Foreign Tax Withheld - Bottom Line Effect

Aug 20, 2007 2 Replies
D

It sounds to me for a small amount (< $300) of foreign taxes being withheld annually, it's no big deal to an individual investor since you get a dollar-for-dollar credit right on the 1040, but I'd like to get confirmation on this. What I'm suggesting is that in this case, although some of my money ends-up in Spain*, it's not going to effect the amount of money I fork over, correct?



--Dale--


  • I started here in the good old US of A with Pacific Power, which became Pacificorp, which got bought by Scottish Power, which got bought by Iberdrola. So I'm taking the ADS European tour without leaving home. I wonder where I'll end-up next!


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D

A related question: is foreign tax withheld the same as foreign tax paid? Or does the withholding suggest that I should really be filing some kind of tax return with the foreign jurisdiction, computing a tax and possibly paying more than was withheld _or_ even getting a refund? When a fund reports foreign tax paid on a 1099 I assume they have in fact paid the correct tax, but when a broker withholds foreign tax on a stock dividend how can they know my actual foreign tax liability unless some simplifying treaty specifies a fixed percentage?

I had Lucent which became Lucent-Alcatel ADR thus prompting the broker to withhold foreign tax on the last dividend. This was in a Roth IRA. Is any deduction or credit available to me? Dan Lanciani ddl@danlan.*com

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B

Dale,

Yes, it's all a wash.

Bill Patch

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