Interest Payments to Foreign Persons

Interest Payments to Foreign Persons

Question: I am a foreign national and I received bank interest income this year. I forgot to file the required forms so the bank took tax withholding from the interest income.

  1. Do I need to file a Form 1040NR to claim the refund of the withholding tax?
  2. Since I do not have a SSN, do I have to apply for ITIN before I can file the 1040NR for the refund?

Answer: Interest (other than qualifying original issue discount (OID)) generally is subject to a 30% tax, unless it qualifies for exemption from U.S. tax. Before you proceed, check to see if your country have  an active treaty with the US.

  1. If there’s a treaty provision available, the you will file a form 1040NR to claim the refund of the withholding tax.
  2. As foreign national, you cannot apply for an ITIN before filing the 1040 NR. Form 1040NR and ITIN Application are filed at the same time. The IRS won’t issue an ITIN unless a return is filed with the application. Attach Form W-7 to the front of the income tax return. On the tax return,  simply leave the SSN field blank.

***Disclaimer: I am a tax accountant and a CPA licensed in Massachusetts , but I am not your accountant or advocate (Unless you have signed up to my services). This communication is not intended as tax advice, and no tax accountant -client relationship results**

« »