La Quinta, CA
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Wednesday, April 29, 2015

Filing 1040NR to Recover Withholding Tax on U.S. Real Estate

As a non-resident, you will need to file a 1040NR to recover withholding tax withheld on real estate sold in the United States. Once you have gone through the escrow process and the payments have been dispersed, you should receive a 8288-a Copy b from the IRS that has been corrected and finalized by your assigned agent.

  • File 1040NR individually (your spouse must file a separate return if property was owned jointly)
  • Attach Schedule OI for Non Resident status validation
  • Attach a Schedule D for capital gain or loss computation 
  • Attach 8288-a Copy b that you received to federal tax return
  • Attach escrow closing statements
  • Attach ALL receipts for costs that are used to figure capital gain/loss
  • File State return (you may owe state tax even if no federal tax is owed)
    • California, Colorado, Georgia, Hawaii, Maine, Marryland, Mississippi, New York, North Carolina, Oregon, Rhode Island, South Carolina, Vermont, and West Virginia all withhold state income tax in a similar manor that federal income tax is withheld

In order to recover the withholding tax, you must now prove that you do not have an income tax liability on the capital gain of the sale of your U.S. property.

You must file a U.S. income tax form 1040NR if you have determined that you are a non-resident of the United States for income tax purposes.

You must attach your copy of the 8288-a Copy b that you received from the IRS as well as any documentation that you used to come up with your capital gain/loss computation.

If you received an 8288-a copy b that says "N/A" under Tax Identification Number for Person Subject to Withholding, you must attach escrow statements and additional proof that all numbers related to the withholding match.

Recovering withheld income tax on the sale of U.S. real estate has been known to be a complicated and lengthy process for Canadians. It is always best to consult a tax preparer in advance. Please contact Borders Bookkeeping and Income Tax Preparation to discuss. We charge a flat rate fee of $250 if one property was sold.

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More Information on Canadians Selling U.S. Real Estate