1040NR 1099-B

Why do you believe you need to file? are you a U.S. citizen? Do you have any U.S. sourced income?

Because I received a letter from the IRS (notice CP59) saying that I did not file the 1040, from 2011.

I called them and they told me : - my broker does not have the information that I am a non resident I should send them the form W-8BEN, to avoid this problem in the future.

- because of that, my broker sent them the information of the stocks I sold in 2011. And sent that information to me in the 1099-B report.

- to solve the problem I would have to send them the 1040NR form.

That's the reason why I was asking about the 1040NR.

- 1040NR (non residents 1040 form, like they told me) - SCHEDULE D + form 8949 (to give the info about the funds I sold)

In the future after I send the W-8BEN to my broker, this should no happen. I am not sure what forms they will send me, but I think it won't be the 1099-B. Do you know what form will it be ?

Thanks

Non US citizens do not need to pay taxes on their capital gains. However, if you were a citizen or permanent resident and gave it up, you may have to file 1040-NR for 10 years and report your capital gains

-- according to my reading of the law.

US citizens have to file 1040.

Capital gains are reported on line 13 of 1040 (capital gains), which comes from Schedule D, which comes from form 8949.

Could some one confirm that this: "- SCHEDULE D + form 8949 (to give the info about the funds I sold)"

Are this the right forms (plus line 14) to send the 1099-B information on the 1040NR ?

Thanks

The simplest thing to do, in my opinion, would be to fill out the bottom of the CP59, and return it. You may want add a short note.

The rules changed after June 15, 2008. See the link for details on the tax consequences of surrendering citizenship or permanent residency if you are considered a long-term resident.

DO NOT use schedule D, or form 8949. Use of these forms imply that you have a capital loss(or loss carryforward) that can used to offset taxable income. If you file the 1040NR, report your loss on Schedule NEC.

What is the difference btw (SCHEDULE D + form 8949) and SCHEDULE NEC ?

Can't be both used to declare funds/stocks gains or losses ?

exchanges are effectively connected with a U.S. business (sch D) or not (sch NEC). NEC = (Not Effectively Connected With a U.S. Trade or Business ) And in my case I sold funds that contain U.S. companies.

I agree. And after I send the W-8BEN form I should have no more problems in the future. Meanwhile I was asked by the IRA to send the 2011 1040NR form.

I agree. They even have a place to do it. On the section "If you don't think you have to file a tax return for 2011" they have the option: - I am not a US citizen or permanent resident

But when I called them at +1 267 941 1000, they told me to send the 1040NR form. Could it be that the person that was on the other side of the line gave me the wrong information ?

Thanks, Pedro

DO NOT use schedule D, or form 8949. Use of these forms imply that you have a capital loss(or loss carry forward) that can used to offset taxable income. If you file the 1040NR, report your loss on Schedule NEC. =========== Point of order: The sale of mutual fund shares IS a capital transaction. He DOES have a capital loss. As this has been reported on a 1099-B, the broker is claiming it is U.S.-sourced. The issue is whether it is truly U.S.-sourced or not.

Although I have not dealt with a 1040-NR for more than two decades, if the

1040-NR instructions say that he can file these forms with it, then he should. He certainly has the right to offset any future U.S.-sourced gains with his capital loss carried forward.

Since he claims to have left the U.S. in 2006, the 2011 short-term gain is might not be U.S.-sourced; it depends on where the mutual fund calls home. However, if the long-term transaction was acquired before leaving, it is definitely U.S.-sourced.

Either Schedule D/8949 or Schedule NEC may be correct (or both). We need more information (acquisition dates and whether the mutual funds were U.S. MF's or not)to determine its source.

It very likely is U.S. sourced income. The key issues, as I see them, are whether the sale is effectively connected with a U.S. trade or business, and whether or not the OP is a U.S. citizen/expatriate. From the OP's comments, I assume that the answers to both of these is no. I am also making the assumption here that the mutual fund does not deal in real property. Under these assumptions, schedule D would not be appropriate. This would not be treated as a disposition of capital asset. See IRS pub 519.

Assuming that you are not a US citizen and you were not a US citizen who renounced his citizenship and was considered a covered individual (subject to an "exit tax" and/or annual reporting) nor are you a former permanent resident of the US who surrendered his green card and was a covered individual (subject to "exit tax" and/or annual reporting) you are just a plain ordinary nonresident alien of the US. Assuming that the transaction are not effectively connected to a trade or business that you operate in the US and that you were not physically present for at least 183 days or more for the subject tax year, then under 26 USC 871 you are not subject to tax on capital gains. In addition, there is no tax benefit for capital losses as NRAs can not carry over a capital loss.

As such, there is no filing requirement. You should merely respond to the CP59 as instructed. Tell the IRS you are an NRA who was not physically present in the US for at least 183 days; you do not operate a trade or business in the US; the capital transactions were not effectively connected to any trade or business and that under these conditions per 26 USC 871 you are not subject to tax. The only reason for someone with the above set of conditions to file would be for a refund of income tax withheld (not the case here).

Yes, but if you gave up your citizenship or US permanent residency then you have to file 1040-NR for 10 years. At least that's what the law was years ago, and I don't know if this is still the case. Anyway, the IRC section that deals with those who gave up their US citizenship says

BEGIN QUOTE

(d) Special rules for source, etc. For purposes of subsection (b)? (1) Source rules The following items of gross income shall be treated as income from sources within the United States: (A) Sale of property Gains on the sale or exchange of property (other than stock or debt obligations) located in the United States.

END QUOTE

Now IRC 877 only applies if you are rich (as stated in (a)(2) Individuals subject to this section). But if it does, then the capital gain must be reported somehwere -- probably on form 1040-NR and I think that the use of Schedule D and line 13 is correct.

The facts: - I am not a US citizen - I am not a US citizen who renounced his citizenship - I am not covered by the exit tax(subject to an "exit tax" and/or annual reporting) - I never had a green card (I worked in the US for 5 years with a H1B) - the transaction I made were not connected to a trade or business that I operate in the US. I just invested my savings in 2006 on Fidelity Mutual funds and I sold them in 2011 (with losses) - I am not physically present for at least 183 days or more for the subject tax year At max I spend 30 days in US as tourist I will respond in the CP59 like Alan said. And I will also send the 1040NR with Sched NEC, because when I called the IRS they told me to do so. They can then choose which one (form) they want to use. On both cases, I don't owe them anything.

Thanks a lot for your replies.

And should also file W8-BEN with all of your US financial institutions.

Well, if you are going to send'em the 1040NR, the Schedule NEC will have the details of the trades on Line 16; Line 17 has the subtotals; and Line 18 has a zero as you said there was a loss. Line 15 has a zero.

The 1040NR would have zeroes on Lines 23, 36, 37 and 60.