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Posted by Harry Thompson on June 18, 2008, 1:25 pm
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Foreign tax was withheld from dividends I received from Total SA. How do I
handle this on my income tax return next year? Is there a Foreign Tax
Credit, or what?
Thanks
========================================= MODERATOR'S COMMENT:
Yes there is a foreign tax creidt line on the back of form 1040.
If all your foreign tax was due to passive sources such as dividends and
is not more than $300 ($600 if MFJ) just enter the total foreign tax paid.
Else file form 1116 or claim foreign tax as other taxes on Schedule A.
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Posted by parrisbraeside@yahoo.ca on June 19, 2008, 7:09 am
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> Foreign tax was withheld from dividends I received from Total SA. How do I
> handle this on my income tax return next year? Is there a Foreign Tax
> Credit, or what?
>
> Thanks
>
> ========================================= MODERATOR'S COMMENT:
> Yes there is a foreign tax creidt line on the back of form 1040.
> If all your foreign tax was due to passive sources such as dividends and
> is not more than $300 ($600 if MFJ) just enter the total foreign tax paid.
> Else file form 1116 or claim foreign tax as other taxes on Schedule A.
Withholdings are not paid taxes.
Did you have an obligation to pay taxes on the dividends earned?
Surprisingly, most people find that the withholdings exceed the
requirements and they are then not entitled to claim the full
withholdings as a result.
--
<< ------------------------------------------------------- >>
<< 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 (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by Harry Thompson on June 19, 2008, 8:50 am
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>> Foreign tax was withheld from dividends I received from Total SA. How do
>> I
>> handle this on my income tax return next year? Is there a Foreign Tax
>> Credit, or what?
>>
>> Thanks
>>
>> ========================================= MODERATOR'S COMMENT:
>> Yes there is a foreign tax creidt line on the back of form 1040.
>> If all your foreign tax was due to passive sources such as dividends and
>> is not more than $300 ($600 if MFJ) just enter the total foreign tax
>> paid.
>> Else file form 1116 or claim foreign tax as other taxes on Schedule A.
To the moderator: Thanks, that's what I wanted to know.
>
> Withholdings are not paid taxes.
>
> Did you have an obligation to pay taxes on the dividends earned?
> Surprisingly, most people find that the withholdings exceed the
> requirements and they are then not entitled to claim the full
> withholdings as a result.
To parrisbraeside: I don't understand your comments. Could you explain a
little more?
--
<< ------------------------------------------------------- >>
<< 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 (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by parrisbraeside@yahoo.ca on June 20, 2008, 6:47 am
Please log in for more thread options >
> > Withholdings are not paid taxes.
>
> > Did you have an obligation to pay taxes on the dividends earned?
> > Surprisingly, most people find that the withholdings exceed the
> > requirements and they are then not entitled to claim the full
> > withholdings as a result.
>
> To parrisbraeside: I don't understand your comments. Could you explain a
> little more?
A common error when dealing with international tax issues is a
tendency to treat or call the taxes withheld from income earned in
another country as taxes paid. They may be taxes paid but you have to
verify with both the treaty for that other country and the tax return
for the other country if they are actually paid.
For example, if you have a capital gains transaction in the US while
you are not a US citizen, or resident, you will be issued a 1042S or
its equivalent showing that there was taxes withheld from the
transaction at either 15% or 30% (generally, it would be the higher
percentage.) Those taxes may be returned to you by filing a 1040NR
return with the IRS. However, if you were a Canadian Citizen and
resident and able to claim the benefits of the Canada-US Tax
Convention, you may apply at your brokerage to have withholding
stopped by filing a Beneficial Ownership Certificate (W8-BEN) and
pointing out that the Treaty does not require the withholding.
So, if you forgot the W8-BEN, you would have withholding of taxes but
no taxes payable. That is why I always harp on the difference between
the two.
Alternatively, you may find that filing the foreign tax return would
require additional taxes to be paid, over and above the taxes
withheld. The taxes withheld are, per treaty, the maximum payable (but
not the minimum) so generally you can forgo the filing of the foreign
tax return and take the withholdings as payable. (Generally...
remember that a foreign country may still require a tax return filed
even with the withholdings. Example: Selling of real property by a non-
resident/citizen generally requires a tax return filed, no matter what
country, even though the tax payable may be larger, you generally have
to make a statement then to refer to the treaty.)
However, as pointed out by someone else, a US tax slips such as a 1099
which mentions foreign tax paid, is tax payable. The original posting
did not indicate that this was a US tax slip and generally the type of
taxing transactions I deal with do not have US tax slips. Just
original transaction documents or brokerage statements.
--
<< ------------------------------------------------------- >>
<< 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 (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by Arthur Kamlet on June 19, 2008, 10:23 am
Please log in for more thread options >> Foreign tax was withheld from dividends I received from Total SA. How do I
>> handle this on my income tax return next year? Is there a Foreign Tax
>> Credit, or what?
As a practical matter, if I own shares in a foreign company or a
mutual fund which invests in foreign companies, and send you a
form 1099-DIV showing foreign tax paid in box 6 (that is what the
IRS prints on form 1099DIV) I am not aware of any problem claiming
the amount.
OP said witheld, but I suspect that OP received a 1099-DIV with
an entry in box 6.
--
ArtKamlet at a o l dot c o m Columbus OH K2PZH
--
<< ------------------------------------------------------- >>
<< 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 (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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