My client is a citizen and resident of Argentina (no tax treaty). They lived and worked in the US a few years while attending a university several years ago and set up an investment account (Fidelity) termed as a "Certified Resident Alien" account. A 1099 was issued for tax year 2013 for dividends, dividend capital gains and capital gains from sale of stock. They are no longer residents of the US and have not been since 2012. A 1040NR is being filed. The tax rate per my research indicates a flat rate of 30% on this type of US income. The client is not happy with this. Does anyone know if I am missing anything to reduce the tax amount?
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I don't believe you are missing anything:
Nonresident aliens are generally subject to U.S. income tax only on their U.S. source income. They are subject to two different tax rates, one for effectively connected income, and one for fixed or determinable, annual, or periodic (FDAP) income.
Effectively connected income (ECI) is earned in the U.S. from the operation of a business in the U.S. or is personal service income earned in the U.S. (such as wages or self-employment income). It is taxed for a nonresident at the same graduated rates as for a U.S. person.
FDAP income is passive income such as interest, dividends, rents or royalties. This income is taxed at a flat 30% rate, unless a tax treaty specifies a lower rate.
Nonresident aliens must file and pay any tax due using Form 1040NR, U.S. Nonresident Alien Income Tax Return or Form 1040NR-EZ, U.S. Income Tax Return for Certain Nonresident Aliens with No Dependents.
You might try: email: jean@1040nror1040.com -she is an expat specialist
Mike -
Thank you so much for your confirmation.Comment
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