circummstances are and how he could go about making a claim?  From what I can tell, the only route (if any) would be to apply direct to the IRS - and I would have no idea where to start with that.

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By David Treitel
20th Aug 2019 12:27

The client has correctly had 30% of US tax withheld. The client is now required to file United States non-resident Form 1040NR for the calendar year of distribution. Along with the tax return, the client will need to apply for an ITIN. When preparing the return the portion that is considered US ECI is taxed at graduated rates that will fall below 30% in this case, resulting in a refund. The portion that is considered to be FDAP income is taxed at a 30% cent tax rate.

If it helps to know, we prepare these kind of US returns routinely and are able to assist with the ITIN application as an IRS Certifying Acceptance Agent.

David Treitel | Managing Director | American Tax Returns Ltd
The Old Exchange, 12 Compton Road, London, SW19 7QD

Tel: 020 3542 6330

Email: [email protected]

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By Taxied
20th Aug 2019 12:30

Many thanks. That's extremely helpful.

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